                        T.C. Memo. 2001-92



                      UNITED STATES TAX COURT



  ESTATE OF MARY B. BULL, DECEASED, JOHN N. EDDY AND THOMAS R.
                EDDY, CO-EXECUTORS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4908-99.                     Filed April 13, 2001.



     Karen L. Hawkins, for petitioner.

     G. Michelle Ferreira, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     GERBER, Judge:   Respondent determined an estate tax

deficiency in the amount of $347,219, all of which is in dispute.

The following three issues are in controversy:   (1) Whether the

reported value of a partially completed personal residence should

be increased to reflect its value if completed because of the

possibility of insurance recovery or reimbursement; (2) whether,
                               - 2 -

in connection with the same residence, the gross estate should

include possible future recovery from insurance and/or whether it

should be reduced by possible future costs of reconstruction of a

partially completed residence; and (3) whether the gross estate

should be increased by $88,506 attributable to a postdeath

insurance recovery received by the estate.

                         FINDINGS OF FACT1

     At the time of the filing of the petition, Mary B. Bull’s

estate was being administered in Martinez, California.   The

coexecutors, at the time of the filing of the petition, resided

in Garland, Texas.   Mary B. Bull (decedent), who died on November

4, 1994, was the sole owner of residential real property located

at 5945 Manchester Drive, Oakland, California.   On October 20,

1991, the Manchester Drive residence and its contents were

completely destroyed in a natural disaster commonly known as the

“Oakland Hills fire”.

     Decedent maintained insurance on the Manchester Drive

property and its contents with the Chubb Group of Insurance

Companies (Chubb), under a policy effective June 16, 1991.     The

policy limits, which were subject to an inflation provision,

provided for coverage of $283,000 on the dwelling and $141,500 on

the contents.   Under the terms of the policy, the coverage would



     1
       The parties’ stipulation of facts is incorporated by this
reference.
                               - 3 -

increase to account for postissuance inflation.    The policy also

provided for extended replacement cost.   The extended replacement

coverage, however, was limited to 50 percent of the policy’s

coverage limits.   Replacement was an alternative option and could

not be claimed in addition to damage recovery.    In the latter

part of 1991, after its adjusters examined the property, Chubb

paid decedent $478,939.25.   That payment represented the maximum

possible recovery for loss of decedent’s dwelling and/or its

contents under the terms of the policy, as adjusted for

inflation.

     Within 6 months after the fire, reportedly under pressure

from the California State Insurance Commissioner, the insurance

industry (including Chubb) unilaterally agreed, in connection

with the Oakland Hills fire, to disregard the 50-percent cap2 on

replacement costs, and to pay the actual cost of replacement,

even if that cost exceeded the policy limits.    That change in

approach occurred after Chubb had paid decedent the maximum

recovery possible under the terms of the policy.

     After Chubb unilaterally offered to pay an amount in excess

of its obligations for replacement under the policy, decedent

invited a bid for construction of a replacement residence from

Krueger Brothers Builders, Inc. (Krueger).   Krueger’s initial bid



     2
       Apparently, the 50-percent cap on replacement was a policy
refinement that was employed in decedent’s geographical area.
                               - 4 -

to restore the dwelling was $1,016,211.69, which included the

cost of an architect and building code upgrades.    A Chubb claims

specialist estimated that the cost of rebuilding other structures

(e.g., retaining walls, driveway, and patio) would be

$129,413.11. During August 1992, Chubb and decedent entered into

a “Settlement Statement and Agreement to Rebuild At Same Location

(Subject to The Terms and Conditions of the Policy)”.    Under that

document, decedent made the choice to reconstruct or restore her

residence, and Chubb undertook the commitment to reimburse

decedent for the restoration in an amount up to $1,299,346.94.

Chubb’s obligation under the agreement, however, was subject to

change (would be less) if decedent “[decided] not to replace part

of the building or other structures or if the cost of * * *

construction is less” than estimated.    Chubb withheld a portion

of any amount due under the agreement to ensure compliance with

decedent’s agreement to reconstruct.    The agreement called for

release of reimbursement payments by Chubb in an incremental

manner:   One-third upon execution of the agreement, one-third

when the architect and/or contractor advised Chubb that the

framing was completed, and one-third when presented with a notice

of occupancy by the city.

