Batchelor-Robjohns v. United States, 788 F.3d 1280

George Batchelor sold his International Air Leases, Inc. (IAL) stock in 1999 for ~ $502 million, received a $150M promissory Note, then repurchased certain IAL assets (Option Assets) in 1999 for ~$92.5M which reduced the Note.
Batchelor reported nearly all proceeds as long-term capital gain on his 1999 and 2000 returns (with some interest income reported for 2000); the Estate later paid assessed deficiencies and sued for refunds (Counts I–II).
The government sued IAL (Batchelor I) to collect corporate tax liabilities as transferee, alleging undervaluation of the Option Assets (by ~$23.5M); expert testimony for the government was excluded and the district court entered summary judgment for the Estate in Batchelor I.
The Estate settled four related lawsuits in 2002–2004, paying $41M in 2004, deducted those payments on the estate tax return under 26 U.S.C. §2053, and then sought an $8.3M income-tax credit on its 2005 return under 26 U.S.C. §1341 (Count III).
The district court: granted res judicata summary judgment for the Estate on Counts I and II (barred government from relitigating Option Asset valuation), and granted the government summary judgment on Count III (holding §642(g) barred a double deduction); parties cross-appealed.

Issue	Estate's Argument	Government's Argument	Held
Whether res judicata bars the government from contesting Batchelor's 1999–2000 personal income tax refunds because Batchelor I (transferee suit re: IAL corporate tax) involved the same transaction	Both cases arise from the same transaction (sale and Option Assets) and thus share the same nucleus of operative fact; government had opportunity to litigate valuation in Batchelor I	The prior suit concerned IAL's corporate tax/transferee liability, a distinct tax obligation and taxpayer, so res judicata does not apply	Reversed: res judicata does not bar government; different causes of action (distinct taxpayers and different tax liabilities)
Whether the Estate may claim §1341 relief (income tax credit/deduction) for the $41M settlements after deducting them on the estate tax return under §2053	§1341 permits relief when income included earlier is later returned; the Estate is not seeking a windfall but credit/deduction tied to the returned capital gain	§642(g) and §691(b) disallow double deductions; §1341 does not itself create a deduction — another Code section must authorize it; the payment does not qualify under the listed income-deduction sections (e.g., §162/§212 recharacterization is barred by Kimbell)	Affirmed: Estate cannot claim both an estate-tax deduction and an income-tax deduction/credit for the same payments because §642(g) bars double deductions and §691(b) exceptions do not apply

In re Piper Aircraft Corp., 244 F.3d 1289 (11th Cir. 2001) (standard for res judicata review and capacity/privity rules)
Comm’r v. Sunnen, 333 U.S. 591 (1948) (each tax year is a separate cause of action; res judicata applies only to same tax year and same claim)
United States v. Lewis, 340 U.S. 590 (1951) (claim-of-right restorations: relief in year of repayment; prior year cannot be reopened)
Fla. Progress Corp. v. Comm’r, 348 F.3d 954 (11th Cir. 2003) (§1341 does not itself create a deduction; a separate Code section must authorize the deduction)
Kimbell v. United States, 490 F.2d 203 (5th Cir. 1974) (payment tied to previously reported capital gain must be treated as capital loss, not an ordinary business expense)
United States v. Davenport, 484 F.3d 321 (5th Cir. 2007) (res judicata barred transferee liability relitigation where both suits concerned same tax liability and tax year)
Baptiste v. Comm’r, 29 F.3d 1533 (11th Cir. 1994) (res judicata applied to bar relitigation of estate tax valuation when same estate-tax liability was at issue)
Frank Sawyer Trust of May 1992 v. Comm’r, 133 T.C. 60 (T.C. 2009) (transferee liability and trust’s own deficiency are different causes of action; res judicata did not bar the transferee action)