                          T.C. Memo. 2007-370



                     UNITED STATES TAX COURT



         ESTATE OF SYLVIA GORE, DECEASED, PAMELA POWELL,
              PERSONAL REPRESENTATIVE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket No. 468-02.                 Filed December 19, 2007.


     Paul R. Hodgson, Edith F. Moates, and James E. Poe, for

petitioner.

     Elizabeth Downs, for respondent.




     *
       This opinion supplements our previously filed opinion in
Estate of Gore v. Commissioner, T.C. Memo. 2007-169.
                                - 2 -

                 SUPPLEMENTAL MEMORANDUM OPINION


     MARVEL, Judge:   Petitioner and respondent filed computations

for entry of decision under Rule 155.1    We must decide which

party’s method of computation is appropriate in determining the

amount of petitioner’s estate tax deficiency.

                             Background

     On June 27, 2007, the Court filed its opinion, Estate of

Gore v. Commissioner, T.C. Memo. 2007-169, in this estate tax

case and the related gift tax case consolidated therewith, Estate

of Gore v. Commissioner, docket No. 467-02 (gift tax case), but

withheld entry of decision so that the parties could submit

computations under Rule 155.2   On September 5 and 7, 2007,

respectively, petitioner and respondent filed their computations

for entry of decision in this estate tax case.    Because

petitioner’s and respondent’s computations conflicted, we

scheduled a hearing on the unagreed Rule 155 computations and

ordered the parties to file statements detailing the items of

disagreement and the reasons for the dispute.

     On October 5, 2007, petitioner filed a detailed statement of

the items of disagreement.   Petitioner contends that respondent’s


     1
       Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure.
     2
       The parties entered into an agreement resolving the
computation of petitioner’s gift tax liability, and decision was
entered in the gift tax case on Dec. 14, 2007.
                                      - 3 -

Rule 155 computation raises a new issue because it eliminates the

$1,183,029 gift tax deduction that respondent allowed in

calculating the estate tax deficiency he determined in the

September 26, 2001, estate tax notice of deficiency.              Petitioner

argues that, because respondent did not contest the gift tax

deduction before submitting his Rule 155 computation,

respondent’s attempt to disallow the gift tax deduction raises a

new issue, which is prohibited by Rule 155(c).3              Accordingly,

petitioner’s Rule 155 computation begins with the deficiency set

forth in the September 26, 2001, estate tax notice of deficiency,

$1,071,650.      From that amount, petitioner subtracts the

following:

Credit allowed for taxes paid to Oklahoma
  State as of statutory notice                ($88,737.00)
Total State death tax paid as of 8/28/07       284,406.50
Balance of State death tax credit              195,669.50     ($195,669.50)

Additional expense submitted to IRS
  and accepted                                296,292.55
Executors fee paid to Pamela Powell            20,814.00
Interest to Oklahoma (negotiated to
  one-half of billed amount)                  103,812.00

Total additional expenses without
  Federal interest included                   420,918.55

Tax on above amount at 55 percent                              (231,505.20)

Balance on tax                                                  644,475.30

     On October 9, 2007, respondent filed his statement regarding

the Rule 155 computation dispute.           Respondent’s computation



     3
       Rule 155(c) provides that “no argument will be heard upon
or consideration given to the issues or matters disposed of by
the Court’s findings and conclusions or to any new issues.”
                                - 4 -

reflects an increased deficiency over the amount determined in

the estate tax notice of deficiency because in calculating the

estate tax deficiency in the notice, respondent claims, he

erroneously allowed a $1,183,029 gift tax deduction.4    Respondent

argues that no gift tax liability existed because decedent’s

transfer of the Marital Fund assets to the Gore Family Limited

Partnership (GFLP) was incomplete for gift tax purposes.

Respondent contends that in Estate of Gore v. Commissioner, T.C.

Memo. 2007-169, we held that the alleged transfer did not

constitute a gift because decedent did not relinquish control

over the Marital Fund assets.   In addition, respondent argues

that the decision in the gift tax case, which petitioner

stipulated, reflects that petitioner had no gift tax deficiency

and provides that all gift tax payments be credited against

petitioner’s estate tax deficiency.     Removing the gift tax

deduction from his computation and incorporating certain credits

and deductions claimed by petitioner,5 respondent determined an


     4
       Respondent apparently assumed that the gift tax deficiency
that was the subject of the gift tax case would be sustained by
this Court and calculated the gift tax deduction accordingly.
Though the deduction has turned out to be erroneous, at the time
of its allowance it was consistent with respondent’s position in
the gift tax case. It seems that respondent’s error, if he
committed any, was in not taking an inconsistent position in the
estate tax case to protect the revenue.
     5
       In his determination, respondent found that petitioner had
not substantiated the $20,814 claimed as executor’s fees or
$55,000 of the $284,406.50 petitioner claimed as death taxes paid
                                                   (continued...)
                               - 5 -

estate tax deficiency of $1,361,004.03.   Respondent, however,

limited the deficiency asserted in his Rule 155 computation to

$1,071,650, the amount determined in the estate tax notice of

deficiency.

