Sec. 1341(a) income tax benefit is includible in the gross estate.

• Jurisdiction: United States
• Date: 01 October 1997
• Author: Barton, Peter C.

In Smith, 108 TC No. 20 (1997), the Tax Court ruled, in a case of first impression, that a Sec. 1341 (a) income tax benefit was includible in a decedent's gross estate, even though the Sec. 1341 (a) benefit was contingent rather than certain on the date of death. A Sec. 1341 (a) benefit results from an income tax deduction or credit based on the repayment of an amount included in gross income in a prior year. The Tax Court also reaffirmed prior case law in ruling that post-death events are relevant in determining the amount of a liability deductible from the gross estate under Sec. 2053(a)(3) if the deductible liability is the amount (if any) actually paid.

Sec. 1341(a) provides income tax relief for taxpayers required to repay an amount previously included in income under a claim of right. The reduction in tax liability is the greater of the following two calculations. The taxpayer either deducts the amount repaid or claims a credit equal to the reduction in tax that would have occurred had the amount repaid been excluded from income in:the earlier year.

Sec. 2033,.includes in the gross estate "all property to the extent of the interest therein of the decedent at the time...