UNITED STATES TAX COURT



   SHERREL AND LESLIE STEPHEN JONES, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 20253-04.                Filed November 1, 2007.



     In 1997, P, an attorney practicing in Oklahoma,
donated to a university library photocopied materials
received from the Government in connection with P’s
representation of a criminal defendant.

     Held: Under Oklahoma law, an attorney does not
own his client’s case file, but rather maintains
custodial possession of the file. Because P did not
possess an ownership interest in the materials and was
thus incapable of effecting a valid gift of the
materials under Oklahoma State law, sec. 170(c),
I.R.C., precludes the charitable contribution
deduction.



Clarke Lewis Randall, for petitioners.

Elizabeth Downs, for respondent.
                                - 2 -



     COHEN, Judge:    Respondent determined deficiencies of $3,675

and $11,109.99 in petitioners’ Federal income tax for 2000 and

2001, respectively.    Unless otherwise indicated, all section

references are to the Internal Revenue Code in effect for the

years in issue.    The sole issue for decision is whether

petitioners are entitled to charitable contribution deduction

carryovers for 2000 and 2001 with respect to the 1997 donation of

a collection of copies related to one of petitioner’s client’s

case files.

                          FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated into our findings by this reference.

Petitioners resided in Oklahoma during the years in issue and at

the time they filed their petition.

     From the date of his appointment by the United States

District Court in May 1995 until his withdrawal in August 1997,

petitioner Leslie Stephen Jones (petitioner) was lead counsel for

the defense of Timothy McVeigh (McVeigh), who was prosecuted for

and convicted of the April 19, 1995, bombing of the Alfred P.

Murrah Federal Building in Oklahoma City, Oklahoma (the Oklahoma

City bombing).    During the course of his representation of

McVeigh and for use in the preparation of his legal defense,

petitioner was periodically provided with photocopies of

documents and copies of certain tangible objects that were
                              - 3 -

prepared, created, or compiled by agencies of the U.S. Government

for the purposes of investigating the Oklahoma City bombing and

prosecuting that crime (materials).   Petitioner always notified

McVeigh of the materials received from the Government and

delivered them to McVeigh whenever he requested them and for

however long McVeigh desired to keep them.

     The materials that petitioner received from the Government

in connection with his representation of McVeigh included:

Copies of 17,802 Federal Bureau of Investigation (FBI) “320s”

(statements of interviews with relevant witnesses); copies of

9,743 FBI “Inserts” (statements of interviews with nonrelevant

witnesses); copies of 25,141 pieces of documentary evidence

assembled by the FBI; copies of 25,000 pages of FBI notes; copies

of 168 files of medical examiner’s reports; 100,000 color or

black and white photographs taken by Government agencies during

the investigation; copies of 1,417 audio and video cassettes made

by Government agencies during the investigation; copies of 1,320

computer disks compiled by Government agencies during the

investigation; copies of correspondence written by McVeigh to

family and friends and acquired by the Government during its

investigation (98 letters, 17 postcards, and 11 envelopes); a

copy of a text of the Declaration of Independence containing

notes made by McVeigh; copies of investigative materials that

were compiled by the Government in its prior investigation of
                                 - 4 -

David Koresh (5 boxes of FBI 320s and 5 boxes of transcripts);

and copies of Government expert summary reports.    None of the

materials described above bears an original signature of or

original notation by McVeigh or any other person.    None of the

original items, of which copies are included in the materials

described above, were prepared personally by petitioner or for

him by anyone under his direction.

     Several interested entities, including the U.S. Department

of Justice, the U.S. Department of the Treasury, the Oklahoma

State Bureau of Investigation, the Oklahoma County District

Attorney’s Office, and the defense team of Terry Nichols, a

convicted conspirator in the Oklahoma City bombing, were provided

the same materials or a substantial part of the same materials

that petitioner received from the Government in connection with

his representation of McVeigh.    McVeigh’s attorneys on appeal

were also provided with copies of the same materials received by

petitioner and the other members of McVeigh’s defense team during

McVeigh’s initial trial.

