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Catherine E. Dowell (sometimes referred to as decedent or
mother) owned 75 percent of the stock of Dowell Insurance Agency,
Inc. (the stock or agency stock; the agency), at the time of her
death. Decedent had previously sold 25 percent of the agency
stock to her daughter, Patricia Low (sometimes referred to as
daughter), and was receiving monthly installment payments from
the sale. The obligation to make the installment payments1 (the
debt) was forgiven by decedent on her deathbed. Decedent's Last
Will and Testament (the will) bequeathed her remaining stock to
her daughter "with the understanding" that she would make monthly
payments of $5,000 to decedent's son for 10 years. A codicil to
decedent's will stated that monthly payments were to be made by
the daughter to decedent's husband instead. After her mother's
death, Patricia Low never made any of the monthly payments.
Decedent's husband was the residuary beneficiary under decedent's
will. Petitioner, decedent's estate, computed the sum of the
monthly payments called for in the codicil to be $450,000, and
claimed that amount as a marital deduction on its Federal estate
tax return. After concessions, the issues for decision are:
(1) Whether decedent's husband inherited her agency stock on
the failure of the daughter to make the payments called for in
the codicil; if decedent's husband did not inherit the agency
stock,
1 The record does not show that an installment note was
entered into by the daughter.
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Last modified: May 25, 2011