## Facts

- Carling Dinkler, Sr. owned substantial interests in a chain of hotel corporations.
- In 1960, Dinkler negotiated to sell the hotel interests to Associated Hotels Corporation for nearly $11 million.
- A significant portion of the transaction involved the sale of corporate stock worth more than $3.5 million.
- On August 4, 1960, the parties executed a written agreement covering the sale of stock and other assets.
- While final details were being completed, Dinkler died on January 30, 1961.
- Trust Company of Georgia, as executor of Dinkler’s estate, continued with the transaction.
- The sale closed after Dinkler’s death (February 23, 1961), and the estate received the stock-sale proceeds.
- The Internal Revenue Service treated the gain received by the estate as “income in respect of a decedent” (IRD) under I.R.C. § 691 and assessed income tax and interest for 1961; the estate paid and filed a refund claim.
- The district court, after a bench trial, ruled for the government, reasoning that Dinkler’s lifetime efforts had effectively completed the sale and that what remained at death was largely ministerial; the executor appealed, arguing the district court applied the wrong legal standard.
- Aubrey C. Ross, District Director of Internal Revenue, defended the judgment on appeal.

## Issues

1. Whether gain realized by an estate from a post-death closing of a stock sale is taxable as IRD under I.R.C. § 691 when the decedent signed a pre-death sale agreement and, at death, the remaining steps to close were largely ministerial.

## Decision

- The Fifth Circuit affirmed the judgment for the government.
- The court held that the stock-sale gain received after Dinkler’s death was taxable to the estate as IRD under I.R.C. § 691.
- Although the court disagreed with how the district court framed the governing standard, it agreed the district court reached the correct result.

## Legal Principles

- I.R.C. § 691 taxes a decedent’s successor on amounts that are “income in respect of a decedent,” meaning items that were not properly included in the decedent’s final return but are later received and trace to the decedent’s pre-death transactions or services.
- For IRD purposes, it is not enough that post-death receipts are connected to the decedent’s lifetime activity; that activity must have produced a legal right to receive the income.
- The “right to income” is distinct from the activity that creates it; § 691 focuses on whether a right existed at the time of death that later resulted in payment to the estate or other successor.
- When a decedent enters into a binding pre-death contract to sell property and, as of death, has done the substantive work needed to secure the sale so that only routine closing steps remain, later proceeds received by the estate can constitute IRD.

## Conclusion

Because Dinkler’s pre-death agreement and completed substantive steps created a right to the stock-sale proceeds that existed at his death, the estate’s later receipt of the gain on the post-death closing was “income in respect of a decedent” under I.R.C. § 691, and the Fifth Circuit affirmed judgment for the government.


Trust Company of Georgia v. Ross, 392 F.2d 694 (1967)