Estate of Howard Gilman, Deceased, Bernard D. Bergreen and Natalie Moody, Executors - Page 15

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                                       OPINION                                        
          A. Whether the Estate May Deduct Interest and Closing Costs                 
               Paid on the Farm Credit Loan                                           
               1.   Contentions of the Parties and Background                         
               The estate contends that all of the Farm Credit loan                   
          proceeds were borrowed for the purpose of paying estate taxes and           
          deductible administration expenses of the estate including (a)              
          Bergreen’s compensation of $19,470,525;8 (b) Davis’s compensation           
          of $5 million; and (c) miscellaneous administration expenses of             
          $816,175.                                                                   
               Respondent contends that none of the interest paid on the              
          Farm Credit loan is deductible under section 2053.  Respondent              
          contends that the loan was unnecessary because the estate had               
          enough liquid assets when it borrowed about $38 million from Farm           
          Credit to pay its taxes and administration expenses.  Respondent            
          alternatively contends that, if the estate was illiquid when it             
          obtained the Farm Credit loan, the loan was unnecessary because:            
          (a) Some of the estate’s planned uses of the loan proceeds (e.g.,           
          compensation for Bergreen and Davis) are expenses of HG and are             
          not administration expenses of the estate; (b) the estate has not           
          substantiated miscellaneous administration expenses of $816,175;            
          (c) the executors caused the estate’s illiquidity by distributing           

               8 The estate concedes that $2.4 million to be paid to                  
          Bergreen as compensation for 1996 and 1997 is not an                        
          administration expense.                                                     





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