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determined they would be required to sell 66,692 shares of class
B stock, leaving only 42,758 shares of class B stock worth
$2,351,690 to offset the remaining estate taxes of $2,349,244,
plus interest and estate income taxes.
The executors determined that a sale of such a large block
of class B stock could jeopardize the estate's subsequent ability
to meet its obligations. At the time they made their decision,
the executors determined that it was preferable to preserve all
of decedent's stock and to borrow funds at favorable interest
rates, in order to better ensure the estate's ability to pay its
obligations. The executors knew that the estate would have
incurred substantial interest expenses if it had made a section
6166 election or if it had obtained loans to pay the estate's
obligations.
In a line of cases going back to 1937, this Court and its
predecessor have recognized that the payment of interest on
estate tax or on money borrowed to pay estate tax is deductible.
See Estate of Bahr v. Commissioner, 68 T.C. 74 (1977); Estate of
Todd v. Commissioner, 57 T.C. 288 (1971); Estate of Huntington v.
Commissioner, 36 B.T.A. 698 (1937); see also Estate of Graegin v.
Commissioner, T.C. Memo. 1988-477; Estate of Sturgis v.
Commissioner, T.C. Memo. 1987-415.
In Estate of Bahr v. Commissioner, supra, a Court-reviewed
opinion, the estate incurred liability for interest incurred on
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