The district court upheld an estate's claim that it was due a tax refund based on a substantial deduction for interest on an erroneous tax payment, which it retroactively characterized as a loan from a limited partnership to the estate for payment of estate taxes. The decedent transferred to the limited partnership the full amount of the applicable community property bonds before her death, and the district court correctly applied the relevant discount reflecting the encumbrance on the partnership interests. The estate and partnership may not be collapsed to functionally the same entity simply because they share substantial (though not complete) common control. The district court correctly permitted a deduction for the interest on the resulting loan. The district court's judgment is affirmed. 5th U.S. Circuit Court of Appeals, No. 10-41311, 09-25-2012.
Keller v. United States
September 27, 2012