- 15 - OPINION A. Whether the Estate May Deduct Interest and Closing Costs Paid on the Farm Credit Loan 1. Contentions of the Parties and Background The estate contends that all of the Farm Credit loan proceeds were borrowed for the purpose of paying estate taxes and deductible administration expenses of the estate including (a) Bergreen’s compensation of $19,470,525;8 (b) Davis’s compensation of $5 million; and (c) miscellaneous administration expenses of $816,175. Respondent contends that none of the interest paid on the Farm Credit loan is deductible under section 2053. Respondent contends that the loan was unnecessary because the estate had enough liquid assets when it borrowed about $38 million from Farm Credit to pay its taxes and administration expenses. Respondent alternatively contends that, if the estate was illiquid when it obtained the Farm Credit loan, the loan was unnecessary because: (a) Some of the estate’s planned uses of the loan proceeds (e.g., compensation for Bergreen and Davis) are expenses of HG and are not administration expenses of the estate; (b) the estate has not substantiated miscellaneous administration expenses of $816,175; (c) the executors caused the estate’s illiquidity by distributing 8 The estate concedes that $2.4 million to be paid to Bergreen as compensation for 1996 and 1997 is not an administration expense.Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
Last modified: May 25, 2011