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amounts deductible from a decedent's gross estate as
'administration expenses' * * * are limited to such
expenses as are actually and necessarily incurred in
the administration of decedent's estate; that is, in
the collection of assets, payment of debts, and
distribution of property to the persons entitled to it.
* * * Expenditures not essential to the proper
settlement of the estate, but incurred for the
individual benefit of the heirs, legatees, or devisees,
may not be taken as deductions. Administration
expenses include (1) executor's commissions; (2)
attorney's fees; and (3) miscellaneous expenses.
[Emphasis added.]
In defining "miscellaneous" administration expenses, section
20.2053-3(d), Estate Tax Regs., provides that
Expenses necessarily incurred in preserving and
distributing the estate are deductible, including the
cost of storing or maintaining property of the estate,
if it is impossible to effect immediate distribution to
the beneficiaries. Expenses for preserving and caring
for the property may not include outlays for additions
or improvements; nor will such expenses be allowed for
a longer period than the executor is reasonably
required to retain the property.
Respondent does not dispute that petitioner is entitled to
deductions under section 2053(a)(2) for its legal fees and
appraisal fees to the extent such fees are substantiated.
Respondent also does not take issue with the general proposition
that interest on funds borrowed to pay estate tax liabilities,
among other things, may be deductible as administration expenses.
See, e.g., Estate of Todd v. Commissioner, 57 T.C. 288 (1971);
McKee v. Commissioner, T.C. Memo. 1996-362. Rather, respondent
argues that Georgia, the jurisdiction under which the estate is
being administered, requires prior court approval for an estate
to incur an interest expense for borrowed funds, which approval
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