## Facts

- Three consolidated bench-tried tax refund actions arose from the 1961 sale of interests in the Dinkler Hotel enterprises.
- Carling Dinkler, Sr. controlled key entities in the hotel chain, including owning all stock of Dinkler‑Tutwiler Corporation.
- In 1960, potential purchasers (Robert K. Lifton and associates) negotiated to buy stock or assets comprising the hotel chain.
- On August 4, 1960, the parties executed a written agreement providing for the sale of stock and assets, including Dinkler, Sr.’s Dinkler‑Tutwiler stock; the transaction contemplated escrow and later closing subject largely to consents and formalities.
- Dinkler, Sr. died on January 30, 1961, before the final closing; the executor later received proceeds when the sale closed in 1961.
- The IRS treated portions of the post-death proceeds attributable to Dinkler, Sr.’s interests as “income in respect of a decedent” (IRD) under I.R.C. § 691, assessed additional tax and interest, and denied administrative refund claims.
- Plaintiffs sought recovery of $1,007,376.09 in income taxes and interest paid for 1961, asserting the proceeds should not be taxed as IRD.

## Issues

1. Whether proceeds received after Carling Dinkler, Sr.’s death from the sale of Dinkler‑Tutwiler stock constituted “income in respect of a decedent” under I.R.C. § 691.
2. Whether, at the time of death, the decedent’s right to the sale proceeds was sufficiently fixed such that later receipt by the estate and beneficiaries was a post-death collection of the decedent’s income rather than income from a sale by the estate.

## Decision

- Judgment was entered for the government; the refund claims were denied.
- The court held the challenged proceeds were IRD under I.R.C. § 691.
- The court found the economic substance of the sale had been substantially completed before death, with remaining steps largely ministerial, and the estate performed no substantial, profit-producing activity to create the income.

## Legal Principles

- I.R.C. § 691 taxes amounts received after death that are attributable to the decedent’s pre-death activities or agreements and that were not properly includible in the decedent’s final return solely because they were not received or accrued before death.
- When a decedent enters a binding sale arrangement before death and the right to proceeds is effectively fixed at death, subsequent receipt by the estate or heirs is IRD rather than gain from a new, independent post-death sale by the estate.
- The classification turns on substance: whether the estate’s post-death role is merely to complete formalities and collect proceeds, as opposed to making a new decision to sell or undertaking meaningful entrepreneurial actions to produce the income.

## Conclusion

Because the decedent’s pre-death contract and actions effectively fixed the right to the sale proceeds and the estate’s post-death role was largely perfunctory, the court treated the 1961 receipts as income in respect of a decedent under I.R.C. § 691 and denied the requested tax refunds.


Tr. Co. of Ga. v. Ross, 262 F. Supp. 900 (N.D. Ga. 1966)