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States, 391 F.3d at 628.6 Because the tax burden associated with
distributing the assets in the IRAs will never be transferred to
a hypothetical buyer, we find that the reasoning of Estate of
Davis v. Commissioner, supra, inapplicable to this case.
B. Cases Where Future Tax Benefit Taken Into Account
1. Estate of Algerine Smith–Value of Section 1341
Deduction Taken Into Account in Valuing Claim
Against Estate
In Estate of Algerine Smith v. Commissioner,7 198 F.3d 515
(5th Cir. 1999), revg. 108 T.C. 412 (1997), the Court of Appeals
for the Fifth Circuit addressed whether to consider the impact of
an income tax benefit in valuing a claim against an estate for
the purpose of the estate tax deduction under section 2053. The
estate owned a royalty interest in Exxon. The U.S. Government
had obtained a multibillion dollar judgment against Exxon, and
the company asserted that it had the right to recoup some of the
royalty payments it made to the estate and others to pay that
judgment. Exxon sued the royalty owners, and the District Court
ruled on a motion for summary judgment determining that the
royalty owners were liable to Exxon. The court then referred the
6Estate of Smith v. United States, 300 F. Supp. 2d 474 (S.D.
Tex. 2004), affd. 391 F.3d 621 (5th Cir. 2004), is discussed at
length infra sec. III.
7For the sake of avoiding confusion, we are providing a
method to differentiate this Estate of Smith from the Estate of
Smith cited in this section and further discussed infra sec. III.
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