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income, the tax amounts to approximately $3,300; whereas, if the
interest is lumped with petitioner’s salary and other income, the
tax on the interest approximates $8,570. Respondent was not
caught off guard by this strategy.
With respect to the first issue, whether petitioner realized
interest income during 2001, the Court sustains respondent. The
accrued interest on the bonds, as the Court held in a parallel
situation in Apkin v. Commissioner, 86 T.C. 692, 695 (1986),
constituted “income in respect of a decedent” under section 691,
which provides in pertinent part:
SEC. 691(a). Inclusion in Gross Income.--
(1) General rule.--The amount of all items of gross
income in respect of a decedent which are not properly
includible in respect of the taxable period in which falls
the date of his death or a prior period * * * shall be
included in the gross income, for the taxable year when
received, of:
* * * * * * *
(B) the person who, by reason of the death of the
decedent, acquires the right to receive the amount, * *
*
Petitioner inherited the bonds when his mother died in 1999.
Petitioner was not only her sole heir but was the sole legatee in
her will. Additionally, petitioner was the named beneficiary on
the bonds. No election had previously been made under section
454(a) by petitioner’s mother to have the annual interest on the
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