Estate of Howard Gilman, Deceased, Bernard D. Bergreen and Natalie Moody, Executors - Page 3

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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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