## Facts

- Benjamin Shapiro died on July 2, 1986; his estate filed a federal estate tax return reporting $1,197,127 due.
- About 95% of the estate consisted of an interest in a closely held business, Benjamin Shapiro Realty Co.
- The Estate elected under I.R.C. § 6166(a) to defer and pay in installments the portion of estate tax attributable to the closely held business interest.
- Under § 6166, the Estate remained obligated to make annual interest payments on the deferred tax and could face acceleration if it failed to make required payments.
- The Estate later asserted it had made premature or excessive payments toward the deferred tax and sought a refund of $478,840.07.
- The Commissioner denied the refund request and treated any excess amounts as applied to the deferred liability rather than as a refundable overpayment.
- The Tax Court denied relief, relying in part on a Ninth Circuit decision treating § 6166 installment “overpayments” as credits against future installments.
- The Estate appealed.

## Issues

1. Whether the Estate actually paid more than its legally due estate tax under the § 6166 installment-and-interest scheme, creating an “overpayment” eligible for refund.
2. If an overpayment existed, whether it must be refunded immediately or may be applied only as a credit against future § 6166 installments.

## Decision

- The Second Circuit affirmed the Tax Court’s judgment.
- The court held the Estate did not, in fact, overpay its estate tax installments when payments were correctly matched to principal and interest obligations under § 6166.
- Because no overpayment existed, the court declined to decide whether a true § 6166 overpayment must be refunded or may be limited to a credit against future installments.

## Legal Principles

- A payment made earlier than required on a deferred tax liability is not an “overpayment” if it does not exceed the taxpayer’s correct legal liability when principal and interest are properly accounted for.
- Under § 6166, deferred estate tax remains an enforceable liability subject to interest, and payments applied to that liability generally reduce the outstanding balance rather than creating refundable surplus.
- An appellate court may affirm on narrower grounds and avoid deciding a broader refund-versus-credit question where the threshold requirement—existence of an overpayment—is not met.

## Conclusion

The Second Circuit affirmed the denial of the Estate’s refund claim because the disputed payments were properly applied to the Estate’s § 6166 principal-and-interest obligations and did not exceed the Estate’s legal liability; the court expressly left open whether a genuine § 6166 overpayment would be refundable or merely creditable.


Estate of Shapiro v. Commissioner, 111 F.3d 1010 (2d Cir. 1997)