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action. Mr. Corn then asked the judge presiding over the will
contest to direct the custodian to turn over the funds to
Mr. Corn, and the judge granted Mr. Corn's request on December
22, 1988. The surrogate's court judge's order reads as follows:
I direct the Financial Institution to turn over the
funds held in the name of the Employer to the
fiduciary. The fact that I am directing that the funds
to be turned over to the fiduciary is not a
determination of who shall ultimately be entitled to
the funds. We are putting them there in order that
they be placed in some interest-bearing accounts and so
forth, and in order to enable the fiduciary to make
payments.
In response thereto, the custodian made the following
distributions to Mr. Corn: $91,902 on December 28, 1988; and
$485,000, $20,000, and $485,390 on January 12, March 30, and
April 20, 1989, respectively.
Mr. Corn, in his capacity as the estate's temporary
administrator and fiduciary, filed the estate's 1988 and 1989
Fiduciary Income Tax Returns, Forms 1041, in March 1991.1 None
of the pension funds were included as gross income on either of
these returns. As to both years, the estate attached a
disclosure statement acknowledging the temporary administrator's
receipt of the funds but asserting that the receipt of the funds
was merely a change in custodial agent and not a taxable
distribution. The 1988 and 1989 tax returns did report interest
income earned on the funds. Mr. Corn also filed the estate's
1 The estate is a cash basis taxpayer.
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