     Petitioner contacted the University of Texas at Austin to

propose donation of the materials on August 27, 1997, the same

day that he was allowed to withdraw from representation of

McVeigh.   Petitioner required, as a primary condition for making

the gift, that the deed of transfer be executed before the end of

1997, without regard to physical delivery of the materials.    From
                               - 5 -

the beginning of formal discussions regarding the potential

donation, petitioner placed restrictions on his donation of the

materials.   Petitioner required that investigative reports given

to petitioner by Terry Nichols’s attorney remain sealed and that

photographs of the deceased victims of the Oklahoma City bombing

remain sealed forever.   He also required that the University of

Texas provide private work space and staff assistance for

petitioner or his designated agents to review the materials.

Petitioner required that the University of Texas pay both the

storage costs with respect to the materials from the date of

acknowledgment of the deed of gift in December 1997 until the

date of actual delivery of the materials in January 1999 and the

shipping costs for delivery of the materials.   Petitioner also

required that the University of Texas pay for his designated

agent to review and organize the materials between the time that

the deed of gift was executed and the date of delivery.     The

review for which the University of Texas paid included

determinations by petitioner or his agent about whether certain

documents should be removed from the donated materials due to

privilege and confidentiality concerns.

     On December 24, 1997, petitioner executed a document

entitled “Deed of Gift and Agreement”, which memorialized the

transfer by petitioner to the Center for American History at the

University of Texas at Austin (University of Texas), a qualifying
                                - 6 -

charitable organization under section 170(c), of the above-

described materials that petitioner received from the Government

during the preparation of McVeigh’s legal defense.

     On May 1, 1998, John R. Payne (Payne), employed by

petitioners to value the materials for the purpose of their

claiming a charitable contribution deduction, appraised the

materials at $294,877.    Payne spent only one day reviewing the

materials, which included hundreds of thousands of items

contained in 171 boxes.   He reviewed only a small percentage of

the materials before assessing their value.   Although he

discounted his preliminary value assessment by 50 percent because

none of the materials were originals, Payne did not take into

consideration that multiple copies of the materials had been

distributed to various attorneys during the course of the

underlying trial.   Payne’s appraisal method in part involved

assessing the value of certain documents at the price that a

legal research service would charge for access to them.     His

appraisal method also relied heavily on purchase prices or

assessed values of document archives that Payne considered to be

comparable collections.   All of the collections to which Payne

compared the materials possessed by petitioner as part of

McVeigh’s case file, however, consisted primarily of original

documents, handwritten letters, and original signatures of

players in other infamous crimes or scandals.   None of the
                               - 7 -

materials in issue are original documents, and none contain an

original signature or notation of McVeigh or any other person.

     Petitioners claimed a deduction of $294,877 on their joint

Federal income tax return for 1997 for the donation of the

materials.   The deductions at issue in this case were carried

over from petitioners’ 1997, 1998, and 1999 Federal income tax

returns.

     Respondent disallowed the charitable deduction claimed by

petitioners for the donation of the materials related to the

criminal prosecution of McVeigh for the Oklahoma City bombing

because respondent determined that petitioner did not personally

own the materials that were provided to him for the purpose of

preparing McVeigh’s legal defense.

                              OPINION

     In order to be eligible for a charitable contribution

deduction under section 170(a), a taxpayer must make a gift of

property to a qualifying charitable organization.   Sec. 170(c).

The parties agree that the University of Texas is a qualifying

charitable organization for purposes of section 170, but they

disagree about whether petitioner legally owned the materials and

thus whether his donation and transfer of possession of the

materials effected a valid gift.   In applying a provision of

Federal tax law, State law controls in determining the nature of

a taxpayer’s legal interest in property.   United States v. Natl.
                                - 8 -

Bank of Commmerce, 

, 722 (1985); United States v.

