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the estate’s principal assets to the foundation in the
restructuring; (d) the estate should have retained enough assets
to sell to pay its expenses; (e) the executors had elected to pay
the estate tax in 10 annual installments; and (f) the executors
could have demanded that the foundation return some of the
proceeds from HG’s sale of assets transferred from the estate.
The estate disputes respondent’s contentions.
An estate may deduct administration expenses allowable under
the probate law of the jurisdiction where the estate is being
administered, sec. 2053(a)(2), and which are actually and
necessarily incurred in administering a decedent’s estate, Estate
of Grant v. Commissioner, 294 F.3d 352, 353 (2d Cir. 2002), affg.
T.C. Memo. 1999-396; sec. 20.2053-3(a), Estate Tax Regs.9
Interest on funds borrowed to pay taxes or other debts of
the estate while the estate is illiquid (i.e., while the estate
9 Sec. 20.2053-3(a), Estate Tax Regs., provides in part:
The amounts deductible from a decedent’s gross
estate as “administration expenses” * * * are limited
to such expenses as are actually and necessarily
incurred in the administration of the decedent's
estate; that is, in the collection of assets, payment
of debts, and distribution of property to the persons
entitled to it. The expenses contemplated in the law
are such only as attend the settlement of an estate and
the transfer of the property of the estate to
individual beneficiaries or to a trustee * * *.
Expenditures not essential to the proper settlement of
the estate, but incurred for the individual benefit of
the heirs, legatees, or devisees, may not be taken as
deductions.
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