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settlement of the claim. Estate of Smith v. Commissioner, 108
T.C. at 425.
Additionally, we had to decide the issue of whether the
income tax benefit derived by the estate as a result of the
application of section 1341(a) was an asset which increased the
gross estate. Id. at 414. We decided that it was, holding that
the taxable estate had to be increased by the amount of section
1341(a) relief that was attributable to the amount the estate
paid to Exxon in settlement of its claim. Id. at 430.8
The estate appealed our decision. The Court of Appeals for
the Fifth Circuit held that Exxon’s claim must be valued as of
the decedent’s date of death and, thus, must be appraised on
information known or available up to (but not after) that date.9
Estate of Smith v. Commissioner, 198 F.3d at 517. The Court of
8In a supplemental opinion, we addressed a dispute by the
parties regarding the Rule 155 computation. Estate of Smith v.
Commissioner, 110 T.C. 12 (1998).
9The Court of Appeals for the Fifth Circuit noted:
Although we are persuaded that, on these facts,
the Commissioner is not permitted to consider–-much
less rely exclusively on–-the amount of the post-death
settlement of the Exxon claim when valuing Decedent’s
allowable estate tax deduction, we are also persuaded
that the estate is not entitled to deduct the full
amount that was being claimed by Exxon at Decedent’s
death. Rather, for the reasons that follow, we
conclude that the correct analysis requires appraising
the value of Exxon’s claim based on the facts as they
existed as of death. [Estate of Smith v. Commissioner,
198 F.3d 515, 521 (5th Cir. 1999).]
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