Estate of Bessie I. Mueller, Deceased, John S. Mueller, Personal Representative - Page 4

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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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