     During the summer of 1993, decedent entered into an

agreement with Krueger to build a replacement residence on the

Manchester Drive land for a projected estimated price of
                               - 5 -

$1,270,658, which included construction of a single family

dwelling, foundation, and site improvement work.    The terms of

the construction contract required certification by decedent’s

architect before progress payments and/or change orders could be

made.   Chubb reviewed the architect’s certifications and any

accountings by Krueger.   Chubb used the information from these

materials as a basis for preparing “Statements of Loss”, the

enabling document preceding reimbursement to decedent.

     Although Chubb paid reimbursement proceeds directly to

decedent, Krueger performed the renovations based on its

expectation of Chubb’s reimbursement of decedent.    Chubb made

payment only after receipt of verification that work had been

performed and accounted for by Krueger.   Chubb also made payments

to decedent for living expenses while the residence was being

rebuilt.

     Prior to her November 4, 1994, death, decedent received

payments totaling $1,663,102 from Chubb, which Chubb

characterized as follows:
                                       - 6 -
  For                   1991           1992        1993            1994

Living
  expenses         $25,000.00       $53,616.14   $45,537.38     $22,984.69
Debris
 removal               3,709.00      25,821.00       ---            ---
Land stabili-
  zation                   ---       21,161.25     5,799.23      15,627.00
Landscaping            14,362.25     20,637.75       ---            ---
  code
Upgrades                  ---        16,312.41    42,261.53         ---
Other
 structures            5,000.00     129,413.11       ---            ---
Building
                   1
 contents           143,623.00         ---       430,138.59        ---
Building re-
                   1
  construction      287,245.00      264,735.72   90,117.01         ---

   Total               478,939.25   531,697.38   613,853.74     38,611.69
       1
         These amounts were paid by Chubb in 1991 as payment in full of the
inflation indexed policy limits and were not originally designated for
rebuilding of the residence.

        As of September 1994, Krueger increased the total projected

cost to complete the residence from $1,270,658 to $1,654,348.                 As

of November 2, 1994, Krueger estimated that the completion of the

residence construction would cost $757,174.24.                As of May 31,

1997 when the residence was completed, a total of $1,759,509.65

had been paid to Krueger.

        After decedent’s death, her nephews, John and Thomas Eddy,

became coexecutors and primary beneficiaries of the estate, and,

ultimately, they decided to complete the reconstruction of the

residence.       During the summer of 1995, John and Thomas Eddy had a

disagreement about whether the residence should be completed.                 An

attorney was engaged to negotiate a resolution, and an agreement

was reached about 1 year later.           The agreement provided that: (1)

No more than $44,000 would be paid for landscaping, with any
                               - 7 -

amount in excess being paid by Thomas; (2) for purposes of the

agreement, the value of the residence was to be $750,000; and (3)

the residence would be distributed to Thomas, and John would

receive other assets valued at $375,000 (representing one-half

the value of the residence).   During 1995, Chubb paid a total of

$1,122,606 to decedent’s estate, which was characterized by Chubb

as being for the following purposes:     Landscaping $19,200.53,

code upgrades $124,859.55, building $890,039.89, and contents

$88,506.17.   After decedent’s death, the estate paid

$1,030,378.44 to Krueger.

     Prior to the completion of the residence, the county

government assessed it as new construction property with an

assessment value of $806,175 for the 1995-96 tax year and

$836,275 for the 1996-97 tax year.     The gross estate included

$732,773 as an amount due from Chubb as potential reimbursement

after the completion of the restoration.     The gross estate was

reduced by $795,440 and $53,075, or a total of $848,515,

representing the amount that would be due to Krueger if it was

decided to proceed with construction to restore the residence and

Krueger completed the work.

     An appraisal attached to the estate tax return reflected the

value of the partially (57 percent) constructed residence at

$612,000, the amount that was included in the gross estate.     Many

of the homes that were rebuilt after the Oakland Hills fire were
                                - 8 -

“overbuilt” in that restoration costs exceeded the completed

home’s fair market value.    The insurance companies’ unilateral

agreement to reimburse policyholders for restoration of

residences, even though the costs exceeded their policy

obligations, was, in great part, responsible for restoration

costs that exceeded the completed market value of the residences.

