YOU CAN LEAD THE IRS TO THE LAW, BUT YOU CAN’T MAKE IT THINK-WHY SECTION 2053 PROPOSED REGULATIONS ARE DEAD WRONG
Michael C. Gerson, Esq.*
As noted in the author’s earlier article, "A Claim is a Claim is a Claim: Post-death Events and Section 2053 Deductions,"1 on April 23, 2007, the IRS issued proposed regulations2 providing that the amount of an estate tax deduction for a claim against the estate equals the amount paid. This article analyzes the IRS proposals and explains why they are fatally flawed.
I. BRIEF BACKGROUND
Internal Revenue Code section 2053(a)(3) allows an estate tax deduction for "claims against the estate . . . as are allowable by the laws of the jurisdiction."3 In determining whether or not post-death events are relevant to this deduction, "the cases in this field dealing with post-death evidence are not readily reconciled with one another, and at times it is like picking one’s way through a minefield in seeking to find a completely consistent course of decision."4 One line of cases, starting in 1929, determined that the amount deductible for a claim is only the amount actually paid.5 Another line of cases, starting in 1935,6 stated that the amount deductible is based on the value of the claim at date of death.7