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Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 

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PUBLISH FIL~ D 

United States Coμrt of Appeal, Tenth Circuit 

UNITED STATES COURT OF APPEALS 

JAN 2 t 1993 

ROBERT L. HOECKER 

Clerk 

TENTH CIRCUIT 

SYLVIA M. BUCKMASTER, as Personal 

Representative of the Estate of 

Daisy Murphy, Deceased, 

Plaintiff-Appellant, 

v . 

UNITED STATES OF AMERICA, 

Defendant-Appellee. 

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No. 91-6210 

Appeal from the United States District Court 

for the Western District of Oklahoma 

{D.C. No. CIV-90-1024-D) 

James H. Rice, Midwest City, Oklahoma, for Plaintiff-Appellant. 

Sara S. Holderness, Tax Division, Department of Justice {James A. 

Bruton, Acting Assistant Attorney General, and Kenneth L. Greene , Tax Division, Department of Justice, with her on the brief), 

Washington, D.C. , for Defendant-Appellee . 

Before LOGAN and SEYMOUR, Circuit Judges, and BROWN, District 

Judge. * 

LOGAN, Circuit Judge. 

* The Honorable Wesley E. Brown, Senior United States District 

Judge, United States District Court for the District of Kansas, 

sitting by designation. 

Appellate Case: 91-6210 Document: 010110157326 Date Filed: 01/21/1993 Page: 1 
Sylvia M. Buckmaster, in her capacity as personal 

representative of the Estate of Daisy Murphy, deceased (the 

estate), appeals the district court's grant of the government's 

motion for summary judgment in the estate's suit for refund of 

income taxes levied by the Internal Revenue Service (IRS). The 

only issue on appeal is whether the estate is entitled to claim a 

deduction under I.R.C. § 661 for income it distributed to estate 

beneficiaries during two of the estate's tax years. The 

disbursements were made without explicit authority under the will 

and without any prior order from the state probate court in 

Oklahoma; but the distributions were approved as part of the final 

~ccounting in the probate court's order of final settlement and 

again later by a nunc pro tune order specifically referencing the 

payments. 1 

I 

Daisy Murphy died testate on February 9, 1984, leaving a will 

that gave her entire estate to her niece, Sylvia M. Buckmaster, 

and to her nephew, Jesse Murphy, in equal shares. Murphy was 

1 The beneficiaries of the estate included the disbursements in 

both years as income on their personal income tax returns. See 

I.R.C. § 662(a). Jesse Murphy was the original plaintiff, suing 

individually and as personal representative of the Estate of Daisy 

Murphy, deceased. The suit included asking for a refund of income 

taxes Murphy paid personally on the distribution in the event the 

deduction to the estate was disallowed. The parties reached 

agreement on this refund claim, resulting in dismissal of any 

remaining claims in the suit, thus permitting us to exercise 

jurisdiction over this otherwise premature appeal. See Lewis v. 

B. F. Goodrich Co . , 850 F.2d 641, 645 (10th Cir. 1988) (en bane). 

While the appeal was pending Jesse Murphy died and Sylvia M. 

Buckmaster was named successor personal representative of the 

Estate of Daisy Murphy, deceased. In this capacity she has been 

substituted as the plaintiff- appellant. 

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Appellate Case: 91-6210 Document: 010110157326 Date Filed: 01/21/1993 Page: 2 
named as executor. The will was admitted to probate, letters 

testamentary issued, and Murphy administered the estate until his 

death while this appeal was pending. The estate contained 

valuable mineral interests that earned significant royalties during the course of the estate's administration. Choosing for the 

estate a tax year ending January 31, 1985 , Murphy distributed during that year $437,000 of the estate's income to himself and to 

Buckmaster in equal shares, and the estate took a deduction for 

this amount, plus Oklahoma gross production taxes and federal 

windfall profits taxes relating to that income, on the estate's 

income tax return. The estate remained open for another year during which it distributed $155,649.51 to the beneficiaries, again 

claiming similar deductions on the estate's income tax return. In 

neither year did the estate secure an order from the probate court 

authorizing the distributions before they were made, but the 

estate was closed out on February 20, 1986. At that time the probate court issued an order of final settlement in which it 

approved all actions taken by the personal representative without 

the order itself referencing the specific disbursements to the 

beneficiaries. These distributions, however, apparently were 

shown on the executor's final accounting filed with the petition 

for final settlement, see Okla. Stat. Ann . tit. 58, § 612, and the 

probate court's order referenced the final accounting. 

