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Discussion
I. Administration Expenses Under Section 2053(a)(2).
Generally, section 2053(a)(2)2 authorizes an estate to
deduct administration expenses that are allowable by the law of
the jurisdiction in which the estate is being administered.3
Section 20.2053-3(a), Estate Tax Regs., provides that expenses
actually and necessarily incurred are expenses "in the collection
of assets, payments of debts, and distribution of property to the
persons entitled to it." As a threshold matter, we will look to
Tennessee law, the State where decedent's estate was
administered, to determine whether the interest expenses claimed
as administration expense deductions are properly deductible.
2Sec. 2053(a)(2) provides, in relevant part, as follows:
SEC. 2053(a). General Rule.--For purposes of the
tax imposed by section 2001, the value of the taxable
estate shall be determined by deducting from the value
of the gross estate such amounts--
* * * * * * *
(2) for administration expenses,
* * * * * * *
as are allowable by the laws of the jurisdiction,
whether within or without the United States, under
which the estate is being administered.
3A deduction is not allowed to the extent the amount of the
administration expenses (and other expenses deductible pursuant
to sec. 2053(a)) exceeds the value, at the time of decedent's
death, of property subject to claims, except to the extent such
deduction represents amounts paid before the date prescribed for
the filing of the estate tax return. Sec. 2053(c)(2).
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