Mitchell, 

, 197 (1971).     State law creates legal

interests, while Federal law determines when and how those

interests shall be taxed.    United States v. Mitchell, supra at

197.    In order to make a valid gift for Federal tax purposes, a

transfer must at least effect a valid gift under the applicable

State law.    See Woodbury v. Commissioner, 

, 193-194

(1967).

       In the case of a valid gift, the amount of an otherwise

allowable deduction for the charitable contribution of property

that would produce ordinary income if sold at its fair market

value is limited to the donor’s cost or basis in the contributed

property.    Sec. 170(e)(1)(A); Chronicle Publg. Co. v.

Commissioner, 

, 447-448 (1991).

       We thus first consider whether petitioner owned the

materials donated such that he was capable of making a valid gift

under the law of the State of Oklahoma.     In determining what the

relevant State law is, that State’s highest court is the best

authority on its own law.    Commissioner v. Estate of Bosch, 

, 465 (1967).    Under Oklahoma law, three elements must be

present in order to effect a valid inter vivos gift:      First, the

donor must possess a donative intent; second, actual delivery of

the subject matter of the gift must be completed; and, third, the

donor must strip himself of all ownership and dominion over the
                                - 9 -

subject matter of the gift.    Frazier v. Okla. Gas & Elec. Co., 

, 13 (Okla. 1936).    In order to divest himself of

ownership and dominion over the subject matter of the gift,

petitioner (the donor) must legally own the property in issue.

See Pettit v. Commissioner, 

, 639 (1974) (“A ‘gift’

has been generally defined as a voluntary transfer of property by

the owner to another without consideration therefor.”     (Emphasis

added.)).    Beneficial ownership is required.   Bare legal title

does not control.    See Estate of Davenport v. Commissioner, 

, 1182-1185 (10th Cir. 1999), affg. T.C. Memo. 1997-390;

sec. 25.2511-1(g)(1), Gift Tax Regs.

     Respondent contends that petitioner did not own the

materials relating to his defense of McVeigh in his trial for the

Oklahoma City bombing and thus could not have divested himself of

ownership in order to effect a valid inter vivos gift of those

materials.    Petitioners assert that, under Oklahoma law,

petitioner legally owned the materials in issue and that the

materials constituted petitioner’s personal property.

     The parties have not cited, and we have not found, any case

in Oklahoma or any other jurisdiction that addresses directly the

ownership of materials in the possession of an attorney that are

related to the representation of his client.     The ownership of

client files is apparently an issue of first impression under

Oklahoma law.    However, Oklahoma State law in related areas
                              - 10 -

provides us with general guidance, and we are assisted in our

analysis by a repository of relevant cases decided by courts in

other jurisdictions that have considered the issue of ownership

of client files and their specific contents.

     Petitioners maintain that, because petitioner at all

relevant times exercised possession and control of the materials,

petitioner was the legal owner of those materials until he

donated them to the University of Texas.   Petitioners argue

further that, because McVeigh did not typically hold any of the

materials in excess of 72 hours, McVeigh did not exhibit control

or dominion over the materials and therefore could not be the

legal owner of them.

     As a general rule under Oklahoma law, possession of personal

property is, if unexplained, prima facie evidence of ownership.

Ragan v. Citizens’ State Bank, 

(Okla. 1913).

Petitioners rely heavily on this general principle of law to

support their assertion of petitioner’s ownership of the

materials.   Due to the unique fiduciary relationship between an

attorney and his client, however, we are not persuaded that items

in an attorney’s possession, and especially in a client’s case

file, generally constitute the attorney’s personal property.

Ethical rules regarding an attorney’s obligation to maintain

funds and other property belonging to his client or a third party

separate from the attorney’s own property, for example, indicate
                              - 11 -

the attorney’s essential role as a fiduciary charged with

safekeeping his client’s property and interests.   See Okla. Stat.

