Determination of Administration Expense Is Question of Federal Law

By De Rosa, Albert | The CPA Journal, October 1991 | Go to article overview

Determination of Administration Expense Is Question of Federal Law


De Rosa, Albert, The CPA Journal


The U.S. Court of Appeals for the Fourth Circuit has joined the Second, Fifth, and Ninth Circuits in holding that federal law controls in the determination of whether an expenditure is deductible as an administrative expense (Love Est. v. Comr., 91-1 USTC para. 60,056 (4th Circuit 1991).

The Case of Love

Prior to death, Margaret Love entered into an agreement to have one of her mares bred. The agreement provided that the owner of the stallion was to receive a one-half interest in any offspring instead of a straight fee. The agreement also provided that Love would pay the owner of the stallion a fixed fee in the event of disaster, such as bankruptcy or death, so that the offspring could be sold free of encumbrances. The mare was impregnated shortly after Love's death. Pursuant to the agreement, the estate paid a fixed fee to acquire the remaining interest in the offspring. The payment was deducted on the federal estate tax return as an administrative expense. The estate argued that although the payment was not yet an obligation at the time of death (the mare was not yet pregnant), it was necessary to the administration of the estate. The Commissioner disallowed the deduction.

Federal Law

The court addressed the issue of whether state or local law controls in the determination of what is an administration expense under the IRC. Sec. 2053(a)(2) of the 1954 IRC, which was in effect at date of death, stated:

"...the value of the taxable estate shall be determined by deducting from the value of the gross estate such amounts...for administration expenses...as are allowable by the laws of the jurisdiction, whether within or without the U.S., under which the estate is being administered."

Prior case law noted that the federal estate tax is a tax on the transfer of property and not property itself. The estate tax allows deductions for administrative expenses that create an estate consisting only of amounts that actually pass to heirs. It would be unfair to allow deductions of expenditures that are not necessry to the estate. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Determination of Administration Expense Is Question of Federal Law
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.