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been due from the estate even considering the overpayment
attributable to the allowance of the credit. As it turned out,
the additional estate tax attributable to the revaluation of the
shares was less than the overpayment resulting from the estate's
failure to claim the credit on its return, and the estate is
therefore due a refund.
Petitioner argues that it should be allowed to recoup
against the additional estate tax attributable to the revaluation
of the shares ($957,099) the amount of income tax overpaid on
their sale ($265,999). The majority would allow equitable
recoupment only if there were an overall deficiency in tax after
taking into account all issues in the case (other than the
equitable recoupment claim). I agree with Judge Beghe that the
recoupment claim should be allowed so long as it did not exceed
the additional tax due as a result of the increased valuation of
the shares; i.e. recoupment should be applied to correct the
error on a transactional basis, not just on the basis of whether
some amount is finally determined to be owed to the party who
received the windfall.
Recoupment has been characterized as a counterclaim or
defense against asserted liability relating to the same
transaction, item, or event upon which the main action is
grounded. Reiter v. Cooper, 507 U.S. 258, 264 (1993); United
States v. Dalm, 494 U.S. 596, 605 n.5, 608 (1990); Bull v. United
States, 295 U.S. 247, 262 (1935). The doctrine is designed to
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