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The estate received $143 million in promissory notes from
some of HG’s businesses when the assets were transferred to HG.
The notes were scheduled to pay interest from 1999 to 2004, and
to be fully repaid in January 2004.
The financial condition of HG’s businesses declined in 2001.
In October 2002, which was 15 months before the estate was
scheduled to receive repayment of the $143 million in notes, the
estate borrowed about $38 million (the Farm Credit loan),
repayable over 10 years. The estate agreed to pay almost $16
million in closing costs and interest, which it seeks to deduct
as an administration expense under section 2053. The estate also
seeks to deduct administration expenses which it paid from the
estate’s income.
After concessions, the issues for decision are:
1. Whether (or to what extent) the estate may deduct as
administration expenses under section 2053(a)(2) interest and
closing costs for the $38 million Farm Credit loan. We hold that
it may to the extent described herein.
2. Whether, in addition to the $1 million respondent
conceded, the estate may deduct $3,507,723 as additional
administration expenses (additional expenses) which it paid from
income of the estate. We hold that the estate may deduct
additional administration expenses of $1,803,939.
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