§2053 — Expenses, indebtedness, and taxes

That the right to reimbursement would have arisen by contract rather than by subrogation under the terms ofthe debt itselfdoes not distinguish Parrott or Estate ofHendrickson. Those cases stand for the general principle that an estate is entitled to deduct a claim under section 2053(a)(3) only to the extent that the amount owed exceeds any right to reimbursement to which payment ofthe claim would give rise.

Memo LEXIS 120, at *17-*18 (holding that taxpayer failed to show that funeral expenses for brother-in-law "was a business [expense] as distinguished from a personal expense"); see also Estate ofYetter v. Commissioner, 35 T.C. 737 (1961) (finding that funeral expenses were not properly claimed on estate's fiduciary income tax return but were allowable only as a deduction to the estate under section 2053).

In the Response to Cross-Motion for Partial Summary Judgment respondent states that the trustee annual commission, the accounting fees, and the legal fees as provided for in the settlement agreement “are deductible on the SK Trust’s Form 1041 when paid.” We express no view on the correctness of this statement.

also argues that its position is supported by caselaw allegedly holding, in the estate’s words, that “a secondary or remote possibility that an estate might have personal liability for the amount of the mortgage was not enough to establish it as a claim against the estate under section 2053(a)(3).” We disagree with the estate’s contention that “a practical approach is mandated” in resolving the question at issue.

Confining the Maiority Opinion Holding to Its Facts Properly confined to its procedural and factual context, then, and notwithstanding some rather open-ended language in the majority opinion, its holding is that the assessed underpayment - 56 - interest in question should have been taken into account in calculating the amount of the estate's overpayment.

Analysis The estate seeks to deduct the Union Bank and Westamerica Bank judgments as claims against the estate pursuant to section 2053(a)(3).

We hold that the interest expense is not deductible.

52011 - 2 - (decedent) to a qualified personal residence trust (QPRT) that terminated 6 months before decedent's death is included in the value of decedent's gross estate pursuant to section 2036;1 (2) investment management fees of $125,000 paid by the estate are deductible administrative expenses pursuant to section 2053; (3) accrued rent of $46,298 is deductible as a debt of decedent pursuant to section 2053; and (4) the estate is entitled to a deduction of $46,452 for unpaid rent owed as an

-6- Accordingly, we hold that the estate is not entitled to an administration expense deduction for .interestl~under section 2053 .

Unlike the Gill children, Valerie Gill was not seeking to enforce the 2000 settlement agreement. All her individual actions were only attempts to obtain assets which had been assigned to the Gill children in the 2000 settlement agreement. We find Valerie Gill's individual egal fees associated with court approval of the 2007 settlement agreement and reformation of the terms of decedent's Living Trust were incurred for her individual benefit rather than for the benefit of the estate and were there

Discussion The issue for decision is whether decedent's estate may deduct the claims of David and Daniel Griffith in the amounts paid to them pursuant to the settlement of their claims.2 Section 2053 allows an estate tax deduction for claims against the estate that are allowable by the laws of the jurisdiction in which the estate is being administered.

Whether 12 Checks Decedent Wrote and Delivered to Her Agent 4 Days Before She Died Were Completed Gifts; If Not, Whether the Checks Are Claims Against the Estate That May Be Deducted Under Section 2053 Decedent intended to make gifts of $10,000 to each of her children and grandchildren during 1989.

behalf of an estate. Decedent's estate also relies on Rev. Rul. 84-75, 1984-1 C.B. 193, to support its position that the interest expenses incurred on the loans were actually and necessarily incurred administration expenses that are deductible under section 2053. In this ruling, the estate consisted almost entirely of closely held stock, but the executor did not make the election to defer taxes under section 6166. Instead, the estate borrowed funds from a private source to pay the Federal estate

e of all property to the extent of the interest therein of the decedent at the time of his death.” As regards the deductions permitted to nonresident aliens, section 2106(a)(1) provides for allowance of that proportion of the deductions specified in section 2053, relating to expenses, indebtedness, and taxes, “which the value of such part [i.e., the part of the decedent’s gross estate which at the time of his death is situated in the United States] bears to the value of his entire gross estate,

Indeed, in computing the estate’s estate tax liability, respondent had allowed the underpayment interest as a section 2053 estate tax deduction.

