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Decedent, a citizen and resident of Canada, died on October
26, 1997. The executors of the estate are Bonny Fern Silver,
Kenneth Kirsh, and Ronald Faust, none of whom resides in the
United States.
Decedent’s will provided for charitable bequests of $312,840
to Canadian-registered charities; these charities are
organizations described in paragraph 1 of article XXI of the
Convention With Respect to Taxes on Income and Capital, Sept. 26,
1980, U.S.-Can., art. XXI, par. 1, T.I.A.S. No. 11087, 1986-2
C.B. 258, 265 (the convention). The bequests were paid solely
out of funds and property located outside the United States.
Decedent’s gross estate in the United States consisted of
252,775 shares of Neuromedical Systems, Inc., valued at $516,268
on the alternate valuation date. See sec. 2104(a). The value of
decedent’s gross estate outside the United States was over $100
million.
Upon decedent’s death, the estate filed a Form 706NA, United
States Estate (and Generation Skipping Transfer) Tax Return (tax
return). The estate claimed a charitable contribution deduction
of $312,840 on the tax return.
In the notice of deficiency, respondent allowed a charitable
contribution deduction of only $1,615. Respondent explained:
The decedent’s will, however, did not direct payment of
the residuary charitable bequests exclusively from the
U.S. assets. As a result, the charitable deduction is
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