JUNE 9, 2000 


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Tax Tid-Bits

Paying Estate Administration Expenses from Charitable Income

 In 1997 the Supreme Court ruled in Commissioner v. Estate of Hubert, 520 U.S. 93, that the IRS could not reduce the value of a deductible charitable bequest after the executor paid estate administration expenses out of the income attributable to the charitable share. The Treasury has now issued, according to the Supreme Court’s suggestion, final regulations governing this issue. 

The final regulations state that, subject to certain exceptions, the charitable deduction will not be reduced when estate management expenses are paid out of the charitable share. Estate management expenses are those incurred in connection with the investment, preservation, or maintenance of assets during estate administration.

However, the charitable deduction will be reduced when estate transmission expenses are paid out of the charitable share. Estate transmission expenses are those that would not have been incurred but for death, such as appraisals, debts, taxes, and costs of distributing the estate.

Source: Techniques (St. Jude Children’s
Research Hospital) 2nd Qtr., 2000