Estate of Algerine Allen Smith, Deceased, James Allen Smith, Executor - Page 1

                                   110 T.C. No. 2                                     


                               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 January 12, 1998.           


                    P (decedent's estate) settled and paid claims that                
               were based in part on excessive royalties that had been                
               paid to and reported by decedent in prior years.  In                   
               our previous opinion in these cases, we held that P was                
               entitled to an overpayment of income tax pursuant to                   
               application of sec. 1341, I.R.C., and that such                        
               overpayment was includable in the taxable estate.                      
               Estate of Smith v. Commissioner, 108 T.C. 412 (1997).                  
               The parties now disagree on the method of calculating                  
               the overpayment.  R also seeks to amend the answer in                  
               order to decrease the credit for State death taxes that                
               was previously allowed in the estate tax notice of                     
               deficiency.                                                            
                    Held:  Relief under sec. 1341, I.R.C., is                         
               restricted to the portion of P's settlement payments                   
               that represents items of income that were previously                   
               included in decedent's income.                                         

               *This opinion supplements our opinion in Estate of Smith v.            
          Commissioner, 108 T.C. 412 (1997).                                          




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