m the PFLLC To Pay Estate Tax The estate argues that the $20,891 in interest that accrued on the loans from the PFLLC members to the estate was necessarily incurred by the estate and, therefore, allowable as an administration expense deduction under section 2053. Section 2053(a)(2) provides that the value ofthe taxable estate shall be determined by deducting from the value ofthe gross estate such amounts for administration expenses as allowable by the laws ofthejurisdiction under which the estat

m the PFLLC To Pay Estate Tax The estate argues that the $20,891 in interest that accrued on the loans from the PFLLC members to the estate was necessarily incurred by the estate and, therefore, allowable as an administration expense deduction under section 2053. Section 2053(a)(2) provides that the value ofthe taxable estate shall be determined by deducting from the value ofthe gross estate such amounts for administration expenses as allowable by the laws ofthejurisdiction under which the estat

agreement are includable in the gross estate for Federal tax purposes pursuant to section 2033 or 2039; (2) whether, in the event that the annuities are to be included in the gross estate, they were properly valued by respondent under section 7520; and (3) whether the estate is entitled to a deduction for the cost of a funeral luncheon pursuant to section 2053.¹ FINDINGS OF FACT Some of the facts have been stipulated and are so found.

When family members adopt a course of action with the intent to pass on wealth, a deduction for the amount transferred is.not permitted under section 2053 unless there was a bargained-for exchange.

(2) Is the estate entitled to deduct under section 2053 claimed personal representative’s commissions in excess of the amount allowed by respondent?

he $143 million in notes, the estate borrowed about $38 million (the Farm Credit loan), repayable over 10 years. The estate agreed t-o pay almost $16 million in closing costs and interest, which it seeks to deduct as an administration expense under section 2053. The estate also seeks to deduct administration expenses which it paid from the estate's income. After concessions, the issues for decision are: 1. Whether (or to what extent) the estate may deduct as administration expenses under section

uant to sec. 2053(a) (2). b. Failed to address and, therefore, is deemed to have conceded that commission of $250,000 paid to Madelyn.M.: Hurley, the original executrìx of decedent's estate, is not deductible as an administrative expense pursuant to sec. 2053 (a) (2) nor deductible as a theft loss pursuant to sec. 2054. 3. Whether payments made by decedent's estate to attorneys representing the Glovers, and payments, if any, to be made to Mr. Glover (one of the residuary beneficiaries) for time

To reflect the foregoing and to permit petitioner to claim additional administrative expenses pursuant to section 2053, Decision will be entered under Rule 155.

Petitioner's Section 2053 Deduction Must Be Reduced on Account of Decedent's Contribution Rights .

The issue remaining for decision is whether the estate is entitled to deduct certain - 2 - amounts claimed under section 2053.1 We hold that it is to the extent stated herein.

To reflect concessions and to permit petitioner to claim additional administrative expenses pursuant to section 2053, Decision will be entered under Rule 155.

ties had agreed on all of the issues raised, and a decision could be entered. At the time of P’s motion the estate tax liability had been paid. R objects to P’s motion on the ground that the interest in question is not deductible by the estate under sec. 2053, I.R.C., and the underlying regulations. Held: P’s motion is denied because of failure to show entitlement to interest deductions under sec. 2053, I.R.C. Estate tax cases involving borrowing to - 2 - pay estate tax and involving delay in en

Friedeberg on his date of death; and (3) whether pursuant to section 2053, the estate is entitled to a deduction for more than 50 percent of the mortgage debt outstanding on jointly owned real properties includable in the estate.

Section 2053 Administrative Expenses Section 2053(a) provides in part that the value of a decedent's taxable estate shall be determined by deducting from the value of the gross estate such amounts for administrative expenses as are allowable by the laws of the jurisdiction under which the estate is being administered. Section 20.2053-3(a), Estate T

After concessions, the issues for decision are: (1) Whether a transfer of real property by petitioner qualifies for the charitable - 2 - deduction under section 2055(a);1 and (2) whether expenses paid by petitioner in the operation of decedent's cattle ranch are deductible under section 2053 as administration expenses.

estate should be increased by the value of death benefit proceeds from two life insurance policies pursuant to section(s) 20312 and/or 2042 and (2), if so, whether decedent’s gross estate should be reduced by the amount of a related settlement under section 2053. 1 Decedent’s estate (Estate) does not contest respondent’s increase to decedent’s adjusted gift tax. 2 Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times,

Court of Appeals for the Eleventh Circuit has observed, “the IRS does not dispute that the waiver of support rights may constitute full and adequate consideration under § 2053; nor could it.” Estate of Kosow v.

