Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 16

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          Russell.  Alternatively, the estate argues that the grain sales             
          income is attributable to Russell because he received it under a            
          claim of right and without any restriction on his right to                  
          dispose of the income.                                                      
          I.   Ownership of Grain at Time of Sale                                     
               Initially, we must decide whether the grain sold in 1994 was           
          owned by Russell or BBP.  If the grain sold in 1994 was owned               
          solely by Russell and was not partnership property, then he will            
          be liable for any tax attributable to the entire amount of grain            
          sales proceeds in 1994.                                                     
               The grain that was sold in 1994 was grown in prior years and           
          was an asset of BBP.  The parties do not dispute that the grain             
          was part of the farming activity which was an operation of BBP.             
          BBP’s 1994 Form 1065 reported the grain sales gain as income to             
          the partnership and the estate and Russell each were allocated              
          one-half of the gain.  The estate and Russell each reported one-            
          half of the grain sales income on their respective 1994 tax                 
               In the settlement agreement signed August 24, 1998, it was             
          stipulated that all grain proceeds held on or after November 1993           
          in the name of BBP were the sole property of Russell.                       
          Handwritten notes of Stephen Ballantyne, dated August 23, 1998,             
          and entitled “Plaintiff’s Settlement Proposal”, state that the              
          plaintiffs “need to word agreement so that Estate will not pay              

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