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The $100,000 Alleged-Debt Deduction
Petitioner deducted $100,000 from the gross value of the
estate for alleged debts of decedent for which there was no
evidence of indebtedness. Furthermore, the return disclosed a
deduction for a debt of only $50,000. The disclosure exception,
therefore, could apply to only $50,000 of alleged debt.
The disclosure exception does not apply where the taxpayer
fails to keep adequate books and records or to substantiate items
properly. Jack is a cotrustee of the JKH Trust and was the
attorney and agent of decedent. He had a fiduciary duty to both
parties, yet he maintained essentially no records. He was unable
to present records of either decedent or the JKH Trust that would
support petitioner's position that decedent entered into a bona
fide creditor-debtor relationship with the JKH Trust at the time
of the transfers at issue.
We hold, therefore, that petitioner is liable for the
accuracy-related penalty for the portion of any understatement of
the tax required to be shown on the return with respect to its
position on the reduction of the gross value of decedent's estate
for the $100,000 of alleged debt.
The Deduction for Maid Service
Petitioner deducted $20,501 as an administration expense for
the maintenance of property prior to its distribution where the
facts show that the expense inured to the benefit of the heirs
and was not properly deductible as an expense of administration.
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