## Facts

- Helen Davison died on December 24, 1952, owning two Arizona farm tracts subject to crop-share leases.
- Under the Coolidge tract lease for 1952, the tenant owed Davison one-fourth of all crops grown; Davison received $6,516.01 before death.
- Under the Eloy tract lease (February 1952 to January 1953), the tenant owed one-half of the net proceeds of crops; Davison received nothing on this lease before death.
- After Davison’s death, the estate received $14,137.14 in February 1953 attributable to the Coolidge tract.
- In early 1954, after negotiation and compromise with the tenant, the estate received $14,429.43 attributable to the Eloy tract.
- The estate included the rights giving rise to these receipts in the gross estate for federal estate tax purposes.
- The estate did not report the 1953 and 1954 receipts as income on its fiduciary income tax returns.
- The IRS assessed income tax deficiencies for 1953 and 1954, the estate paid them, sought refunds, and filed a refund suit after disallowance.

## Issues

1. Whether post-death crop-share receipts under leases entered into during the decedent’s lifetime were taxable income to the estate when received, rather than non-taxable corpus.
2. Whether inclusion and valuation of the underlying rights in the gross estate for estate tax purposes precluded income taxation of the later receipts.

## Decision

- The Court of Claims held the 1953 and 1954 crop-share receipts were taxable income to the estate in the years received.
- The court rejected the estate’s position that the receipts were merely collections of principal already “capitalized” and taxed through the estate tax.
- The court entered judgment for the United States, denying the estate’s refund claims.

## Legal Principles

- Post-death receipts arising from a decedent’s pre-death contractual rights to rents or proceeds can be taxable to the estate upon receipt as income in respect of a decedent (or its predecessor concept), rather than non-taxable corpus.
- Valuation and inclusion of a right to receive future payments in the gross estate does not change the income character of payments later realized under that right.
- Estate tax and income tax apply to different tax bases: the former to property value at death, the latter to later realized receipts; both may apply to the same underlying right without barring income taxation of subsequent payments.

## Conclusion

The court treated crop-share payments collected by the estate after the decedent’s death as taxable income when received because the decedent held an unliquidated contractual right to future proceeds, and estate-tax inclusion of that right did not immunize later collections from income tax.


Estate of Davison v. United States, 292 F.2d 937 (Ct. Cl. 1961)