Bohan v. United States

Ruth Bohan (plaintiff) was the widow of Dr. Peter Bohan, who left an estate of approximately $900,000 at the time of his death in 1955. Ruth was the executrix and sole residuary legatee of Peter’s will. In 1957, the estate had distributable net income totaling $29,076.15. Ruth also received distributions in kind that year of corporate stock, rights to a dividend, and rights to purchase additional stock. These partial distributions were made from the estate’s corpus by the Missouri probate court to Ruth in advance of the final settlement. Ruth reported income in the amount of the estate’s DNI and paid income taxes on that amount, but she did not report income on any of the distributions made to her. The government (defendant) found that she had income in the amount of the DNI of the estate from the in-kind beneficiary distribution and issued a deficiency for that amount. The estate was allowed a deduction in the amount of its DNI. Ruth paid the income tax sought and sued for a refund. The government argued that Ruth had received the distribution as a property properly paid within the meaning of the Internal Revenue Code, which rendered it as income. Ruth disagreed with this conclusion, noting that the probate court could still recall the distributions until it approved the final distribution of Peter’s estate. The trial court agreed with Ruth’s contention. However, the government appealed, arguing that the funds received by Ruth were received under a claim of right and that they should still be included as income.