Reevaluation of estate justifies equitable recoupment of income tax

Article Abstract:

The Tax Court has ruled against the IRS in the 'Branson' case. After hearing the arguments of the estate, the court found that the estate was entitled to a credit for overpaid income tax since the circumstances met the requirements of the doctrine of equitable recoupment. Citing the Supreme Court's decision in the 'Dalm' case (1990), the court ruled that the estate's recoupment claim was valid since the residuary legatee had complied with all relevant provisions. The dissenting opinion in the Tax Court, however, pointed to the differences between the Tax Court and the federal courts, noting that while the Tax Court had the jurisdiction to redetermine deficiencies it did not have the authority to apply the doctrine of equitable recoupment to make judgements on its own.

Personal Income Taxes, Income tax, Personal income tax, United States. Internal Revenue Service

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Remainder interest excludable from gross estate

Article Abstract:

The Ninth Circuit has ruled against the IRS in the 'Estate of Magnin' case. In overruling the Tax Court, the appellate court took into consideration prior decisions in the 'D'Ambrosio' case (1996) and the 'Merrill v. Fahs' (1945) case. After examining these cases, the Ninth Circuit found that the language of Section 2036(a) excepted the decedent's remainder interest from the estate. Moreover, the appellate court ruled that the time for valuing the consideration paid to the decedent by his father was when the father transferred the stock to his decedent. The Ninth Court, however, was uncertain of the value of the stock the decedent had received and remanded the case back to the Tax Court so that the proper values of the considerations involved could be determined.

Gift tax

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Payment to shareholder's estate included taxable income

Article Abstract:

The Ninth Circuit has ruled against the IRS in the 'Estate of Cartwright' case. Overruling the Tax Court, the appellate court accepted the argument of the estate that most of the $5 million paid to it from the proceeds of an insurance policy that benefitted the decedent's law firm were purchases of stock assets and not compensation as claimed by the IRS. Moreover, the appellate court ruled that firm's payments for work in process was actually an asset. The Ninth Circuit, however, decided that a portion of the $5 million paid to the decedent was compensation and remanded the case back to the Tax Court so that the fair market value of the decedent's stocks in the firm could be determined and its tax treatment properly computed by the IRS.

Life Insurance, Direct Life Insurance Carriers, Taxation

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