By Jerry Moskal
Gannett News Service

WASHINGTON - The estate of Margaret M. Hillenbrand will pay $4.16 million in additional taxes to settle a $12.8 million tax dispute with the Internal Revenue Service.

The agreement between the estate of Mrs. Hillenbrand, a major stockholder of Hillenbrand Industries, Inc., of Batesville, Ind., and the IRS is part of a stipulated decision approved byU.S. Tax Court Judge Thomas B. Wells here. She died June 12, 1997.

"We were pleased with the stipulated decision," Walter T. Kilmer Jr., a New York tax lawyer for the estate, said Thursday. "Because of attorney-client privilege, I cannot comment further. Like many people, the Hillenbrand family values its privacy.''

Mrs. Hillenbrand, who retired to Palm Beach, Fla., was the beneficiary of a trust set up for her by her late husband, G.C. Hillenbrand, who died Oct. 27, 1986. The couple formerly lived in Batesville.

The trust held 2.24 million shares of Hillenbrand stock on which the estate claimed a 27 percent discount instead of the 5.65 percent the IRS allowed. The IRS ruled the trust was worth $101.1 million rather than the $77.8 million the estate reported.

Mrs. Hillebrand's husband was a descendant of John Hillenbrand, who founded the company, a leading maker of hospital beds, 141 years ago. Company subsidiaries manufacture coffins and cremation devices, and market funeral insurance.

Her estate filed a petition nearly 14 months ago asking the court here to overturn the IRS ruling. The petition noted the stock left in trust for Mrs. Hillenbrand had a provision limiting sale to 1 percent of the company's 68.8 million outstanding shares in any one year.

When she died, the petition said, Hillenbrand family members and corporate insiders owned 57.7 percent of the stock. The company had $2.1 billion in sales and $181 million in net income last year.