A CLAIM IS A CLAIM IS A CLAIM: POST-DEATH EVENTS AND SECTION 2053 DEDUCTIONS
By Michael C. Gerson, Esq.
There are two certainties in life: death and taxes.1 The interplay of these two has confused the courts, reflecting the old adage that "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.