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authority to apply equitable recoupment. We further hold that
petitioner is entitled to recoup the residuary legatee's
excessive payment of income tax against the estate tax
deficiency.
The relevant facts are taken from our findings in Branson I,
the parties' submissions, and the existing record. Petitioner is
the estate of Frank A. Branson (decedent), who died testate on
November 9, 1991, in Mendocino, California. Mary March (March),
decedent's daughter, is the executrix and residuary legatee of
the estate. March's legal address was Potter Valley, California,
at the time the petition in this case was filed.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect as of the date of decedent's
death, and all Rule references are to the Tax Court Rules of
Practice and Procedure. All dollar amounts are rounded to the
nearest dollar, unless otherwise indicated.
Background
At the time of his death, decedent owned 12,889 shares of
Savings stock and 500 shares of Willits stock. Petitioner
reported the value of the Savings and Willits shares as $181.50
and $485, respectively, per share, on its Form 706, United States
Estate (and Generation-Skipping Transfer) Tax Return.
Decedent's will provided that all estate taxes were to be
paid from the residue of the estate. Pursuant to a court order,
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