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the Foundation must be reduced by taxes and administrative
expenses, and (2) a postmortem bonus remitted by SSE to the
Estate cannot be considered to have paid those expenses so as to
leave the charitable deduction unreduced.
Petitioners do not contest that the charitable deduction may
be reduced if payments for administrative expenses and taxes
exceed the amount of the 1992 Trust residue (meaning in this
context residual trust assets other than the SSE stock). Rather,
petitioners maintain that the bonus received by the Estate should
be included in computing the residue available for paying these
obligations. In that event, petitioners calculate that
sufficient funds would exist to cover all taxes and expenses
without need to resort to the charitable gift. We, however,
conclude that petitioners’ view is contrary to the express terms
of the will and trust agreement executed by decedent.
As a general rule, section 2055 permits a deduction for the
value of bequests to charitable entities but limits the amount of
such deduction to “the value of the transferred property required
to be included in the gross estate.” Sec. 2055(a), (d). Here,
the parties agree that the postmortem bonus was not includible in
the gross estate. The sum was instead includible in the income
of the Estate for fiduciary income tax purposes. As a result,
receipt of the bonus did not increase the total amount otherwise
potentially deductible under section 2055. The relevant question
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