Estate of Dean v. Commissioner

T.C. Memo 1983-276 (1983)

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Estate of Dean v. Commissioner

United States Tax Court
T.C. Memo 1983-276 (1983)

Facts

Jack Dean sold cattle to Paul C. Dean, who promised to pay $221,252.69 in annual installments over eight years. Jack secured the arrangement by having Paul sign a promissory note. Jack died on July 26, 1972, before Paul had made any payments on the promissory note. Jack’s estate (plaintiff) was entitled to collect on the promissory note, and the residue of the estate was to be distributed equally among Jack L. Dean, Bonnie D. Evans, and Deborah K. Dean. In 1974, Paul made his first payment to Jack’s estate, and shortly after, the estate distributed the promissory note to the three beneficiaries. Paul then paid off the remainder of the promissory note by paying the three beneficiaries in December of 1974. After filing the 1974 estate-tax return, Jack’s estate claimed a deduction for the distribution of the promissory note to the beneficiaries, citing § 661(a)(2) of the Internal Revenue Code, which allowed for a deduction for estate income that was distributed to the estate’s beneficiaries. The Internal Revenue Service (IRS) (defendant) denied the deduction, citing § 691, which provided that income in respect of a decedent must be taxed to the estate without a deduction. The estate petitioned the tax court for review.

Rule of Law

Issue

Holding and Reasoning (Fay, J.)

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