Estate of Algerine Allen Smith, Deceased, James Allen Smith, Executor - Page 3

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          docket No. 3976-95, respondent determined a deficiency of                   
          $558,272 in petitioner's Federal income tax for 1992.  The                  
          deficiency determined in docket No. 3976-95 represents an                   
          alternative position taken by respondent to protect the                     
          Government's interest in the event its position in docket No.               
          19200-94 is not sustained.                                                  
               After concessions, the issues remaining for decision are:              
          (1) Whether petitioner's section 2053(a)(3) deduction for a claim           
          against the estate is limited to the amount for which the claim             
          was settled following decedent's death; (2) if petitioner is                
          entitled to a section 2053(a)(3) deduction for the entire amount            
          claimed on the Federal estate tax return, whether petitioner                
          realized discharge of indebtedness income pursuant to section               
          61(a)(12) when it settled the claim in question for a lesser                
          amount; and (3) whether the income tax benefit derived by                   
          petitioner as a result of the application of section 1341(a) is             
          an asset which increases the gross estate.                                  

                                     Background                                       

               This case was submitted fully stipulated pursuant to Rule              
          122.  The stipulation of facts, supplemental stipulation of                 


               1(...continued)                                                        
          Practice and Procedure.                                                     
               2Respondent has conceded the accuracy-related penalty under            
          sec. 6662(a).                                                               




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