Ann., tit. 5, ch. 1, app. 3-A, R. 1.15 (West 2001).   Due to the

fiduciary nature of an attorney’s relationship to his client, we

cannot treat petitioner’s possession of the materials as prima

facie evidence of his ownership.   Petitioner’s uncontested

possession of the materials neither proves ownership nor

establishes petitioners’ eligibility for a charitable

contribution deduction with regard to their donation of the

materials.

     Respondent argues that general principles of agency law and

ethical rules governing the conduct of attorneys establish that

petitioner did not own the materials and was not entitled to

dispose of them.   Respondent contends that petitioner received

the materials as an agent of McVeigh during the course of

defending McVeigh in his trial for the Oklahoma City bombing and

that the materials thus belong to McVeigh, not petitioner.

Petitioners maintain that general agency law is inapplicable to

this case and that, although his clients may possess a right of

access to information in their case files, petitioner, as

attorney, is the rightful owner of his clients’ case files.

Alternatively, petitioners argue that, even if we hold that

clients own their case files under Oklahoma law, attorneys are

entitled to keep copies of their clients’ case files, and,
                               - 12 -

because the materials contained only copies of documents and

other evidence, petitioner rightfully owned them.   We infer that

petitioners’ argument is essentially that an attorney’s right to

copy and keep client files for himself is equivalent to

traditional rights of ownership, including the right freely to

dispose of property.

     Central to our analysis of ownership is the principle that

the attorney-client relationship is fundamentally one of agency.

See Commissioner v. Banks, 

, 436-437 (2005); State ex

rel. Okla. Bar Association v. Taylor, 

, 1253 (Okla.

2000); Crisp, Courtemanche, Meador & Associates v. Medler, 

, 390 (Okla. Civ. App. 1983).   Generally, an agency

relationship is one in which the parties agree that one party is

to act on behalf of another.   Garrison v. Bechtel Corp., 

, 283 (Okla. 1995).   Because an attorney is the agent of his

client, the delivery of the materials to petitioner occurred

within the scope of the agency relationship.   The materials were

delivered to petitioner from the Government in the course of his

preparation for the defense of McVeigh.   The materials were for

McVeigh’s benefit and were delivered to allow him and his

attorney better to prepare his case for trial.   Indisputably, the

materials were delivered to petitioner within the scope of his

representation of McVeigh’s criminal prosecution for the Oklahoma
                              - 13 -

City bombing and thus were received by petitioner as the agent of

McVeigh.

     Petitioners assert that general principles of agency law do

not resolve the issue of ownership, and they rely instead on

several cases from other jurisdictions that have considered the

issue of ownership of client case files.   Those cases generally

hold that an attorney or accountant, not his client, has property

rights in the portions of his client’s case file containing the

professional’s self-created work product or working papers,

generally defined as the attorney’s or accountant’s notes,

drafts, and internal memoranda recording the professional’s

ideas, opinions, and impressions.   See Corrigan v. Armstrong,

Teasdale, Schlafly, Davis & Dicus, 

, 96 (Mo. Ct.

App. 1992).   For similar holdings with respect to accountants and

their working papers, see also Ipswich Mills v. Dillon, 

(Mass. 1927), and Ablah v. Eyman, 

(Kan. 1961).

Although petitioners rely heavily on these cases, they represent

a small fraction of the jurisdictions that have considered the

issue of ownership of an attorney’s or an accountant’s work

product.

     The majority of courts that have considered the issue of

whether attorneys or clients own case files have held that

clients are the legal owners of their entire case files,

including the attorney’s work product for which the client paid
                                - 14 -

when he purchased the attorney’s services.    See Swift, Currie,

McGhee & Hiers v. Henry, 

, 39 (Ga. 2003) (citing

Resolution Trust Corp. v. H---, P.C., 

(N.D. Tex.

1989); In re Kaleidoscope, Inc., 15 Bankr. 232, 241 (Bankr. N.D.

