Edith Hunter Hornberger, et al. - Page 14




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                                       OPINION                                        
          Issue 1.  Tax-Benefit Rule                                                  
               Respondent contends that the tax-benefit rule requires                 
          petitioner to include in her 1992 income the $2,290,469 refund of           
          interest  which was deducted on her 1988 amended tax return.  In            
          the alternative, respondent asserts that that amount is includable          
          in the income of either the estate or the trust.11                          
               The tax-benefit rule requires an amount to be currently                
          included as income to the extent that:  (1) The amount was properly         
          deducted in a year prior to the current year; (2) the deduction             
          resulted in a tax benefit; (3) an event occurs in the current year          
          that is fundamentally inconsistent with the premises on which the           
          deduction was originally based; and (4) a nonrecognition provision          
          of the Internal Revenue Code does not prevent the inclusion in              
          gross income.  See, e.g., Hillsboro Natl. Bank v. Commissioner, 460         
          U.S. 370, 383-384 (1983); Frederick v. Commissioner, 101 T.C. 35,           
          41 (1993).  A current event is an event that is fundamentally               
          inconsistent with the premises on which the deduction was                   
          originally based when that event would have prevented the deduction         





               11   The deficiencies and additions respondent determined              
          against the estate and trust are alternatives.  Neither a                   
          deficiency nor an addition to tax will be due from either entity            
          should we hold that petitioner realized income pursuant to the              
          tax-benefit rule.                                                           





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