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determined in the notice of deficiency, combined with
respondent's allowance in the notice of deficiency of the credit
for tax on prior transfers, will result in a decision that there
is no deficiency in petitioner's estate tax.4 Indeed, petitioner
is entitled to recover an overpayment of its estate tax,
regardless of whether or not equitable recoupment applies in this
case.5
The threshold issue we must address is whether petitioner
may use equitable recoupment against respondent, where respondent
has no valid claim for additional estate tax against which
petitioner needs to defend.
Pursuant to the doctrine of equitable recoupment, "a party
litigating a tax claim in a timely proceeding may, in that
proceeding, seek recoupment of a related, and inconsistent, but
now time-barred tax claim relating to the same transaction."
United States v. Dalm, 494 U.S. 596, 608 (1990). Equitable
recoupment can be used as a defense by both taxpayers and the
Government. Stone v. White, 301 U.S. 532 (1937). While
recoupment claims are generally not barred by the statute of
4This credit, which was not claimed on decedent's estate tax
return, was for property received by decedent from the estate of
her stepson Robert E. Mueller. Allowance of this previously
unclaimed credit was appropriate in determining the amount of the
deficiency. See sec. 6211.
5Both parties agree that there is no estate tax deficiency
and that petitioner is entitled to a decision that it has
overpaid its estate tax, regardless of any effect that the
doctrine of equitable recoupment might have.
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