     On August 22, 1996, the coexecutors petitioned the probate

court for and received a waiver to permit distribution of the

rebuilt residence to Thomas at the previously agreed value of

$750,000.    Thomas, on December 17, 1996, entered into an

exclusive listing with a real estate agent to place the residence

on the market for an asking price of $995,000.    Ultimately, the

residence was sold for $1,030,000 on March 18, 1997.

                               OPINION

     Decedent’s home was destroyed by fire and was being restored

at the time of her death.    Her estate, relying on an appraisal,

included $612,000 in the gross estate as the fair market value of

the residence, which was 57 percent complete.    Also included in

the gross estate was an amount exceeding $700,000 that the estate

estimated would be due from the insurance carrier for future

reimbursement upon completion of the restoration of the

residence.   Finally, the gross estate was reduced by an amount

exceeding $800,000 that the estate estimated would be due to the

contractor, if the construction of the residence was completed.
                               - 9 -

In effect, the amounts estimated as being due to the contractor

and due to the estate from the insurance company resulted in a

net reduction of approximately $120,000 in the gross estate.

Considering the $612,000 inclusion and reduction of approximately

$120,000, the gross estate was increased by a net amount of

approximately $490,000 in connection with decedent’s interest in

the partially completed residence.

     With respect to the $612,000 amount, respondent determined

that the value of the residence, as completed, should be

includable in the gross estate.   Based on the $1,032,000

completed value set forth in the appraisal attached to the estate

tax return, respondent determined that the gross estate should be

increased by $420,000 ($1,032,000 less the $612,000 already

included)3.   Respondent argues that the $420,000 increase

reflects decedent’s right to receive reimbursement from the

insurance company for the completion of the residence.

     Respondent also determined that the gross estate should be

increased by $122,400,4 representing the excess of the estimated

amounts that may be due to the contractor over the estimated



     3
       A more complete discussion of how the $612,000 value was
computed appears infra pp. 13-14.
     4
       We have referred to this difference as an “approximate”
amount because it is not clear in the record how the $122,400
amount was calculated. In any event, the parties only argue
about whether the $122,400 adjustment should be sustained and not
about the stated amount.
                               - 10 -

amount that may be due from the insurance company.    The notice of

deficiency contained the following explanation for disallowing

the $122,400 adjustment:    “It is determined that the estate took

a $855,573 deduction for outstanding monies owed to the

contractors.    Since the insurance was to pay for the entire cost

of rebuilding, the estate cannot deduct more than it returns as

an asset.”    In effect, respondent’s approach results in a net

amount of $1,032,000 being included in the gross estate with

respect to the partially completed residence.

     We disagree with the approach utilized by both parties.      We

do not question the legal principles relied upon by either party,

but question their interpretation and application of those

principles to the facts.    We first review the legal principles.

     For Federal estate tax purposes, assets are includable in a

decedent’s gross estate at fair market value determined at the

date of death.    See sec. 2031(a);5 sec. 20.2031-1(b), Estate Tax

Regs.    Fair market value is “‘the price at which the property

would change hands between a willing buyer and a willing seller,

neither being under any compulsion to buy or to sell and both

having reasonable knowledge of relevant facts.’”     United States

v. Cartwright, 411 U.S. 546, 551 (1973) (quoting sec. 20.2031-



     5
       All section references are to the Internal Revenue Code in
effect as of the date of decedent’s death, and all Rule
references are to the Tax Court Rules of Practice and Procedure,
unless otherwise indicated.
                              - 11 -

1(b), Estate Tax Regs.); Estate of Hall v. Commissioner, 92 T.C.

312, 335 (1989).   Fair market value is tested on an objective

basis using a hypothetical buyer and seller and not on the basis

of particular entities or individuals involved.   See Estate of

Andrews v. Commissioner, 79 T.C. 938, 956 (1982); Estate of

Bright v. United States, 658 F.2d 999, 1005-1006 (5th Cir. 1981).

     The circumstances here are unconventional in several

respects.   Firstly, the asset in question was incomplete and

under construction at the time of death.   More significantly, the

residence was to be restored to its prefire specifications.     As

we understand that concept, the cost of restoring the destroyed

residence to its original vintage condition was substantially

greater than the per-square-foot cost of constructing a

contemporary home.   In other words, there was no compulsion for

the construction costs to be within boundaries that comport with

resale value.   That anomaly resulted in circumstances where more

was being expended for construction and restoration than could

possibly be realized if the structure were sold upon completion.

