Estate of Davison v. United States

Helen Davison died on December 24, 1952. At the time of her death, Davison owned two pieces of real estate: a 320-acre tract, which she had leased for the year 1952 to Fred Jones in exchange for one-fourth of all crops grown on the land, and a 640-acre tract, which had similarly been leased from February 1952 to January 1953 for one-half of the net proceeds of all crops grown on the property. At the time of Davison’s death, she had already received $6,516.01 for the smaller tract (called the Coolidge tract). Davison had not received any money for the larger tract (called the Eloy tract). In February 1953, Davison’s estate (plaintiff) was paid $14,137.14 for the Coolidge tract, and, after some discussion and compromise, in early 1954, the estate received $14,429.43 for the Eloy tract. Both amounts were included on Davison’s estate tax return, but neither amount was reported as income to the estate. The government (defendant) found a deficiency and requested that the estate pay income tax on both amounts received for the tracts. The estate paid income tax, filed claims for refund, and, on its disallowance, filed this suit. The estate argued that the funds received were part of the property of Helen’s estate and that because the estate received these amounts in satisfaction of claims for rent for those amounts, the estate did not receive any income. The government argued that the incoming money was income for the estate in the years received.