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ESTATE AND GIFT TAX CONSIDERATIONSof the dispute was the outcome when these expenses are allocated by the executorof the estate to income. The Court held that the estate tax deduction for charitablebequests does not have to be reduced by the amount of the estate’sexpenses that were paid from income generated during administration of theestate by assets allocated to the bequests. 123 (This means that, when the representativeof the estate is given the power by the will to apportion expenses toincome or principal, the estate tax charitable deduction need only be reduced bythe portion of estate administration expenses allocated to principal.)The estate involved was valued at more than $30 million. During the periodof administration, the estate generated more than $4.5 million in income andmore than $2 million in administration expenses (including substantial litigationcosts). The estate paid about $500,000 in expenses from principal and paid therest of the expenses from this postdeath income. The executors were given theauthority to apportion administration expenses; this apportionment provisionand other aspects of the will were consistent with state law.The estate, in calculating its tax liability, did not reduce its charitable (ormarital) deductions by the amount of the income used to pay the balance of theadministration expenses. The IRS contended, however, that use of income forthis purpose requires a dollar-for-dollar reduction of the amounts of the charitable(and marital) deductions. 124 (The parties to this case agreed that the charitableand marital deductions had to be reduced by the amount of charitable andmarital residue principal used to pay administration expenses.)The Supreme Court noted that, although the language of the estate tax charitablededuction and the marital deduction differs in some respects, the twodeduction statutes are to be read to require the same answer in this context. Inasmuchas the marital deduction has more specific terms on this point, the Courtin its rendition of the law concentrated on that provision. It started with theobservation that the marital deduction is available for qualifying property basedon the value of the property value as of the date of death. 125 This valuation isbased on the present value of the remainder interest passing to the spouse. 126The controlling regulation includes a provision that requires material limitationson the right to receive income to be taken into account when valuing the propertyinterest passing to the surviving spouse. 127 The IRS read this regulation asstating that the fact that income from property is used to pay expenses duringthe administration of an estate is always a material limitation that would havean effect on valuation. The Court, by contrast, read the regulation as meaning123 Commissioner v. Hubert Estate U.S. (1997), aff’g 63 F.3d 1083 (11th Cir. 1995), aff’g 101 T.C. 314 (1993).124 The Tax Court previously rejected this position of the IRS in Street Estate v. Commissioner, 56 T.C.M. (CCH)774 (1988), but was reversed on appeal. 974 F.2d 723 (6th Cir. 1992). This position of the Sixth Circuit wasthus in conflict with that of the Eleventh Circuit (see supra note 110), although another federal court of appealswas in accord with the former. Burke v. United States, 994 F.2d 1576 (Fed. Cir.), cert. denied, 510 U.S. 990(1993). See also Bonner v. City of Pritchard, 661 F.2d 1206 (11th Cir. 1981); Alston v. United States, 349 F.2d87 (5th Cir. 1965); Roney Estate v. Commissioner, 294 F.2d 774 (5th Cir. 1961); Ballantine v. Tomlinson, 293F.2d 311 (5th Cir. 1961).125 IRC § 2056(a); Reg. § 20.2056(b)-4(a). The exception to this rule occurs when an estate uses the alternativevaluation date. IRC § 2051.126 Reg. §§ 25.2523(a)-1(e), 20.2031-7; see also Reg. § 20.2055-2(f)(1).127 Reg. § 20.2056(b)-4(a). 242