Ga. 1981), revd. on other grounds 25 Bankr. 729 (N.D. Ga. 1982);

In re Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn

L.L.P., 

, 882-883 (N.Y. App. Div. 1997)); see also

Averill v. Cox, 

, 1092 (N.H. 2000); In re X.Y., 

, 690 (Minn. 1995).    These courts have held that the

creation of the case file is part of the services for which the

client pays his attorney, and they have justified their holdings

that clients have full access to and superior property rights in

their entire case file based primarily on the principle that the

fiduciary relationship between attorney and client necessitates

full disclosure.   See, e.g., Resolution Trust Corp. v. H---,

P.C., supra at 649-650; see also Swift, Currie, McGhee & Hiers v.

Henry, supra at 40; In re Sage Realty Corp. v. Proskauer Rose

Goetz & Mendelsohn L.L.P., supra at 882.

     However, some courts have held that ownership of a case file

is divided between attorney and client.    These jurisdictions

generally hold that an attorney’s work product, including

internal legal memoranda and preliminary drafts of documents,

remains the property of the attorney; however, the client has

superior property rights in the end product of the attorney’s
                              - 15 -

representation, which includes finalized legal documents,

pleadings filed, correspondence among parties, and other papers

“‘exposed to public light by the attorney to further [the]

client’s interests’”.   In re Sage Realty Corp. v. Proskauer Rose

Goetz & Mendelsohn 

(quoting Fed.

Land Bank v. Fed. Intermediate Credit Bank, 

, 479

(S.D. Miss. 1989), modified 

(S.D. Miss. 1989));

see also Apa v. Qwest Corp., 

, 1250 (D. Colo.

2005) (upon termination of representation, attorney must

surrender case file to client and the “cost of making a copy of a

client file by a withdrawing lawyer belongs to the lawyer, not

the client”; however, duplication costs may be charged to the

client for copies of the attorney’s work product); Loeffler v.

Lanser (In re ANR Advance Transp. Co.), 302 Bankr. 607, 614 (E.D.

Wis. 2003) (concluding that the difference between the majority

and minority rules is primarily who bears the burden of proving

need for disclosure or secrecy, respectively, with regard to the

attorney’s work product); Womack Newspapers, Inc. v. Town of

Kitty Hawk, 

, 104 (N.C. Ct. App. 2007) (“anything in

a client’s file, which is in the hands of the client’s attorney,

belongs to the client, with the exception only of the attorney’s

notes or work product”).   One State appellate court has held

explicitly that, while a client may be entitled to access his

attorney’s work product in order to understand the services
                                - 16 -

provided by the attorney, the attorney’s fiduciary duties to his

client do not necessitate the conclusion that the client has a

property right or ownership interest in the attorney’s work

product.    Corrigan   v. Armstrong, Teasdale, Schlafly, Davis &

Dicus, supra at 98.     While the opinions of courts in other

jurisdictions are persuasive and helpful in our analysis, we must

ultimately determine whether, and to what extent, an attorney or

his client owns the client’s case file under Oklahoma State law.

     The Oklahoma Rules of Professional Conduct generally imply

that clients have ownership rights in their case files under

Oklahoma law.    Rule 1.6 of the Oklahoma Rules of Professional

Conduct, which codify general principles regarding an attorney’s

ethical duties and fiduciary responsibilities to his client,

provides:

          (a) A lawyer shall not reveal information relating
     to representation of a client unless the client
     consents after consultation, except for disclosures
     that are impliedly authorized in order to carry out the
     representation * * *

Okla. Stat. Ann. tit. 5, ch. 1, app. 3-A, R. 1.6(a) (West 2001).

     Petitioners assert that rule 1.6, Oklahoma Rules of

Professional Conduct, is irrelevant because petitioner testified

without contradiction that McVeigh waived the attorney-client

privilege and the protection of the work product privilege.

Petitioner did not testify about any particulars regarding

McVeigh’s alleged waiver of the attorney-client privilege or
                             - 17 -

present any evidence to support his claim that his client did

waive the attorney-client privilege with regard to the materials.

