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July 12, 2022

Tax Court concludes both IRS and estate misunderstood distinction between 'depository' and 'drawee' banks

The Tax Court has held (Estate of William Demuth, Jr., et al. v. Commissioner, Dkt. No. 18724-19) that only 7of 10 checks written before, but paid after, the decedent's death are includable in his gross estate, due to an apparently erroneous concession by the IRS based on both parties' misunderstanding of the distinction between a "depository bank" and a "drawee bank." "This terminological distinction is critical," the Tax Court wrote, because the IRS's opening brief conceded that three checks were not includible in the gross estate "seemingly on the basis that the checks had not been 'credited by drawee banks' before decedent's death."


Estate of Demuth v CIR