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loan was not necessary to the extent that funds were borrowed
beyond January 2004, or were to be used to pay unidentified
miscellaneous administration expenses or Bergreen’s and Davis’s
compensation. Thus, the estate may deduct a portion of the
interest and closing costs that accrued from October 18, 2002, to
January 31, 2004; the deductible portion of the interest and
costs is allocable to the portion of the loan used to pay the
estate’s Federal and State estate taxes.
B. Whether the Estate May Deduct $3,507,723 in Additional
Administration Expenses
1. Contentions of the Parties and Background
The executors paid administration expenses of: (a) $244,074
in legal fees to Cullen & Dykman; (b) $1,556,164 in consulting
fees to Price Waterhouse; (c) $633,347 in legal fees to
Fensterstock & Partners; (d) $826,364 in consulting fees to Pearl
Meyer; and (e) $1,247,775 in legal fees to Carter Ledyard,
counsel for the estate, for a total of $4,507,723. The executors
allocated those expenses to income. Respondent does not dispute
that these amounts were paid to lawyers, accountants, and Pearl
Meyer, or that the estate had income of $2,844,738. Respondent
concedes that the estate may deduct legal expenses of $1 million
that the executors paid from income.
The estate contends that it may deduct additional expenses
of $3,507,723 (i.e., that much more than the $1 million
respondent concedes) because those expenses are administration
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