## Facts

- Maude V. Simcoe, an elderly widow, owned and lived on a farm in Jefferson County, Kentucky, near a proposed Ford Motor Company heavy-duty truck assembly plant site.
- Ford, working through Houston-McCord Realty Company (a wholly owned subsidiary of Louisville & Nashville Railroad), sought to assemble land for the project.
- Simcoe signed an option contract with Houston-McCord to sell her property for $4,000 per acre.
- Upon signing the option, Simcoe received $6,000, described in the contract as liquidated damages payable if the option was not exercised or the sale was not consummated.
- Simcoe appointed her son, Newton Simcoe, as her personal representative and gave him power of attorney to act for her.
- On August 12, 1967, Houston-McCord exercised the option to purchase the farm.
- On August 15, 1967, Newton Simcoe entered an agreement allowing Houston-McCord and Ford immediate possession of the property.
- In early September 1967, Ford entered the land and began clearing and preparing it for construction.
- Simcoe died on October 2, 1967; at her death, no deed had been delivered and no purchase-price payment had been made other than the $6,000 liquidated-damages payment.
- The real estate transaction closed 16 days after Simcoe’s death, and the purchase price was paid to Simcoe’s estate (administered by successor administratrix Doris Simcoe Claiborne).
- The estate paid federal income tax on the sale proceeds under protest, sought a refund, and the IRS denied the refund.
- The estate filed a refund action in federal district court; on stipulated facts, the district court ruled for the estate, concluding the proceeds were not “income in respect of a decedent” (IRD) under I.R.C. § 691 because Simcoe was not entitled to the proceeds at death.
- The United States appealed to the Sixth Circuit.

## Issues

1. Whether the proceeds paid to Simcoe’s estate at a closing held after her death were “income in respect of a decedent” under I.R.C. § 691(a) because Simcoe was entitled to the sale income at the time of her death.

## Decision

- The Sixth Circuit affirmed the judgment for the estate.
- The court held the post-death purchase-price payment was not IRD because, at Simcoe’s death, she did not have a fixed, legally enforceable right to receive the purchase price.
- The court rejected the government’s argument that pre-death steps toward completion (option exercise, transfer of possession, and site work) made the later-received proceeds IRD.

## Legal Principles

- Under I.R.C. § 691(a), IRD generally covers amounts that the decedent had a right to receive as gross income at death but that were not properly included in the decedent’s final taxable year.
- A transaction’s progress before death does not, by itself, make later payments IRD; the question is whether the decedent’s right to the income was fixed and enforceable at the moment of death.
- For IRD analysis, courts look to whether the income was “properly accruable” to the decedent at death, which depends on whether the decedent could have compelled payment at that time.
- Where a real estate sale has not closed before death and the decedent lacks an enforceable claim to the purchase price at death, the later-received purchase price is not IRD to the estate, even if the buyer has taken possession and begun work on the property.

## Conclusion

Claiborne v. United States held that proceeds from a land sale that closed after Maude Simcoe’s death were not taxable to her estate as income in respect of a decedent under I.R.C. § 691(a) because, despite the option’s exercise and the buyer’s pre-death possession and development activity, Simcoe had no fixed, enforceable right to the purchase price at the time she died, so the estate was entitled to a refund.


Claiborne v. United States, 648 F.2d 448 (1981)