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In the District Court, the Government moved for summary
judgment arguing that the sisters were not entitled to a refund
because the value of the settlement trust, if not part of the
stepfather's estate, was part of the mother's estate.19 The
Government claimed--by way of asserted equitable recoupment--that
taxes due from the mother's estate greatly exceeded the $90,000
that the sisters were trying to recover. The District Court
granted the Government's motion.
The sisters filed a timely motion for reconsideration in
1995, arguing for the first time that equitable recoupment did
not apply because the case did not involve a single transaction
or an identity of interest as required under the doctrine. The
District Court denied the sisters' motion for reconsideration,
finding that equitable recoupment applied. The District Court
reasoned that the case involved a single transaction, the
taxation of the settlement trust, and that the requisite identity
of interest was present because the parties seeking the refund
were the same parties who received the benefit of a larger
inheritance when the mother's estate was not taxed.
19The District Court found that at the time of her death,
the mother had a cause of action against the stepfather for his
fraudulent conveyances. By converting the mother's asset (her
cause of action) into a sum certain by settling the claim, that
sum was therefore includable in the mother's gross estate. See
Parker v. United States, 110 F.3d 678, 681 (9th Cir. 1997).
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