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Click here for the full text of this decision FACTS:Louis Smith died in March 1997. In the estate tax form (Form 706) filed that year, the estate identified two retirement accounts from Phillips Petroleum Co. One was a thrift plan valued by the estate at $725,550, and the other was a stock plan valued at $42,808. The form reflected an estate tax balance due of $140,358, which the estate paid in full. In October 1999, the estate then filed a claim for a refund, plus accrued interest. The estate asserted that the refund was necessary to correct an “error in the calculation and the valuation of the gross estate of the decedent.” This request for refund was accompanied by a supplemental Form 706 that discounted the two retirement accounts by 30 percent. An attachment to Form 706 explained that the discount reflected the amount of income taxes that would be paid by the beneficiaries of the accounts upon their distribution through the estate. With the discount, the tax liability was calculated to be $61,627, and the refund requested was for $78,731 of the $140,358 paid. The IRS denied the refund, so the estate filed suit. The government moved for summary judgment, saying the estate was not entitled to discount the value of the retirement accounts, and that the accounts should be valued at their fair market value, as determined by the willing buyer-willing seller standard. The district court granted the motion, and the estate appeals. The estate argued the district court erred 1. by refusing to consider evidence properly included in the summary judgment record � such as additional factors asserted by an expert opinion that could affect the value of the retirement accounts; and 2. when valuing the retirement accounts, failing to apply a discount for the federal income tax liability that will be triggered upon distributions from the retirement accounts to the beneficiaries. HOLDING:Affirmed. The court considers whether the district court should have weighed in evidence of additional factors asserted by the expert opinion contributing to the lack of marketability of the retirement accounts and the need for a reasonable profit in order to induce a willing buyer to enter into a transaction. The court finds the estate made only vague references to these issues in the expert’s opinion, and those references were insufficient to put those issues properly before the district court. As to the specific point of the retirement accounts’ alleged lack of marketability, the court finds that the estate raises this point for the first time on appeal, and so refuses to analyze it. As to the specific point of the tax liability of the beneficiaries, the court notes that the income used to purchase the assets in the accounts has never been subject to income tax, and it is true that when the accounts are actually distributed, the beneficiaries must pay an income tax on the proceeds. Also, the estate must pay an estate tax on the retirement accounts. The court further notes that to at least partially compensate for this potentially double taxation, Congress enacted Internal Revenue Code 691(c), which grants the recipient of income in respect of a decedent an income tax deduction equal to the amount of federal estate tax attributable to that asset. This deduction is allowed in the same year the income is realized, when the accounts are actually distributed. The court finds no basis for the estate’s assertion that the accounts should be discounted under the willing buyer-willing seller to reflect the federal income tax liability to the beneficiaries upon distribution. The estate’s position turns the willing buyer-willing seller test into a subjective one, which is not how it should be applied. Instead, applying the test appropriately entails looking at what a hypothetical buyer would pay for the assets in the retirement accounts, which consist of stocks and bonds. “A hypothetical buyer would pay the value of the securities as reflected by the applicable securities exchange prices. A hypothetical seller would likewise sell the securities for that amount. Correctly applying the willing buyer-willing seller test demonstrates that a hypothetical buyer would not consider the income tax liability to a beneficiary on the income in respect of a decedent since he is not the beneficiary and thus would not be paying the income tax.” OPINION:King, C.J.; King, C.J., Higginbotham and Davis, JJ.

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