Commissioner v. Estate of Hubert, 520 U.S. 93, 32 (1997)

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Cite as: 520 U. S. 93 (1997)

Scalia, J., dissenting

stantial administrative expenses paid out of marital bequest principal may not require a reduction of the marital deduction. This result is, of course, inconsistent with the statute, see 26 U. S. C. § 2056(a), and with what appears to be (as I noted earlier, supra, at 125-126) the concurrence's view, ante, at 112-113.

Respondent asserts that some inquiry into "substantiality" is necessarily implied by the fact that the last sentence of the regulation describes an income-to-pay-administration-expenses limitation as "[a]n example of a case in which this rule [of taking account of material limitations] may be applied," 26 CFR § 20.2056(b)-4(a) (1996) (emphasis added). The word "may" implies, the argument goes, that in some circumstances under those same facts the rule would not be applied—namely (the argument posits), when the administration expenses are not "substantial." But the latter is not the only explanation for the "may." Assuming it connotes possibility rather than permissibility (as in, "My boss said that I may go to New York"), the contingency referred to could simply be the contingency that there be some income which is used to pay administration expenses.

The Tax Court (in analysis adopted verbatim by the Eleventh Circuit and seemingly adopted by the concurrence, ante, at 120-121) took yet a third approach to "material limitation," which I must pause to consider. The Tax Court relied on 26 CFR § 25.2523(e)-1(f)(3) (1996), which, it stated, provides that so long as the spouse has substantial beneficial enjoyment of the income of a trust, the bequest will not be disqualified from the marital gift deduction by virtue of a provision allowing the trustee to allocate expenses to income, and the spouse will be deemed to have received all the income from the trust. The Tax Court concluded: "If Mrs. Hubert is treated as having received all of the income from the trust, there can be no material limitation on her right to receive income." 101 T. C. 314, 325-326 (1993). This reasoning fails for a number of reasons. First, § 25.2523(e)-

131

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