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of this congressional action, the Sachs estate received a full
refund of the taxes it had paid. Under these facts, the Court of
Appeals for the Eighth Circuit disallowed the claimed deduction
for income tax paid, because the estate's obligation for such
taxes had been eliminated, and the estate had been made whole by
receiving a full refund of those taxes.
Unlike the income tax in Estate of Sachs, the interest
expenses paid by the estate in this case have not been refunded,
forgiven, or eliminated. The interest expenses were allowable
under Tennessee law and were paid out of the estate's assets. We
hold that the interest expenses constitute a deductible
administration expense under section 2053(a)(2).
III. Conclusion
Pursuant to section 2053(a) and section 20.2053-1(a)(1),
Estate Tax Regs., an estate generally may deduct an
administration expense that is allowable as a legitimate charge
against the estate under the laws governing decedents' estates in
the State of the probate proceeding. In this case the estate in
the course of its administration was obliged to incur interest
expenses whether the executors made a section 6166 election or
whether the executors decided to borrow funds from a third party
to pay the estate's Federal and State tax obligations.
Decedent's estate has met its burden of proving that the loans
were necessary costs of administering the estate. The Company
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