Section 2053 allows deductions from the value ofthe gross estate for funeral expenses, administration expenses, claims against the estate, and any unpaid debt. A decedent's estate is also entitled to deductions for bequests made 22 As the Commissioner notes, the Moore children themselves kicked in $400 at the FLP's inception. See supra p. 14. The p

Section 2053 allows deductions from the value ofthe gross estate for funeral expenses, administration expenses, claims against the estate, and any unpaid debt. A decedent's estate is also entitled to deductions for bequests made 22 As the Commissioner notes, the Moore children themselves kicked in $400 at the FLP's inception. See supra p. 14. The p

r could it. Section 2056(a) limits the marital deduction to the value ofthe interest that is ¹³Pursuant to sec. 2056(b)(9), however, the allowable marital deduction must be reduced by the amount ofany such management expenses that are deducted under sec. 2053 on the decedent's Federal estate tax return. Sec. 20.2056(b)-4(d)(3), Estate Tax Regs. - 27 - included in the value ofthe gross estate. Income produced by the estate's assets after the decedent's death is not included in the calculation oft

to one "doubling," we are pre- sented with separate taxpayers seeking deductions and since we observe that Congress has acted explicitly on one occasion to prevent double deductions arising in an estate tax context. See § 642(g) with reference to §§ 2053 and 2054. In addition, using broad equitable consideration, such as preventing multiple deductions, to solve problems raised by a tax statute is a dangerous course, e.g., Budd Company v. United States, 252 F.2d 456, 458 (3rd Cir. 1957). This ap

are to the Internal Revenue Code in effect for the date ofdecedent's death, and all Rule references are to the Tax Court Rules ofPractice and Procedure. 2 Respondent concedes that the estate is entitled to deduct $500,000 ofthe policy proceeds under sec. 2053. Thus, the parties disagree over whetherthe estate may deduct the remaining $1,995,000. - 3 - incurred after the estate filed its Form 706, United States Estate (and Generation- Skipping Transfer) Tax Return. FINDINGS OF FACT Some ofthe fac

s to those outcomes, and quantifying the results. Respondent contends, however, that the same standards of reliability of valuation techniques for asset purposes do not apply to liabilities in view of the stricter provisions of the regulations under section 2053. In other words, a value may be determined for asset inclusion purposes that does not satisfy the "ascertainable with reasonable certainty" standard for deduction purposes. It is essentially undisputed that postdeath events are not consi

respondent under section 7491(a). We therefore find that the burden of proof remains with the Estate. II. Interest Expense We now turn to whether the Estate may deduct the interest on the loan from the Walter Trust as an administration expense under section 2053. The value of a decedent's taxable estate is determined by deducting from the value of the g oss estate certain amounts including administration expens s allowable by 4All Rule references are to the Tax Court R les of Practice and Proced

he estate contends alternatively, that if the Keach lawsuit is not an impairment to the value of the estate under sections 2031 and 2033, then the Keach lawsuit instead constitutes a claim against the estate entitling the estate to a deduction under section 2053. Section 2053(a) allows a deduction for claims against the estate that are allowable by the laws of the jurisdiction under which the estate is administered. Section 20.2053-1(b) (3), Estate Tax Regs., as in effect for the date of death o

to those outcomes, and quantifying the results. Respondent contends, however, that the same standards of reliability of valuation techniques for asset purposes do not apply to liabilities in view of the stricter provisions of the regulations under section 2053. In other words, a value may be determined for asset inclusion purposes that does not satisfy the “ascertainable with reasonable certainty” standard for deduction purposes. It is essentially undisputed that postdeath events are not consid

ed the entire credit for tax on prior transfers under section 2013-. Respondent also denied the claim for refund in the amended Form 706 of Mrs . Le Caer's estate on the ground that a deduction for Mr . Le Caer's estate taxes is not allowable under section 2053 . On October 19, 2007, Mr . Le Caer's estate filed with respondent a "Notice of Section 2056 Schedule M Protective Claim" . Mr . Le Caer's estate. made the protective claim "to preserve * * * the placing of and claiming of the personal re

llowed the entire credit for tax on prior transfers under section 2013. Respondent also denied the claim for refund in the amended Form 706 of Mrs. Le Caer’s estate on the ground that a deduction for Mr. Le Caer’s estate taxes is not allowable under section 2053. On October 19, 2007, Mr. Le Caer’s estate filed with respondent a “Notice of Section 2056 Schedule M Protective Claim”. Mr. Le Caer’s estate made the protective claim “to preserve * * * the placing of and claiming of the personal reside

Black's estate may deduct, as administrative expenses under section 2053, the following fees or expense reimbursements : (a) a $1,150,000 fee paid to petitioner for services as the executor of Mrs .

