Tax Court Correctly Refused To Recognize Settlement Between Estate and IRS.

The decedent married his wife in 1955, had four children together, but later divorced in 1978.  Under the marital separation agreement, the decedent agreed to leave one-half of his eventual estate equally to the children.  The decedent remarried in 1979 and later executed a will and trust.  Under the trust terms, sufficient funds were to be set aside to buy an annuity that would pay the ex-wife $3,000 monthly.  The balance of the trust assets were to pass to the children, with six percent passing to each of three daughters and 16 percent to the son and the balance to the surviving spouse.  After the decedent's death, the children waived all potential claims they might have against the estate.  As a result, each daughter received approximately $3.5 million and the son received $9.5 million.  The estate claimed a deduction of $14 million for the payments to the children under I.R.C. Sec. 2053(a)(3).  The IRS denied the deduction in full and the estate filed a Tax Court petition.  Before trial, the IRS agreed to allow 52.5 percent of the $14 million deduction and informed the Tax Court.  Some of the children then sued the estate for fraudulent procurement of their waiver.  The estate settled by paying each child at issue an additional $1.45 million.   The decedent's estate then sought to set aside the settlement agreement based on mutual mistake of fact or because the IRS knew that at least one child was going to sue the estate before the Tax Court was advised of the settlement.  The Tax Court refused to set aside the settlement agreement between the parties.  On appeal, the court held that the estate could not set aside the settlement agreement on the grounds of mutual mistake because the doctrine didn't apply.  The estate simply failed to see that any of the children would sue the estate.  Also, the court held that the allegation that the IRS didn't reveal a statement by one of the children indicating the child would sue was not a misrepresentation that would allow the estate to set aside the settlement.   The settlement established the amount of the deduction.  Billhartz v. Comr., No. 14-1216, 2015 U.S. App. LEXIS 12730 (7th Cir. Jul. 23, 2015).