Petitioner’s testimony alone, even if uncontradicted, does not

establish McVeigh’s waiver of the attorney-client privilege.     See

Boyett v. Commissioner, 

, 208 (5th Cir. 1953), affg.

a Memorandum Opinion of this Court.   Confidentiality is a

hallmark of the attorney-client relationship, and the attorney’s

mere conclusion that the client waived that privilege is not

sufficient evidence of an explicit waiver.   In the absence of

evidence establishing that McVeigh consented to disclosure by his

attorney of the materials in issue, petitioner is bound by his

ethical obligations under the Oklahoma Rules of Professional

Conduct to refrain from disclosing and capitalizing on

information related to his representation of McVeigh.

     Rules 1.15 and 1.16 of the Oklahoma Rules of Professional

Conduct also support our holding.   Rule 1.15 requires that an

attorney safeguard all clients’ property in the attorney’s

possession and preserve records of account funds and other

property for at least 5 years after representation is terminated.

Okla. Stat. Ann. tit. 5, Ch. 1, App. 3-A, R 1.15(a).    Rule 1.16,

Oklahoma Rules of Professional Conduct, requires:

          (d) Upon termination of representation, a lawyer
     shall take steps to the extent reasonably practicable
     to protect a client’s interests, such as * * *
     surrendering papers and property to which the client is
     entitled * * *. The lawyer may retain papers relating
     to the client to the extent permitted by other law.
                              - 18 -


Okla. Stat. Ann. tit. 5, Ch. 1, App. 3-A, R 1.16(d).   The Comment

to rule 1.16 explains the last clause of the quoted rule above by

noting that the attorney may retain papers as a security for a

fee only to the extent permitted by law.

     The Oklahoma Rules of Professional Conduct cited above

illustrate the fiduciary nature of the attorney-client

relationship.   They emphasize the attorney’s duty to keep details

of his representation of a client confidential, even after the

representation has been terminated, and they suggest that, while

an attorney may retain documents related to his representation of

the client in certain situations, those documents rightfully

belong to the client and should not be disposed of or exposed in

a way that may be detrimental to the client.   Although McVeigh

cannot and his successors likely will not attempt to have the

Oklahoma Rules of Professional Conduct enforced against

petitioner, the rules do suggest that petitioner is not the

exclusive owner of the materials, regardless of his rightful

possession of the materials themselves or of additional copies of

those materials, and that petitioner was not entitled to dispose

of, publicize, or capitalize on them for his personal gain.

     Petitioners rely primarily on Corrigan v. Armstrong,

Teasdale, Schlafly, Davis & 

, to support

their assertion of petitioner’s exclusive legal ownership of the

materials in issue in this case.   However, the court in Corrigan
                               - 19 -

was faced with the narrow question of ownership of notes, working

papers, drafts, and internal memoranda written by the attorney,

over which the client in that case asserted an ownership interest

superior to that of her attorney.    

   The materials in

issue in this case are distinguishable from those in the Corrigan

case because they are not petitioner’s work product and do not

contain his ideas, opinions, or impressions.      See 

materials are not work product, it is not

necessary for us to determine in this case whether Oklahoma would

follow the majority or minority view with regard to ownership of

case files.   We are aware of no court that has held that clients

have no ownership interests in their respective case files.

Rather, as we have summarized above, all jurisdictions that have

considered explicitly the issue of ownership of case files have

held that clients have superior property rights in at least those

items in the case file that are not the attorney’s self-created

work product.   Those courts that have reserved a property right

to the attorney have done so only with regard to the attorney’s

personal notes, working drafts and papers, and internal

memoranda.    The materials in issue in this case fall outside of

this work product exception.    Thus, under either approach, the

documents in issue in this case belong properly to petitioner’s

client, McVeigh, and not to petitioner.    Petitioner, in effect,

was merely the authorized and incidental custodian of the copies
                              - 20 -

in issue and had no ownership rights sufficient to effect a gift

or support a charitable contribution deduction under section 170.