Black's estate may deduct, as administrative expenses under section 2053, the following fees or expense reimbursements : (a) a $1,150,000 fee paid to petitioner for services as the executor of Mrs .

to GFLP’s partners’ capital accounts or as direct gifts of limited partnership interests; (6) whether the value of a Smith Barney investment account ($102,139) is includable in decedent’s gross estate under section 2033; (7) whether decedent’s estate is entitled to deduct administration expenses in excess of those already claimed and allowed under section 2053; and (8) whether decedent’s estate is entitled to deduct ad valorem tax of $3,367 under section 2053.

to GFLP’s partners’ capital accounts or as direct gifts of limited partnership interests; (6) whether the value of a Smith Barney investment account ($102,139) is includable in decedent’s gross estate under section 2033; (7) whether decedent’s estate is entitled to deduct administration expenses in excess of those already claimed and allowed under section 2053; and (8) whether decedent’s estate is entitled to deduct ad valorem tax of $3,367 under section 2053.

F.3d 515 (5th Cir. 1999), revg. 108 T.C. 412 .(1997), the Court of Appeals for the Fifth Circuit addressed whether to consider the impact of an income tax benefit in valuing a claim against an estate for the purpose of the estate tax deduction under section 2053. The estate owned a royalty interest in Exxon. The U.S. Government had obtained a multibillion dollar judgment against Exxon, and the company asserted that it had the right to recoup some of the royalty payments it made to the estate and

F.3d 515 (5th Cir. 1999), revg. 108 T.C. 412 (1997), the Court of Appeals for the Fifth Circuit addressed whether to consider the impact of an income tax benefit in valuing a claim against an estate for the purpose of the estate tax deduction under section 2053. The estate owned a royalty interest in Exxon. The U.S. Government had obtained a multibillion-dol-lar judgment against Exxon, and the company asserted that it had the right to recoup some of the royalty payments it made to the estate and

To reflect the foregoing, and to take into account any further allowable deduction under section 2053, Decision will be entered under Rule 155.

To reflect the foregoing, and to take into account any further allowable deduction under section 2053, Decision will be entered under Rule 155.

The Commissioner determined that the claim was not deductible under section 2053, and that petitioner’s claim against the estate was - 9 - not “contracted bona fide and for an adequate and full consideration in money or money’s worth.” The Stern estate paid the deficiency and sued for a refund in the U.S.

t completion of the gift might fail was in the hands of another party. See Rorabaugh v. Garvis, 3 Although petitioner claimed on the estate tax return a deduction for the gifts made pursuant to the order, petitioner has conceded by stipulation that sec. 2053 does not support the deduction of those gifts from the gross estate. - 6 - 252 N.W.2d 161 (Neb. 1977) (gift completed before the donor’s death even though the bank did not complete the transfer of funds, because the donor had done all that w

Section 2053 allows a deduction for certain expenses, indebtedness, and taxes. Section 2054 allows a deduction for certain losses. Section 2055 allows a deduction for certain transfers for public, charitable, or religious uses. Section 2056 allows a deduction for certain bequests to a surviving spouse. Nowhere in the Code or regulations thereunder

OPINION Section 2001 imposes a transfer tax on the taxable estate (determined under section 2053) of every decedent who is a citizen or resident of the United States.

Section 2053 allows a deduction for certain expenses, indebtedness, and taxes. Section 2054 allows a deduction for certain losses. Section 2055 allows a deduction for certain transfers for public, charitable, or religious uses. Section 2056 allows a deduction for certain bequests to a surviving spouse. Nowhere does the Code or regulations thereunde

Petitioner argues that section 2053 (there being no section 2054 expenses) does not "allow" deductions.

(1961). Respondent concedes that if we decide that the transfers at issue are loans, then they are included in the value of the stock of Beth W. Corp., and petitioner may deduct the amount of the unpaid transfers as a claim against the estate under section 2053. - 15 - 2. Applicable Factors The following factors suggest that a transfer to a shareholder from a corporation is a loan rather than a dividend: (a) The shareholder does not control the corporation; (b) the corporation is restricted in

section references are to the Internal Revenue Code as of the date of decedent's death, and all Rule references are to the Tax Court Rules of Practice and Procedure. 2Petitioner also contends that it is entitled to claim additional deductions under sec. 2053 and an increase in the State death tax credit under sec. 2011. These issues shall be resolved in accordance with the Court's opinion herein under Rule 155. - 3 - decedent's oldest son, is the executor of his estate. Donald Magnin filed a ti

In the case of a taxable termination, the taxable amount is "the value of all property with respect to which the taxable termination has occurred," reduced by expenses, indebtedness, and taxes of the kind that would be allowable under section 2053 (relating to the Federal estate tax).

In the case of a taxable termination, the taxable amount is “the value of all property with respect to which the taxable termination has occurred,” reduced by expenses, indebtedness, and taxes of the kind that would be allowable under section 2053 (relating to the Federal estate tax).