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rejecting a settlement offer and proposing a counteroffer of
$944,280 for Exxon’s claim against the Allen parties.
Decedent died testate on November 16, 1990, in Texas. James
Allen Smith, decedent’s son, is the executor of decedent’s
estate, and he filed a Form 706 on July 12, 1991. On the Form
706, the estate claimed a deduction of $2,482,719 for a claim
against the estate pursuant to section 2053(a)(3). The estate
derived this amount from Exxon’s contention that, with interest,
the amount due from decedent for Exxon’s claim was $2,482,719.7
Net of interest, Exxon contended the amount due was $1,032,315.
On July 21, 1994, respondent issued a notice of deficiency.
In the notice of deficiency, respondent determined that the
estate’s deduction for Exxon’s claim against the estate was
allowable in the amount of $681,840, rather than $2,482,719,
because “it has not been established that any greater amount is
deductible under the provisions of the Internal Revenue Code.”
Prior Court Proceedings
The main issue for decision in this case was the amount the
estate was entitled to deduct pursuant to section 2053(a)(3) for
Exxon’s claim against the estate. In our original opinion, we
held that the amount of the estate’s section 2053(a)(3) deduction
for Exxon’s claim was limited to the amount ultimately paid in
7This amount included amounts sought from Jessamine’s and
Frankie’s interests, which decedent had inherited.
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