See Pettit v. Commissioner, 

.

     Although not dispositive, it is also relevant that Oklahoma

law recognizes a common law possessory or retaining lien with

respect to an attorney’s retention of his client’s papers, money,

or other property that are in the attorney’s possession until

fees for services rendered are paid by the client.   Britton &

Gray, P.C. v. Shelton, 

, 1212 (Okla. Civ. App. 2003)

(citing State ex rel. Okla. Bar Association v. Cummings, 8

64, 1168-1170 (Okla. 1993)).   The existence of such a retaining

lien supports our conclusion that Oklahoma law generally

considers property that is held by an attorney in the scope of

representing his client as properly belonging to the client,

against whose possessory interest the retaining lien may attach.

     Petitioners argue further that, because it is undisputed

that attorneys are entitled to retain copies of their clients’

case files even after surrendering them to their clients and

because the materials are copies, not originals, the copies

belong legally to petitioner, and thus he may claim an ownership

interest in them.   We are not persuaded by petitioners’ implicit

argument that an attorney’s right to maintain a copy of his

client’s file after termination of representation includes a

right to publicize, sell, or otherwise dispose of the case file
                                - 21 -

to the attorney’s benefit.    Moreover, this argument by

petitioners undermines their assertions as to the value of the

collection of copies and the amount of their charitable

contribution deduction.     The appraisal of copied documents from

an attorney’s case file as if it contained originals or the only

set of documents, even if discounted by 50 percent because all

the documents were photocopies, and without regard to the

existence of multiple sets of the copies, is a major defect in

the Payne appraisal.

     Finally, even if the materials were the work product of

petitioner such that he was potentially the legal owner of them,

petitioners would not be entitled to a charitable contribution

deduction for the donation of them.      The amount of any charitable

contribution of property otherwise taken into account for the

deduction under section 170(a) must be reduced by the amount of

gain that would not have been long-term capital gain (i.e., by

the amount of gain that would have been ordinary gain) if the

property contributed had been sold by the taxpayer at its fair

market value.    Sec. 170(e)(1)(A).   Thus, unless the materials

were long-term capital assets, petitioners’ deduction, if

otherwise allowable, would be limited to their cost or basis in

the materials.    See 

specifically excludes

from the definition of “capital asset”:
                              - 22 -

          (3) a copyright, a literary, musical, or artistic
     composition, a letter or memorandum, or similar
     property, held by--

               (A) a taxpayer whose personal efforts created
          such property, [or]

               (B) in the case of a letter, memorandum, or
          similar property, a taxpayer for whom such
          property was prepared or produced * * *

Because the materials would fall under the exclusion of letters,

memoranda, or similar property created by the taxpayer’s own

efforts, if they had been created by the taxpayer’s own efforts

and were work product, we would be required to treat them as

ordinary assets.   Thus, even if petitioners could fall within the

minority work product exception to the general rule that a

client’s case file legally belongs to the client, their allowable

deduction would be limited to their basis in the materials.

Petitioners have presented no evidence that the basis in the

materials was greater than zero.   Thus, even if we held that

petitioner legally owned the materials under a work product

exception, section 170(e)(1)(A) would limit petitioners’

deduction to zero, the amount of petitioners’ basis.

     Because petitioner was not the legal owner of the materials,

he was not legally capable of divesting himself of the burdens

and benefits of ownership or effecting a valid gift of the

materials.   He is therefore not entitled to any deduction under

section 170 for his donation of the materials.   Because the

materials contain merely copies of documents and other items that
                             - 23 -

have been duplicated many times and are in the possession of many

different people and entities, we have serious doubts about the

value asserted by petitioners’ appraiser.   However, because

petitioner was not the legal owner of the materials and was not

legally entitled to donate them, we need not reach the valuation

issue.

     We have considered all arguments by the parties, and, to the

extent not mentioned, we conclude that they are moot, irrelevant,

or without merit.

     To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.