28
Opinion of the Court
I
Congress effected major revisions of the Internal Revenue Code in the Tax Reform Act of 1986, 100 Stat. 2085. One of those revisions was the addition of a new estate tax provision applicable to any estate that filed a timely return after the date of the Act, October 22, 1986. The new provision, codified as 26 U. S. C. § 2057 (1982 ed., Supp. IV),1 granted a deduction for half the proceeds of "any sale of employer securities by the executor of an estate" to "an employee stock ownership plan." § 2057(b).2 In order to qualify for the deduction, the sale of securities had to be made "before the date on which the [estate tax] return . . . [was] required to be filed (including any extensions)." § 2057(c)(1).
Respondent Jerry W. Carlton, the executor of the will of Willametta K. Day, deceased, sought to utilize the § 2057 deduction. Day died on September 29, 1985. Her estate tax return was due December 29, 1986 (after Carlton had obtained a 6-month filing extension). On December 10, 1986, Carlton used estate funds to purchase 1.5 million shares of MCI Communications Corporation for $11,206,000, at an average price of $7.47 per share. Two days later, Carlton sold the MCI stock to the MCI ESOP for $10,575,000, at an average price of $7.05 per share. The total sale price thus was $631,000 less than the purchase price. When Carlton filed the estate tax return on December 29, 1986, he claimed a deduction under § 2057 of $5,287,000, for half the proceeds of the sale of the stock to the MCI ESOP. The deduction reduced the estate tax by $2,501,161. The parties have stipu-1 Section 2057 was repealed for estates of decedents who died after December 19, 1989. See Omnibus Budget Reconciliation Act of 1989, § 7304(a), 103 Stat. 2352.
2 Section 2057(e) defined "employer securities" by reference to § 409(l) of the Code, which in turn defined the term generally as "common stock issued by the employer (or by a corporation which is a member of the same controlled group) which is readily tradable on an established securities market." 26 U. S. C. § 409(l)(1) (1982 ed., Supp. IV).
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