104
Opinion of Kennedy, J.
"charge to income or principal, executor's or trustee's commissions, legal and accounting fees, custodian fees, and similar administration expenses . . . [does] not result
. . . . . "[does] in the disallowance or diminution of the marital deduction for estate and gift tax purposes unless the execution of such directions would or the exercise of such powers could, cause the spouse to have less than substantially full beneficial enjoyment of the particular interest transferred." Rev. Rul. 69-56, 1969-1 Cum. Bull. 224.
The Revenue Ruling cites for this proposition §§ 20.2056(b)- 5(f)(1) and 25.2523(e)-1(f)(1), parts of the estate and gift tax qualification regulations discussed above. The qualification regulations provide that an interest may qualify as deductible only in part. Where that happens, the deduction need not be disallowed but it must be diminished. See, e. g., § 20.2056(b)-5(b); § 25.2523(e)-1(b); see also 26 U. S. C. §§ 2056(b)(5), 2523(e). It is in this qualification context that the Revenue Ruling speaks of "diminution" of the marital deduction. There is no dispute the entire interests transferred in trust here qualify for the estate tax marital and charitable deductions, respectively. The question before us is one of valuation. Sections 25.2523(e)-1(f) and 20.2056(b)- 5(f) and Revenue Ruling 69-56 do not bear on our inquiry.
The parties here agree that the marital and charitable deductions had to be reduced by the amount of marital and charitable residue principal used to pay administration expenses. The Commissioner contends that the estate must reduce its marital and charitable deductions by the amount of administration expenses paid not only from principal but also, and in all events, from income and by a dollar-for-dollar amount. The Commissioner cites the controlling regulation in support of her position. The regulation says:
Page: Index Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: October 4, 2007