                        108 T.C. No. 4



                 UNITED STATES TAX COURT



        ESTATE OF MARY K. WETHERINGTON, DECEASED,
MARY LOUISE RIPPLE, PERSONAL REPRESENTATIVE, Petitioner v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent




 Docket No. 19235-94.               Filed February 10, 1997.

           R extended the time for P to pay estate
      tax under sec. 6161(a), I.R.C. P filed a
      request for further extension of time to pay
      tax under sec. 6161(a), I.R.C., which is now
      pending with the Commissioner. P moved to
      delay entry of decision until an extension of
      time to pay tax under sec. 6161(a), I.R.C.,
      no longer applies.

           Held, under the rationale of Estate of
      Bailly v. Commissioner, 81 T.C. 949 (1983),
      we will delay entry of decision until P's
      extension of time to pay tax under sec. 6161,
      I.R.C., is no longer in effect.


 Debra K. Smietanski, for petitioner.

 James F. Kearney, for respondent.
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                              OPINION


     COLVIN, Judge:   This matter is before the Court on

petitioner's Motion to Stay Proceedings.   In the motion,

petitioner asks the Court to postpone entry of decision until

either (1) An extension of time to pay petitioner's Federal

estate tax under section 6161(a) is no longer in effect and any

appeal of respondent's denial of an extension is final, or (2)

petitioner fully pays its outstanding Federal tax liability and

related interest, whichever happens first.   The parties agree

that, if we grant the motion, petitioner may deduct interest that

it would not be allowed to deduct if we had entered a decision.

Sec. 6512(a).

     We conclude that it is appropriate to delay entry of

decision until an extension of time for the payment of

petitioner's estate tax under section 6161 is no longer in effect

and any administrative appeal of respondent's denial of such an

extension is final, or until petitioner fully pays its Federal

tax liability and related interest, whichever occurs first.

     This is a case of first impression.   However, in a related

context, we delayed entry of decision where the taxpayer elected

to defer payment of estate tax for 10 years under section 6166.

Estate of Bailly v. Commissioner, 81 T.C. 949 (1983).
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     Section references are to the Internal Revenue Code as

amended.    Rule references are to the Tax Court Rules of Practice

and Procedure.

                             Background

     Mary K. Wetherington (decedent) died on April 8, 1990.    Her

estate consisted almost exclusively of agricultural real property

in Hillsborough County, Florida.    Petitioner filed decedent's

estate tax return on September 9, 1991.    Petitioner paid Federal

estate tax of $61,000 on April 2, 1991, and $97,793.77 on August

18, 1992.

     On March 3, 1995, petitioner sold part of decedent's real

property.   Petitioner paid estate taxes of $498,321.93 on March

6, 1995.

     Under section 6161(a)(1), the Secretary may extend the time

in which a taxpayer must pay estate tax for up to 12 months.

Under section 6161(a)(2), the Secretary may grant an extension,

for reasonable cause, up to 10 years from the due date of the

return.

     Respondent extended the time for petitioner to pay estate

tax under section 6161(a) for 1 year, and possibly for a second

year, because petitioner's assets were not liquid, and petitioner

could not pay the balance due.    Petitioner applied for a further

extension under section 6161(a), which is pending as of December

18, 1996.
                                  - 4 -


     Respondent determined a deficiency in estate tax.

Petitioner filed a petition to contest that determination.     The

parties have settled all issues in this case (except those in the

motion before us).   Petitioner had no deficiency or overpayment.

Petitioner owed $98,707.93 of the tax shown on the return plus

interest of $292,878.72 when petitioner filed this motion.

                            Discussion

A.   Background

     1.   Sections 6161 and 6166

     A taxpayer generally may deduct interest on unpaid Federal

and State estate taxes from the gross estate as an expense of

administration.   Sec. 2053(a).    Interest may accrue on unpaid

estate taxes because the estate has an extension of time to pay

tax under section 6166 or section 6161(a).     An executor may elect

to pay estate tax in 10 equal installments, starting at the end

of a 5-year period during which only interest is payable, if a

closely held business constitutes more than 35 percent of the

adjusted gross estate.   Sec. 6166(a)(1).    Petitioner did not make

an election under section 6166.     The Secretary may extend the

time in which a taxpayer is required to pay estate tax (up to 12

months) if there is reasonable cause under section 6161(a)(1) and

the accompanying regulations.1     Under section 6161(a)(2), the

     1
      Sec. 6161(a) provides:

                                                      (continued...)
                               - 5 -


Secretary may grant an extension, for reasonable cause, up to 10

years from the due date of the return.   Interest which arises

because the Secretary permitted a deferred payment of Federal

estate tax under section 6161(a) is deductible from the gross

estate as an administrative expense under section 2053(a)(2).

Estate of Bahr v. Commissioner, 68 T.C. 74, 83 (1977) (Court

reviewed).

     1
      (...continued)
     Sec. 6161. EXTENSION OF TIME FOR PAYING TAX.

     (a)   Amount Determined by Taxpayer on Return.

           (1) General rule. The Secretary, except as
           otherwise provided in this title, may extend the
           time for payment of the amount of the tax shown or
           required to be shown, on any return or declaration
           required under authority of this title (or any
           installment thereof), for a reasonable period not
           to exceed 6 months (12 months in the case of
           estate tax) from the date fixed for payment
           thereof. Such extension may exceed 6 months in
           the case of a taxpayer who is abroad.