The facts here reflect that the fair market value of the finished

residence was substantially less than the cost of restoration.

     Finally, although the insurance company’s obligation was

contractually and legally limited to the payment of up to one-

half of the stated policy limit if the residence was rebuilt, the

insurance company unilaterally agreed to bear the cost of
                               - 12 -

replacement of the vintage structure and to pay decedent’s living

expenses during the interim.   The insurance company’s agreement

to pay, however, was contingent upon decedent’s pursuit and

completion of restoration and unique to decedent.    Ultimately,

that agreement resulted in the insurance company’s paying almost

$2.8 million in connection with the restoration of a house that

was insured for coverage of $283,000 on the dwelling and only 50

percent of $283,000, if the insured chose to rebuild.    Of the

$2.8 million paid, less than $200,000 was paid for living

expenses and removal of the debris caused by the fire.    The

remainder of the $2.8 million was reimbursement for restoring the

residence, landscaping, and building contents.

      We cannot rely on these expenditures for purposes of

valuation.   Considering the fact that about 3 years after

decedent’s death, the residence was sold at arm’s length for

slightly over $1 million, the expenditures have no rational

relationship to the value.   In a similar vein, at the time of

decedent’s death the estimated “completed value” of the residence

was an amount approaching $1 million, whereas at the time of

death, a willing buyer would not have offered the completed

price.

     Conventional approaches to valuation, inclusion of assets,

and reduction of the estate for decedent’s obligations do not

accurately address these peculiar circumstances.    The estate’s
                               - 13 -

approach of estimating the cost to complete and the reimbursement

of part of that cost have no meaningful relationship to

decedent’s asset--the partially completed residence.     At the date

of death, the estate had no right to receive insurance

reimbursement and no obligation to pay for the completion of the

residence.   For that reason, we sustain respondent’s

determination that the gross estate be increased by $122,4006.

     Next, we consider respondent’s determination that the

incomplete residence should be valued by considering its value if

finished.    From respondent’s perspective, decedent had a contract

right or chose in action that was worth, at very least, the

difference between the incomplete structure and its ultimate

selling value.   The estate reported the value of the incomplete

structure at $612,000, the value set forth in the appraisal

attached to the estate’s return.   The appraisal utilized a cost-

per-square-foot approach to project the completed value of the

then 57-percent completed residence at $1,032,000.

Appropriately, the appraiser’s cost approach did not rely on the

actual cost, which was more than the cost to build a contemporary

residence and did not comport with fair market values of

comparable residences.   The appraiser’s valuation was


     6
       The $122,400 increase in the gross estate is a net result
of the disallowance of the amount claimed as due to the
residential contractor and the removal from the gross estate of
the amount included as possible recovery from the insurance
company.
                              - 14 -

corroborated by means of contemporaneous sales of four comparable

properties.   The land was valued at $215,000 and the 57-percent

completed building at $465,690 ($817,000 times 57 percent) for a

total of $680,690.   A 10-percent marketability discount ($68,690)

was used to reflect the incomplete status of the residence to

arrive at an appraised value of $612,000.     Respondent’s notice

determination utilized the appraiser’s $1,032,000 completed value

to determine that the gross estate should be increased by

$420,000 ($1,032,000 less the $612,000 reported).

     At trial, the estate offered an expert who concluded that

the value of the residence, if it had been completed on November

4, 1994, would have been $900,000.     The trial expert explained

that the cost method was usually a good measure of value, but

that it was not a reliable measure of value with respect to the

actual cost of restoring the Manchester Drive property because

the costs were excessive.   The expert reached that conclusion

because the actual construction costs were not “recoverable in

the marketplace”, due to “the abnormal post fire construction

environment and the high quality of workmanship”.     He also

concluded that the income method was inappropriate, so that a

sales comparison approach was the only relevant way to measure

value.   Five comparable contemporaneous sales of property were

used to reach the $900,000 value if completed.
                              - 15 -

     We do not place much reliance on the estate’s trial expert’s

departure from the cost approach that had been used by the

appraiser, whose report was attached to the estate tax return.

The appraisal attached to the estate tax return used a

contemporaneous cost-per-square-foot approach to determining

value, not the peculiar cost of the Manchester Drive residence.

