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In 1988, Exxon filed suit against certain owners of royalty
and mineral interests, including decedent and Frankie
individually and against decedent as executrix of the estate of
Jessamine. Exxon claimed that it had overpaid royalties during
the years 1975 through 1980. Exxon's base claims for overpaid
royalties were made against decedent and Frankie in the following
amounts:
Algerine Allen Smith $249,304
Frankie Allen 783,013
Total Damages Sought $1,032,317
Exxon's claim against decedent represented 24 percent of the
total damages sought against decedent and Frankie.5
Decedent died in 1990 after she had inherited Jessamine's
and Frankie's interests in the oil and gas properties. Thus, by
1992, Exxon's claims for excess royalties paid to Jessamine,
Frankie, and decedent were all being pursued against petitioner
(decedent's estate). In 1992, petitioner settled and paid the
above claims for $681,840.
On her 1975 through 1980 Federal income tax returns,
decedent reported gross royalties from the oil and gas leases in
question in the following amounts:
5The record does not disclose how much of Exxon's stated
claims related to excess royalties received by Jessamine prior to
her death in 1979 or by Jessamine's estate after her death.
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