IRD and the Tax Court

AuthorSeymour Goldberg
ProfessionSenior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
According to the United States Tax Court in Chastain v. Commissioner,
59 T.C. 461 (1972) the fractional rule is used in determining the IRD
deduction that is applicable to a recipient of an IRD amount. The Tax
Court opinion stated in part the following:
The parties are not in disagreement as to the general operation of
section 691(c). First, a fraction is determined in which the nu-
merator consists of the section 691(a) items of income received
by the taxpayer during the year and in which the denominator
consists of the sum of all the section 691(a) items. The fraction is
632,402.84 / 793,092.06. So much is agreed to by the parties. That
fraction is then to be multiplied by the amount of estate tax at-
tributable to the net value for estate taxes of all the section 691(a)
items. . . .
In the Estate of Kincaid v. Commissioner, 85 T.C. 25 (1985), Mrs.
Kincaid was the recipient of IRD payments. The value of the right to
the IRD payments was includable in Mr. Kincaid’s gross estate and was
eligible for the marital deduction under Sec. 2056(a) of the Code.
According to the Tax Court’s opinion in Kincaid:
[T]he section 691(c)(1)(A) deduction is computed by creating a
fraction in which the numerator is the IRD received by Mrs. Kin-
caid during the year and included in her income and in which the
denominator is the value of all IRD included in Mr. Kincaid’s gross
estate. That fraction is multiplied by the estate tax attributable to
all IRD included in his gross estate. The result is the section 691(c)
(1)(A) deduction.

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