Rev. Rul. 79-252

ISSUE

Is interest on a federal estate tax deficiency deductible for estate tax purposes under section 2053(a)(2)?

LAW AND ANALYSIS

Section 2053(a)(2) of the Code and the applicable regulations provide that the value of the taxable estate is determined by deducting from the value of the gross estate amounts expended for necessary administration expenses to the extent the expenses are allowable under the laws of the jurisdiction in which the estate is being administered.

The Service has determined that postdeath interest on an income tax deficiency is a necessary administration expense and is deductible under section 2053(a)(2) of the Code to the extent allowable under local law. See Rev. Rul. 69-402, 1969-2 C.B. 176, following Maehling v. United States, Civil No. 66-C-87 (S.D. Ind. Aug. 16, 1967). The Service has made a like determination with respect to post-death interest on a gift tax deficiency. See 1977-2 C.B. 2 and 3, acquiescing and nonacquiescing in Estate of Webster v. Commissioner, 65 T.C. 968 (1976). The acquiescence relates to this issue.

For purposes of section 2053(a)(2), no distinction should be drawn between interest incurred on a gift or income tax deficiency, and interest incurred on an estate tax deficiency. See Estate of Buchholtz v. Commissioner, 70 T.C. 814, 817 (1978); Estate of Bahr v. Commissioner, 68 T.C. 74 (1977), acq., 1978-1 C.B. 1, Rev. Rul. 78-125, 1978-1 C.B. 292.

HOLDING

Interest on a federal estate tax deficiency is a necessary administration expense under section 2053(a)(2) and is deductible to the extent allowable under local law.