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After concessions, the issue for decision is whether the
estate is entitled to deductions for (1) the portion of a Federal
income tax liability to be refunded due to a reduction in
reported income and (2) the corresponding portion of a State
income tax liability for which a refund has yet to be requested.
This case was submitted fully stipulated under Rule 122.
Unless otherwise indicated, all section references are to the
Internal Revenue Code as in effect as of the date of decedent's
death, and all Rule references are to the Tax Court Rules of
Practice and Procedure. The stipulated facts are incorporated
herein by this reference.
Background
Evelyn M. McMorris (decedent) died on March 4, 1991, a
resident of Colorado. The personal representative, decedent's
son Jerry D. McMorris (Jerry McMorris), was a resident of
Colorado at the time the petition was filed in this case.
Donn D. McMorris, decedent's husband (Mr. McMorris), died on
April 10, 1990. On June 11, 1990, decedent was declared
incompetent due to irreversible advanced Alzheimer's disease, and
Jerry McMorris was appointed as conservator for her estate. In
partial distribution of decedent's interest in her husband's
estate, 13.409091 shares of stock in N.W. Transport Services,
Inc. (NW), were distributed to the estate of Evelyn M. McMorris,
Protected Person. On September 19, 1990, decedent, through Jerry
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