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estate and allowable under local law. Section 20.2053-3(a),
Estate Tax Regs., provides the following interpretation of the
above-stated requirement:
The 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 the decedent’s estate; that is,
in the collection of assets, payment of debts, and
distribution of property to the persons entitled to it.
The expenses contemplated in the law are such only as
attend the settlement of an estate and the transfer of
the property of the estate to individual beneficiaries
or to a trustee * * *. 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. * * *
Further explanation is provided in section 20.2053-8(b), Estate
Tax Regs., as follows:
The only expenses in administering property not subject
to claims which are allowed as deductions are those
occasioned by the decedent’s death and incurred in
settling the decedent’s interest in the property or
vesting good title to the property in the
beneficiaries. Expenses not coming within the
description in the preceding sentence but incurred on
behalf of the transferees are not deductible.
Respondent argues that the last sentence of each of the
above-quoted regulations should govern the situation in this
case. Respondent reasons that the loan proceeds used to pay the
estate tax were “attributable” to assets in or associated with a
QTIP trust. Because the QTIP trust is not subject to the probate
of the estate, section 2053(b) and section 20.2053-8(b), Estate
Tax Regs., govern this situation and prohibit the deduction of
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Last modified: May 25, 2011