Based on the use of the cost method, a $1,032,000 value was

placed on the completed residence, a value that was only $2,000

more that the eventual arm’s-length selling price.   Moreover,

respondent has not questioned the credibility of the appraisal

attached to the return.   Respondent appears to accept $612,000 as

being the value of the 57-percent completed residence on November

4, 1994.   The Court also accepts that value as the amount that

should have been included in decedent’s gross estate.

     Respondent, however, contends that the value should be

increased to reflect the completed value of the residence because

the insurance company agreed to reimburse decedent for rebuilding

the residence.   The estate argues that decedent did not own any

asset, contract right, or chose in action that would enhance the

value of the incomplete residence at the time of her death.    We

agree with the estate.

     The concept of fair market value, in the context of Federal

taxation, has remained unchanged for more than 80 years.   For

estate tax purposes, the amount includable in the gross estate is
                              - 16 -

the fair market value of decedent’s interest in an asset on the

date of death.   Here decedent owned an incomplete residence (57-

percent completed).   The parties’ disputes, however, focus on the

intangible aspects connected with the possible completion of the

residence.

     Respondent does not argue that cost should be the measure of

the value of the partially or fully completed asset.   On this

point also see Securities Mortg. Co. v. Commissioner, 58 T.C.

667, 675 (1972), where cost was not used to value incomplete

realty.   Respondent’s determination is that decedent had a right

or was entitled to the completion of the residence so that the

completed value should have been included in the gross estate.

Accordingly, respondent’s position is that decedent had a right

to the insurance reimbursement, and the value of that right was

includable as an asset in her estate.

     Under the agreement between Chubb and decedent, Chubb had

unilaterally agreed to pay for restoration of the residence, but

only if restoration was pursued and completed.   To the extent

that Chubb had an obligation to decedent at the time of her

death, it could only be to reimburse for any portion of the

residence that had been restored.   In addition, Chubb’s exposure

under the agreement was to be reduced if the cost of construction

was less than estimated.
                               - 17 -

     At the time of decedent’s death, it appears that neither

decedent nor her heirs had any enforceable right to payments from

Chubb.   Chubb had no outstanding debt or obligation to decedent

or her heirs.   Additionally, because the construction contract

ran between decedent and Krueger and was not with her executors

or heirs, at the time of death there was no assurance Krueger

would complete the project.7   The parties’ actions in connection

with the rebuilding of the residence reveal an informal

arrangement between Chubb, the coexecutors, and Krueger under

which, Krueger completed construction on the expectation of

payment from the insurance reimbursement.   Chubb, however, would

not reimburse decedent or the coexecutors unless or until the

restoration had been completed.   Chubb’s postdeath payments were

not made until additional work was accounted for and verified.

Under these circumstances, Chubb’s obligation to pay for

improvements after decedent’s death was subject to a condition

precedent.

     Because of the lack of contractual rights by the estate

and/or the heirs to payment from Chubb or performance by Krueger,

the practical reality was, that after decedent’s death, there



     7
       We also note that more was being expended to complete the
residence than could be recovered from a sale of the completed
residence. Under those circumstances, it would have been to
Krueger’s financial detriment to incur the cost of labor and
materials without assurances and commitments from the heirs,
executors and/or the insurance company.
                              - 18 -

existed a 57-percent complete residence with no enforceable right

to insurance reimbursement and no contractual obligation between

the estate or heirs and Krueger for the completion of

construction.   Under these circumstances no amount was includable

in decedent’s gross estate to represent any possible future

payment from Chubb.

    The situation here is unlike those where services have been

performed and/or an asset exchanged and something was due to or

from decedent at the time of death.    See, e.g., Estate of Curry

v. Commissioner, 74 T.C. 540, 545-547 (1980), where a contingent

legal fee was includable in an estate based on the rationale that

it had been earned and a claim existed at the time of death.

     Chubb’s obligation to pay is conditional and did not arise

or exist until after decedent’s death.   Stated another way,

decedent did not have a right, at the time of her death, to

receive reimbursement from Chubb until and unless the restoration

was accomplished triggering Chubb’s obligation.   See also Estate

of Rowan v. Commissioner, 54 T.C. 633, 640 (1970), where crops

had been produced, sold, and delivered prior to death so that

there was a right to receive payment that was includable in that

estate.

