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II. Equitable Estoppel
Petitioner contends that as a matter of equity, and
notwithstanding the provisions of section 6324(a)(2), petitioner
should be relieved from personal liability as a transferee for
the unpaid Federal estate taxes of decedent's estate. Petitioner
relies upon Schuster v. Commissioner, 312 F.2d 311 (9th Cir.
1962). In Schuster, a Federal estate tax return was filed for
the decedent's estate, but the return failed to include the value
of the corpus of a trust in the decedent's gross estate. The
Commissioner audited the estate tax return of the estate and
determined, erroneously, that the trust corpus was not taxable.
The results of the audit were relayed to the trustee, which was a
bank, by the beneficiary under the trust instrument. The trustee
relied on the Commissioner's mistake that the trust corpus was
not includable in decedent's gross estate, and distributed the
trust corpus to the beneficiary, the trustee believing that no
Federal estate tax was due. Thereafter, the Commissioner
realized the mistake and asserted transferee liability against
the beneficiary and the trustee for deficiencies in the estate's
Federal estate tax. The trustee had distributed the trust assets
to the beneficiary and did not retain any trust property which
was the subject of the deficiency. Accordingly, any liability of
the trustee would have to come out of its own funds and not from
the corpus of the trust. We held that the trustee was liable
under section 827(b) of the Internal Revenue Code of 1939, the
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