A CLAIM IS A CLAIM IS A CLAIM: POST-DEATH EVENTS AND SECTION 2053 DEDUCTIONS

By Michael C. Gerson, Esq.

I. INTRODUCTION

There are two certainties in life: death and taxes.¹ The interplay of these two has confused the courts, reflecting the old adage that "[1]ogic and taxation are not always the best of friends."² The Ninth Circuit has proven this adage true in its approach to the estate tax deduction claims that constitute a liability and are against the decedent, that is, "for claims against the estate."³

A decedent’s claims can be either an asset (such as a pending lawsuit against a third party) or a liability (such as a pending lawsuit against the decedent). The Ninth Circuit’s consistent position has been that claims, contingent or otherwise, that constitute an asset are included in a decedent’s gross estate based on their date of death value.⁴ However, the Ninth Circuit’s position on claims that constitute a liability, that is, "claims against the estate," has been inconsistent.⁵ First, the Ninth Circuit held that post-death events are relevant in valuing the deduction for a claim against the estate.⁶ Then the Ninth Circuit concluded that post-death events are irrelevant in valuing the deduction for a claim against the estate, but in dicta opined that uncertain claims are valued at the date of payment.⁷ Subsequently, the Ninth Circuit has confirmed that post-death events are irrelevant in valuing the deduction for a claim against the estate.⁸ Thus, the author respectfully disagrees with the contrary conclusion reached in Loeb, Crossed Circuits on Estate Tax Deductibility of Contingent or Disputed Claims,⁹ that in the Ninth Circuit, contingent claims are valued based on post-death events.