     Another significant reason for our holding is that the

reimbursement payments, if made, had no rational relationship to

the value of the completed residence or asset.    Any such payments
                                - 19 -

were to be reimbursement for costs of construction that had been

completed.   Respondent’s determination was that the estate should

not be allowed to claim more than $800,000 in future obligations

to the contractor for an asset (the residence) that is valued at

$612,000 for estate tax purposes.     Respondent’s logic is equally

applicable to the inclusion of possible insurance reimbursement

where it has no meaningful relationship to the fair market value

of an includable asset.    Ultimately, the transfer tax should

reach the net value of decedent’s assets, and the cost and

reimbursement amounts in the setting of this case do not provide

a basis to calculate that value.

     Conceptually, the purpose of the estate tax is to tax the

transmission of wealth at death.     See United States v. Stapf, 375

U.S. 118, 134 (1963).     Section 2031 is intended to provide for

inclusion of a decedent’s interests transferred at death.

Likewise, section 2053(a) was intended to ensure that only the

net estate; i.e., that which is available for distribution to the

beneficiaries, is taxed.     See Hibernia Bank v. United States, 581

F.2d 741, 746 (9th Cir. 1978).

     In this case, the asset available for distribution to the

beneficiaries was the 57-percent completed residence.     The

beneficiaries had the option to complete the residence and

thereby incur benefits and burdens of such action.     The fair

market value of the asset received by the beneficiaries, however,
                              - 20 -

was no more or less than the $612,000 fair market value of the

incomplete residence.

     Accordingly, we hold that the fair market value of the

residence at decedent’s death was $612,000, as reported by the

estate.   We also hold that the estate is not entitled to deduct

the possibility of future obligations to Krueger or required to

include the possibility of reimbursements from Chubb.   The effect

of our holdings is a net increase of $122,400 to the gross

estate.

     The last issue we must consider is whether the estate failed

to include in the gross estate the amount of $88,506 that

respondent concluded was equal to the value of reimbursement for

household furnishings lost in the fire.   Respondent reaches the

conclusion that the estate failed to report the value of

household furnishings.   The record shows that Chubb paid decedent

$573,761.59 prior to her death, and that amount, according to the

terms of the policy, was, in part, for the contents lost in the

fire.   Respondent became aware of an $88,506 amount subsequently

received by the estate as part of a larger insurance

reimbursement payment.   The $88,506 amount had been labeled and

characterized by Chubb as for “contents”.   Respondent has

concluded that Chubb’s labeling part of the payment as “contents”
                                - 21 -

indicates that it was for the reimbursement of lost furnishings

(personal property).8

         The estate argues that inclusion of $88,506 in the gross

estate would, in effect, result in double counting.     That is so

because decedent was paid the policy limits prior to her death,

which included $142,915 for household contents.     At the time of

death, decedent had received reimbursement from the insurance

company in an amount that exceeded the insurance company’s

maximum liability to pay for the loss of “contents”.     To the

extent that predeath reimbursement was used to pay for

restoration, it would have been reflected in the value of the

partially completed residence.     To the extent that predeath

reimbursement was used to pay for furnishings, they would have

been scheduled as assets on the estate tax return.     To the extent

that any reimbursement or payment received in connection with the

insurance policy had not been used, it would be reflected as part

of decedent’s liquid assets (cash) that was included in the gross

estate.

     Respondent’s approach of anticipating the possible existence

of household furnishings based on events occurring subsequent to

decedent’s death and that were not known at the time of



     8
       Based on the record and in the context of this case, there
is no way to know with certainty the meaning of the term
“contents” or whether decedent was owed $88,506 at the time of
her death for the loss of personal property.
                              - 22 -

decedent’s death cannot be sustained.    The insurance company had

already exceeded its obligations to make payments to decedent

under the existing policy.   To the extent that any other payments

were made to decedent’s estate or heirs, there is no indication

that the insurance company was legally obligated to make them or

that decedent had a right to such payments at the time of her

death.   Accordingly, we hold that respondent has erred in

determining that the gross estate should be increased $88,506 for

household furnishings of decedent.

      The estate raised the issue of the estate’s entitlement to

fees and costs incurred for legal and accounting provided during

the pendency of this tax controversy.    Respondent conceded that

the estate would be entitled to legal and professional fees to

the extent the estate can substantiate such costs under the

Internal Revenue Code.   We therefore leave this item to the

parties’ computations under Rule 155.

     To reflect the foregoing,

                                      Decision will be entered

                                 under Rule 155.
