Sunday, January 20, 2008
Professor Wendy C. Gerzog (Baltimore) recently published "Dealing with Post Death Events" in Tax Notes. Here is the introduction:
In the background section of the proposed regulations dealing with the effect of postdeath events on the estate tax deductions under section 2053, the government describes the disparate treatment accorded to postdeath events by different courts. One group of courts relies on an interpretation of Ithaca Trust that views date of death valuation as prohibiting consideration of postdate events; diametrically opposed is another group that, underlining that the deduction should reflect actual claims against the estate, allows a deduction only for amounts that are actually paid by the estate. Within that panoply of interpretations are those courts that, while adhering to the first view, allow some review of postdeath events to deny the deduction "when a claim is contested, contingent, unenforceable, becomes unenforceable after the decedent's death, or is not in fact presented for payment."
Those inconsistencies in interpretation have resulted in an inherently whimsical, uneven, and unjust application of the statute dependent on the executor's residence. Rejecting what it refers to as the date of death approach because it results in "an inefficient use of resources" for the parties and the courts, is expensive because of appraisal and litigation costs, and illogically produces a mismatch between the deduction amount and the actual expense, the government opts for the opposite interpretation: "An estate may deduct under section 2053(a)(3) only amounts actually paid in settlement of claims against the estate." For claims unresolved at the end of the limitations period, "the estate may file a protective claim for refund to preserve its right to claim a deduction under section 2053(a)."
For the entire article, go to Dealing with Post Death Events, 2007 TNT 176-57, available on Lexis.