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The Trust's basis in the stock is controlled by the value of the
stock at decedent's date of death. See sec. 1014(a)(1).3
In Estate of Mueller v. Commissioner, T.C. Memo. 1992-284
(Mueller I), we found that the date-of-death value of the Mueller
Co. stock was $1,700 per share, as opposed to $1,505 per share as
reported on petitioner's estate tax return or $2,150 as
determined by respondent in the notice of deficiency. As a
result, it is now clear that the Trust understated its basis and
overstated its gain on the sale of Mueller Co. stock and,
therefore, overpaid its income tax. However, the statute of
limitations bars refund of the Trust's overpayment of income tax.
Respondent moved to dismiss petitioner's claim for
recoupment on the ground that we lacked jurisdiction to consider
equitable recoupment. In Estate of Mueller v. Commissioner, 101
T.C. 551 (1993) (Mueller II), we held that this Court is
authorized to entertain the affirmative defense of equitable
recoupment in an action for redetermination of a deficiency and
denied respondent's jurisdictional motion. Id. at 561. However,
we made no findings with respect to whether petitioner satisfied
the requirements for applying equitable recoupment in this case.
It subsequently became clear that our opinion in Mueller I,
which increased decedent's taxable estate by less than the amount
3Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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