     On October 15, 2007, we conducted a hearing on the Rule 155

computation issue.   Counsel for both parties appeared and were

heard.   At the hearing, respondent’s counsel conceded deductions

by petitioner for the $20,814 in executor’s fees, the additional

$55,000 in Oklahoma estate taxes, and $12,495 in attorney’s fees.

The only remaining issue is whether the erroneous gift tax

deduction allowed in the September 26, 2001, estate tax notice of

deficiency should be included in the Rule 155 computation of

petitioner’s estate tax deficiency.

                            Discussion

     Under Rule 155(a), after the Court files its opinion

determining the issues in a case, the Court may withhold its

decision to allow the parties to submit computations of the

correct amount of the taxpayer’s deficiency to be entered as the

decision pursuant to the findings and conclusions of the Court.

If the parties disagree on the amount of the deficiency to be

entered as the decision, either or both of them may file a

computation of the deficiency they believe to be in accordance



     5
      (...continued)
to the State of Oklahoma.
                                 - 6 -

with the findings and conclusions of the Court.      At the Court’s

discretion, the parties may then be given an opportunity to be

heard in argument thereon, and the Court will determine the

correct deficiency.     Rule 155(b).   However, parties may not raise

new issues or matters in their Rule 155 computations.      See supra

note 3; see also Rule 155(c); Bankers Pocahontas Coal Co. v.

Burnet, 287 U.S. 308, 312 (1932).      The starting point for the

computation is the notice of deficiency from which the parties

compute the redetermined deficiency on the basis of matters

agreed to by the parties or determined by the Court.      See Home

Group, Inc. v. Commissioner, 91 T.C. 265, 269 (1988), affd. 875

F.2d 377 (2d Cir. 1989).

     Petitioner contends that the issue regarding the gift tax

deduction is a new issue which respondent may not assert in his

Rule 155 computation.    Respondent concedes that he failed to

recognize his computational error in the notice of deficiency and

that he failed to plead an increased deficiency during

litigation.   Nevertheless, respondent argues that the question of

whether decedent’s transfer of the Marital Fund assets to GFLP

constituted a completed transfer for gift tax purposes was

directly at issue in this estate tax case and in the gift tax

case.

     We agree with respondent.    While the notice of deficiency

serves as a starting point for the Rule 155 computation, the
                                   - 7 -

parties must compute the deficiency on the basis of the matters

decided by the Court.    See id.     Petitioner cannot reasonably

contend that the validity of the alleged transfer giving rise to

the gift tax deduction was not at issue.      At trial, petitioner

asserted various arguments relating to the transfer of assets to

GFLP, but we ultimately held that decedent did not complete the

transfer as claimed.    Because the attempted transfer of the

Marital Fund assets to GFLP was not completed and did not

constitute a gift, a gift tax liability attributable to the

transfer of Marital Fund assets did not arise, and no gift tax

deduction is warranted.    In the gift tax case, petitioner

acknowledged this result by entering into an agreement

recognizing that petitioner was not liable for any gift tax

deficiency and crediting all gift taxes paid against petitioner’s

estate tax deficiency.    The allowance of a gift tax deduction for

$1,183,029 would not reflect the findings of the Court in this

estate tax case or result in a correct computation of

petitioner’s estate tax deficiency.

     Respondent’s computation incorporates the parties’

stipulations and the findings of the Court and accounts for the

appropriate credits and deductions claimed and substantiated by
                                 - 8 -

petitioner.6   Consequently, we adopt respondent’s computation and

conclude that petitioner’s estate tax deficiency is $1,071,650.

     To reflect the foregoing,


                                         Decision will be entered

                                 in accordance with respondent’s

                                 computation.




     6
       Although respondent conceded several credits and
expenditures at the Oct. 15, 2007, hearing that he did not
include in his initial Rule 155 computation, we note that whether
or not respondent takes these additional expenses into account is
irrelevant because the resulting estate tax deficiency would
still exceed $1,071,650.
