108 T.C. No. 20
UNITED STATES TAX COURT
ESTATE OF ALGERINE ALLEN SMITH, DECEASED, JAMES ALLEN SMITH,
EXECUTOR, Petitioner v. COMMISSIONER OF INTERNAL REVENUE,
Respondent
Docket Nos. 19200-94, 3976-95. Filed June 4, 1997.
During 1975 through 1980, decedent received
royalties from Exxon, which she reported as income. In
1983, Exxon was ordered to make restitution for
overcharging its customers. Exxon made restitution and
in 1988 filed suit in District Court against decedent
and other royalty interest owners for reimbursement of
the portion of the royalties attributable to Exxon's
overcharges. Decedent contested Exxon's claim.
Decedent died on Nov. 16, 1990. On Feb. 15, 1991,
the District Court determined that the royalty interest
owners were liable to Exxon for restitution of the
portion of royalties based on Exxon's overcharges. The
District Court referred the calculation of the amount
of this liability to a special master. In April 1991,
Exxon claimed that P owed a total of $2,482,719. On
its Federal estate tax return, filed July 12, 1991, P
claimed a deduction for $2,482,719 pursuant to sec.
2053(a)(3), I.R.C. On Feb. 10, 1992, P and Exxon
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