When the IRS notified the estate after an August 1987 audit 

that it was disallowing the deductions taken by the estate, the 

personal representative obtained from the probate court an order 

nunc pro tune to reflect explicit approval of the disbursements . 

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This did not satisfy the IRS, which issued a deficiency assessment 

disallowing the deductions as unlawful because t here was no probate court approval before they were made. The estate paid the 

deficiencies with interest, filed claims for refund, which were 

denied, and then brought the instant suit in the district court t o 

secure the refunds. 

Both parties filed motions for summary judgment. The district court granted the government's motion, holding that the 

question whether the disbursements were "properly paid" for purposes of I .R.C. § 661 is one of state law, that they were not 

proper under Oklahoma law unless approved by the probate court in 

advance of payment, and that the nunc pro tune order did not cure 

the defect. 2 The estate then appealed. 

II 

The federal income tax law recognizes the estate of a decedent as a separate tax entity entitled to choose its own tax year 

ending at the end of any month not exceeding one year after the 

decedent's death. I.R.C. §§ 441(b), 443(a)(2), 641; Treas. Reg. 

§ 1 . 443-l(a) (2). It also recognizes the right of the representative of the estate, when acting properly, to spread the income 

otherwise taxable to the estate between the estate and the beneficiaries. This is accomplished by allowing deductions on the 

estate's income tax return for income required to be distributed 

2 Because of our disposition we do not find it necessary to consider whether the nunc pro tune order has any special significance. 

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Appellate Case: 91-6210 Document: 010110157326 Date Filed: 01/21/1993 Page: 4 
currently or in fact "properly paid" during the tax year to beneficiaries of the estate. I.R.C. § 661{a) (2). It is common practice for personal representatives of decedents' estates to make 

distributions of income during the estate's tax year either for 

the support or convenience of the beneficiaries or to obtain the 

advantages of having the income taxed in the lowest possible 

rates. 

The only question in the instant case is the correctness of 

the district court's determination that the distributions from the 

estate were not "properly paid" unless the probate court approved 

them before they were made. It is acknowledged that the will did 

not require the payments. The law is that the determination of 

what is properly paid is a matter governed by local law. See 

Freuler v. Commissioner, 291 U.S. 35, 44-45 (1934); Simon v. Hoey, 

88 F. Supp. 754, 759 {S.D.N.Y. 1949), aff'd, 180 F.2d 354 {2d 

Cir.), cert. denied, 339 U.S. 966 (1950). We review the district 

court's determination of local law de novo. Salve Regina College 

v . Russell, 111 S. Ct. 1217, 1221 (1991). 

The United States Supreme Court has considered the issue 

before us in the context of distributions from a trust under California law. In Freuler, the Supreme Court found no meaningful 

distinction between pre-distribution and post-distribution orders: 

"[I]f the order of the state court does in fact govern the distribution, it is difficult to see why, whether it antedated actual 

payment or was subsequent to that event, it should not be effective to fix the amount of the taxable income of the benefi ciaries. " 291 U.S . at 44 - 45 . Accord Commissioner v. Crawford's 

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Estate , 139 F.2d 616, 618 (3d Cir. 1943 ) (Pennsylvania law) ; 

Proctor v. White, 28 F. Supp . 161, 166 (D . Mass. 1939 ) (Massachusetts law). 

A number of state court decisions have upheld post-payment 

approvals of personal representative's payments t o beneficiaries. 

In Siemon v. Mortgage Inv. Co. (In re Bennett's Est ate), 90 P .2d 

84, 89 (Cal. 1939), the California Supreme Court rejected t he probate court's holding that payments made prior to obtaining court 

approval were null and void, reasoning that as long as the administrator paid the correct person, he or she is protected regardless of whether prior court approval was obtained. Accord 

Shivvers v. Mueller (In re Estate of Shivvers), 340 N.W.2d 586, 

589 (Iowa 1983); Barrett v. McDonald, 121 N.W.2d 165, 172 (Minn. 

1963); White v. Freitag (In re Freitag's Estate), 107 P.2d 978, 

980 (Or. 1940 ) ; In re Herman's Estate, 293 N.W . 353, 354 (Neb . 

1940); In re Estate of Kingseed, 413 N.E.2d 917, 923 (Ind. Ct . 

App. 1980) . 3 

The government claims and the district court found that the 

law in Oklahoma is contrary to these other decisions, relying upon 

In re Cook's Trust, 135 P.2d 492 (Okla . 1943 ). In that case, the 

Oklahoma Tax Commission sought to tax monies paid out of an estate 

3 We do not consider the cases the government relies upon, Hurley 

v. Hirsch, 66 S . W.2d 387 (Tex. Civ. App. 1933 ) , or DuVall v. 

