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calculated on an annual basis, but is a one-time charge or excise
that is computed on the value of a decedent's gross estate less
certain deductions which are specifically allowed by the Code.
Some of these deductions, like the ones at hand, cannot be
determined until after a return is filed. Unlike an NOL
carryback, these deductions do not depend on unrelated,
unforeseen, or fortuitous circumstances that may occur in later
years. These deductions are directly related to a determination
of an estate's tax liability. In contrast to the determination
of Federal income tax liability, a determination of Federal
estate tax liability is not made based solely on deductions that
are required to be reported on the appropriate tax return as
filed. Indeed, our rules explicitly recognize the fact that even
some expenses incurred at or after a trial are deductible in
determining an estate's Federal estate tax liability. See Rule
156; see also Estate of Bailly v. Commissioner, 81 T.C. 246,
supplemented by 81 T.C. 949 (1983).
We also disagree with respondent's argument in this case
because it could possibly lead to the imposition of the fraud
penalty when the taxpayer/estate does not have an underpayment of
tax and, indeed, may even be entitled to an overpayment. Such a
result is inconsistent with jurisprudence. As this Court has
consistently held, the fraud penalty does not apply without an
underpayment because "[absent] an underpayment, there is nothing
upon which the fraud addition to tax [or penalty, as it is now
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