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On appeal, the Court of Appeals for the Ninth Circuit
accepted the Government's concession that the settlement trust
had been improperly included in the stepfather's estate.
However, the Court of Appeals concluded that even if the mother's
claim against the stepfather had been includable in her estate,
the Government's claim against her was time barred and that bar
could not be circumvented by application of the doctrine of
equitable recoupment because this case involved two or more
taxpayers, two or more transactions, no inconsistent treatment
between them, and no equitable reason to deny the sisters their
refund.
In concluding that the District Court erroneously combined
two or more separate transactions and analyzed them under the
guise of taxation of the trust, the Court of Appeals for the
Ninth Circuit observed that when the Supreme Court declared in
Rothensies v. Electric Storage Battery Co., 329 U.S. at 299, that
equitable recoupment
"permit[s] a transaction which is made the subject of
suit by a plaintiff to be examined in all its aspects,
and judgment to be rendered that does justice in view
of the one transaction as a whole." * * * This
pronouncement, however, does not mean that courts
should lump together related, but nonetheless separate
transactions so that the facts of a case can be viewed
as "one transaction as a whole." * * * [Parker v.
United States, supra at 684; citation omitted.]
A number of factors contributed to the Court of Appeals'
decision in Parker to treat the sisters' matter as involving more
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