NEW YORK — The grandsons of two Holocaust victims and a Chicago art collector have reached a "Solomonic" settlement over a stolen Edgar Degas painting, only weeks before the opening of a trial that was expected to set the precedent for the recovery of Nazi-looted art.

The heirs of Friedrich and Louise Gutmann will share ownership of the Degas pastel "Landscape with Smokestacks" — now valued at $1.1 million — with pharmaceuticals magnate Daniel C. Searle, who bought the painting for $850,000 in 1987.

The suit, in federal court in Chicago, would have weighed the rights of what experts called two innocent parties — the Nazi victims' heirs and the present buyer.

Searle, a benefactor of the Chicago Institute of Art, contended that he bought the Degas in "good faith" and was unaware of its Holocaust-era history.

The Degas was among the art works looted from Friedrich Gutmann, a German Jewish banker who was beaten to death in Theresienstadt. His wife, Louise, died in Auschwitz.

Under the terms of the agreement, which was reached Aug. 7, Searle will donate the Degas to the art institute. Gutmann's grandsons, Nick and Simon Goodman, will then sell their share of the Degas to the museum for half of the work's fair-market value.

Gutmann's grandsons, who live in Los Angeles, had been trying to recover the art since they learned in 1995 that it was in the United States. Their father, who lived in Britain, had spent his lifetime looking for the Gutmann art in Europe.