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other hand, on the partnership tax return, Hillgren reported a
.05-percent profit interest so more income from the partnership
could bypass him and go to the trust that provided for his
children. The discrepancy was not fixed until after the
examination of the estate tax return had begun. Hillgren then
caused amended partnership tax returns to be filed for 1997,
1998, and 1999.
During trial, Albrecht was questioned by respondent as to
why he took inconsistent positions on the estate tax return and
on the partnership return regarding Hillgren’s interest in the
partnership. Albrecht testified that, because decedent had died
and because the amended trust provided for disposition of her
estate to Hillgren’s children, the estate could essentially
disregard the provisions of the partnership agreement by
interpreting Hillgren’s partnership interest in a way that would
benefit his children and beneficiaries of decedent’s estate. The
income not allocated to Hillgren would not flow through the
partnership or subject him to income tax on the distributions and
ultimately would not pass through Hillgren’s estate.
Hillgren testified regarding the discrepancy on the returns
as follows:
Q Now, you heard counsel for respondent in his
opening statement mention the fact that in the 1997 tax
return for the partnership, your sister’s profit
interest was shown at 99.95 percent and yours was shown
at either zero, or .05 percent, instead of 25/75. Why
was that?
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