           (2) Estate tax. The Secretary may, for
           reasonable cause, extend the time for payment of--

                (A) any part of the amount determined by the
                executor as the tax imposed by chapter 11, or

                (B) any part of any installment under
                section 6166 (including any part of a
                deficiency prorated to any installment under
                such section),

           for a reasonable period not in excess of 10 years
           from the date prescribed by section 6151(a) for
           payment of the tax (or, in the case of an amount
           referred to in subparagraph (B), if later, not
           beyond the date which is 12 months after the due
           date for the last installment).
                                - 6 -


     2.   Deduction of Interest Paid on Estate Taxes Deferred
          Under Section 6166

     A taxpayer may not deduct interest paid or incurred after

entry of a decision, sec. 6512(a), Estate of Bailly v.

Commissioner, 81 T.C. at 954, unless section 7481(d) (discussed

below) applies.   The taxpayer in Estate of Bailly v.

Commissioner, supra, elected to pay estate tax in 10 annual

installments under section 6166.    We delayed entry of decision in

that case to allow the taxpayer to deduct interest on the tax.

Id. at 958.   Section 6512(a) would have prevented the taxpayer

from deducting interest it paid after our decision became final.

In Estate of Bailly v. Commissioner, supra, we said that we were

troubled by the harshness of section 6512(a) with respect to

estate tax cases.   We agreed, in the interest of fairness and

justice, to postpone entry of decision until the final

installment of the estate tax liability is due, or paid,

whichever is earlier.

     Section 7481(d) was enacted in 1988 in response to Estate of

Bailly v. Commissioner, supra.     Technical and Miscellaneous

Revenue Act of 1988, Pub. L. 102-647, sec. 6247, 100 Stat. 3342,

3751-3752.    Under section 7481(d), a taxpayer may move to reopen

a case to which an extension of time to pay estate tax under

section 6166 applies to ask the Court to modify the amount of the

estate's deduction for interest.    See Rule 262.

B.   Contentions of the Parties
                                - 7 -


     Petitioner asks the Court to postpone entry of decision

until:    (1) An extension of time to pay petitioner's Federal

estate tax under section 6161(a) is no longer in effect and

appeal of respondent's denial of an extension is final, or (2)

petitioner pays estate tax and interest it owes, whichever is

earlier.    Petitioner contends this situation is analogous to that

in Estate of Bailly v. Commissioner, supra.

     Respondent contends:    (1) This case is not like Estate of

Bailly because no extension of time to pay tax is now in effect;

(2) granting petitioner's motion would prevent respondent from

reviewing the facts and circumstances to determine whether a

hardship under section 6161 is present; and (3) Congress

considered section 6161(a) when enacting section 7481(d), but did

not provide a remedy for petitioner's situation.    Respondent

points out that if we delay entry of decision, petitioner can

deduct interest, the deduction of which would otherwise be

precluded by entry of decision under section 6512(a).    Neither

party questions the Court's power to postpone entry of decision

in this case.

     1.     Effect of the Fact That Petitioner's Request to
            Continue To Defer Tax Under Section 6161 Is Pending
            With The Commissioner

     Respondent contends this situation is unlike that in Estate

of Bailly v. Commissioner, supra, because no extension of time to

pay tax under section 6161(a) is now in effect.    We disagree.
                                - 8 -


Respondent has previously granted an extension under section

6161(a).    According to our record, petitioner's request for a

further extension is now pending.

     Respondent contends that we should not delay entry of

decision because it would enable petitioner to deduct interest

that it could not otherwise deduct.     We disagree with

respondent's view that such a result is improper.     Section

6161(a), like section 6166, can result in an extension of time

for a taxpayer to pay estate tax.    We believe the situation in

this case is analogous to that in Estate of Bailly v.

Commissioner, supra.

     We distinguish this case from Estate of Nevelson v.

Commissioner, T.C. Memo. 1996-361, because there petitioners

asked the Court to delay entry of decision more than 5 years past

the date the parties had agreed to file a stipulated decision.

Here, the parties have not agreed to a date to file a stipulated

decision.

     2.     Whether Granting Petitioner's Motion Would Interfere
            With Respondent's Exercise of Discretion Under Section
            6161

     Section 6161(a) gives the Commissioner discretion to grant a

taxpayer's request for extension of time to pay taxes.

Respondent contends that granting petitioner's motion would

eliminate that discretion.    We disagree.   Our granting of this
                                 - 9 -


motion would not affect respondent's discretion to act on a

taxpayer's request to defer payment of tax under section 6161(a).

     3.   Congressional Intent

     Respondent contends that we should deny petitioner's motion

because Congress considered section 6161(a) extensions when

enacting section 7481(d), but did not provide a remedy for

petitioner's situation.   We disagree.   There is no indication in

the conference report accompanying the enactment in 1988 of

section 7481(d) that Congress considered (much less rejected)

extending it to section 6161(a).    H. Conf. Rept. 100-1104, at

232-233 (1988), 1988-3 C.B. 473, 722-723.    Respondent points to

no other authority for that assertion.

C.   Conclusion

     We will not enter decision until an extension of time for

the payment of petitioner's estate tax under section 6161 is no

longer in effect and any administrative appeal of respondent's

denial of petitioner's request for an extension is final, see

section 20.6161-1(b), Estate Tax Regs., or until petitioner fully

pays its outstanding Federal tax liability and related interest,

whichever occurs first.   The parties shall report to the Court

when those conditions are met.

                                               An appropriate Order

                                          will be issued.
