Cory

In this case we hold that the full appraised value of real property is subject to inheritance taxation even though, as the result of a good faith settlement of a will contest, a distributee named in the decedent’s will received a cash substitute for the real property substantially less than its appraised value.

Facts

After Alma Timmons died on February 22, 1982, 1 appellant filed a petition for admission of her 1981 will to probate. Pursuant thereto appellant was bequeathed decedent’s community property interest in certain real property along with a portion of decedent’s personal property.

Contestant, decedent’s husband by a second marriage, filed a will contest claiming that decedent was under undue influence and not of sound mind when she executed the 1981 will. He contended that a 1974 will which left him all of the decedent’s estate, including the subject real property, should be admitted to probate.

After extensive pretrial discovery and negotiations, the will contest was eventually settled in good faith. By its terms, the settlement agreement provided:

*306 1. That the estate transfer the real property to the contestant in consideration for the payment by him…