Fau lkner, 149 N. E. 868 (Ohio 1925), to state a contrary rule. In 

Hurley the court made no reference to the propriety of payments 

made without a court order but later ratified; it was concerned 

with a claim for prejudgment interest only. DuVall involved a 

claim made by beneficiaries that was not submitted to the probate 

court before it approved final settlement. Each made isolated 

general statements cited by the government out of context . 

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to the beneficiaries as if those funds had been paid from a trust, 

which had been provided for by the decedent's will but which had 

never received any distribution from the estate because of protracted probate proceedings. The payments had been ordered by the 

probate court and agreed to by all parties. The court explicitly 

limited its review to 11 whether, for tax purposes only, said sums 

were constructively, though not actually, paid to the trustee so 

as to constitute taxable income of the trust." Id. at 493-94. 

The court held that the disbursements were not properly taxable to the trust, because the trust had no legal existence in the 

absence of a probate court order. In so holding, the court stated 

that "[u]ntil the county court makes an order for partial or final 

distribution of the estate of a decedent, the executor or administrator is without authority to deliver any of the estate to a 

trustee .. .. " Id. at 494 (citation omitted). The district 

court relied heavily upon this language, interpreting it to mean 

that any payment made by an executor or administrator in the absence of prior court approval is per se improper, regardless of 

whether such approval is obtained after the fact. We believe the 

quoted language does not support such a broad conclusion. 

In Cook's Trust, the probate court had ordered each payment 

before its being made, so the Oklahoma Supreme Court had no occasion to consider whether the payments would have been valid had 

they been made without prior authorization but later ratified by 

the probate court . The cited language does not foreclose afterthe-fact approvals by the probate court. The key word is 11 until"; 

the distributions are unauthorized "until" court approval is 

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obtained. Nothing in either Cook's Trust or the probate laws prevent after-the-fact ratification of disbursements by the executor 

or personal ad.111inistrator, which would make them "properly paid" 

for purposes of I.R.C. § 66l (a) (2). This is not to say that an 

executor is free to plunder an estate at will; the estate concedes 

that distributions made before receiving court approval are made 

at the representative's own risk. The personal representative 

must make an accounting to the probate court of all disbursements 

and expenditures, and the probate laws provide recourse if the 

personal representative fails to do so. See Okla. Stat. Ann . tit. 

58, §§ 541-557. Once the probate court approves the final settlement and account, however, the personal representative is discharged from liability for prior distributions. Id. § 691. 

The sections of the Oklahoma probate laws concerning partial 

distributions, on which the district court and the government 

rely, are not to the contrary. One section expressly provides 

that an heir, devisee, or legatee (or personal representative 

acting on behalf of such an entity) may petition the court for his 

or her share of the estate if three months have elapsed following 

the issuance of letters testamentary. Okla. Stat. Ann. tit. 58, 

§ 621. This section is intended to provide recourse for heirs who 

believe that they are entitled to a share of the estate but have 

not received satisfaction from the executor; it says nothing concerning the need for the executor to obtain court approval before 

making disbursements to such individuals in the absence of a petition. 

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Our task is to determine how the Oklahoma Supreme Court, if 

presented with the issue before us, would rule. See AdamsArapahoe School Dist. No. 28-J v. GAF Corp., 959 F.2d 868, 871 

(10th Cir. 1992). The probate laws were not drafted with the 

income tax laws in mind. Rather, they exist to facilitate resolution of a decedent's affairs and distribution of the estate to the 

proper beneficiaries. Of course it would be better if the personal representative would secure advance probate court approval 

of distributions of income from the estate. But these decisions 

often must be made near the end of the tax year of the estate, 

when the amount of its income can be estimated reasonably. There 

may not be time to follow the normal procedures for probate court 

approval. In such cases the personal representative acts on his 

own at some peril. Nevertheless, a disbursement that operates to 

reduce the net tax liability of the estate and the beneficiaries 

and that does not contravene provisions of the will would almost 

certainly meet with the approval of the probate court, as it did 

here. 

We hold that the Oklahoma Supreme Court, if presented with 

the issue, would consider distributions of estate income by an 

executor or administrator made without prior probate court approval but subsequently ratified by that court to be "properly 

paid" within the definition of I.R.C. § 661(a) (2). This is the 

position of every appellate court that has directly considered the 

question, including the United States Supreme Court. The decision 

of the district court is therefore reversed, and the cause 

remanded for further proceedings consistent with this opinion. 

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REVERSED AND REMANDED. 

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