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Issue 3. Whether Petitioner May Deduct the Expense of Defending
Its Reporting Position
Petitioner asserts by amended petition that certain expenses
it incurred defending its reporting position with regard to the
value of the Savings and Willits shares are administration
expenses deductible from the value of the gross estate.
Respondent did not address this issue at trial or on brief.
Section 2053(a)(2) provides that administration expenses
shall be deducted from the value of the gross estate if they are
allowable by the law of the jurisdiction under which the estate
is being administered. Administration expenses include
attorney's fees and miscellaneous expenses. See sec. 20.2053-
3(a), Estate Tax Regs. Miscellaneous administration expenses
include accountant's fees and appraiser's fees. See sec.
20.2053-3(d)(1), Estate Tax Regs. The amounts deductible as
administration expenses are limited to such expenses as are
actually and necessarily incurred in the administration of the
decedent's estate. See sec. 20.2053-3(a), Estate Tax Regs.
However, 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. See id.
Attorney's fees incurred by beneficiaries incident to litigation
as to their respective interests are not deductible if the
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