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therefore is whether the bonus may be applied to payment of taxes
and expenses in lieu of gross estate assets which would support a
deduction if transferred to charity.
The property from which a decedent’s debts and taxes are
payable and the order of payment of those items are governed by
applicable State law. See Riggs v. Del Drago, 317 U.S. 95, 97-98
(1942). The pertinent law in this case regarding the
administration of the Estate is that of South Dakota. Under
South Dakota law as in effect in 1993, where a decedent’s will,
construed together with other testamentary instruments, directs
the source from which obligations are to be paid, such directions
are given effect. See S.D. Codified Laws secs. 29-5-1, 29-5-2,
29-5-4, 29-6-7, 29-7-1 (1993). The statutory codification then
provides additional default rules to ensure a complete and
orderly disposition of the decedent’s property. Accordingly, we
must first consider the portions of decedent’s will and the 1992
Trust agreement which speak to this issue.
Decedent’s will states the following regarding taxes and
expenses:
Payment of debts, expenses and death taxes. I
direct my Executors to pay out of my residuary estate
my legally enforceable debts and the expenses of my
last illness, funeral and burial. I direct that all
inheritance, estate, succession and transfer taxes * *
* which may be imposed by any domestic or foreign law
by reason of my death or because of the transfer,
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