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estate taxes and interest. Approximately 3 years later, the
personal representatives had paid only $11,000 towards the
principal on the loan; however, the estate held assets with a
market value of $944,448. The Commissioner disallowed almost all
of the interest expenses claimed on the loan on the ground that
the loan was not necessary for the administration of the estate.
We rejected the Commissioner's argument and held that the
interest expenses were deductible. We stated that
Although respondent has suggested the executors
could have sold more land or timber, and that no
contingency reserve is appropriate, we are not prepared
to second guess the judgments of a fiduciary not shown
to have acted other than in the best interests of the
estate. * * * the fiduciaries to have been prudent
indeed to have anticipated contingencies such as an
increased estate tax liability. [Id.]
Moreover, in Estate of Sturgis, we determined that the value of
the estate's real property was understated by approximately $2
million and noted that the personal representatives turned out to
be very prudent in retaining a contingency reserve.
In this case, respondent initially sought to impose
approximately $2 million in additional gift and estate taxes on
decedent's estate, plus interest, virtually all of which related
to respondent's attempt to increase the value of the Company
stock. Respondent has conceded this issue. We do not think that
the loans in this case were unnecessary, either when made or
because the estate administration has been unduly prolonged,
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