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§ 8.3 FEDERAL ESTATE TAXthat such a fact “may” be material, and went on to find that an executor’s discretionto pay administration expenses out of income is not a material limitation onthe right to receive income. 128 Though the record was not complete on the point,the Court found that the estate’s expenses could have been thought to be immaterialin relation to the amount of income that the estate’s corpus could havebeen expected to generate. 129In general, then, the matter comes down to distinguishing between thesources of estate administration expenses. When an administration expense ispaid out of principal, the amount received by the beneficiaries is reduced. Thus,when the beneficiaries are a charitable organization and a spouse, the charitableand marital deductions are correspondingly lowered. By contrast, administrationexpenses allocable to income do not change the amount of the estate principalreceived by the beneficiaries, so the amount of the deductions should not bealtered.Critics of this view assert that the outcome approved by the Supreme Courtleads to a double deduction, in that the larger charitable (and marital) estate taxdeduction is preserved and the administration expenses allocable to income aredeductible for purposes of income taxation of the estate. This is perceived as aviolation of tax law. 130 This argument was dismissed by the Court plurality asbeing “rhetorical” and of “no basis,” in that the charitable and marital deductionsare already valued with respect to expected income and material expectedadministration expense charges to which estate income may be subjected. 131The IRS was not satisfied with this opinion and announced that it was in theprocess of developing regulations concerning situations in which there is amaterial limitation on a surviving spouse’s right to the income from property,when the income is used to pay administrative expenses of the estate. Commentson this matter were sought by the IRS. 132 Thereafter, the IRS abandonedthe approach based on material limitations and issued regulations that differentiatebetween estate transmission expenses and estate management expenses; thevalue of the property involved, for purposes of either deduction, would bereduced by the first category of expenses. 133Land Subject to Permanent Conservation Easement. A special rule 134 allows anexecutor to elect to exclude from a decedent’s estate 40 percent of the value ofany land subject to a qualified conservation easement that meets the followingrequirements:• The land has been owned by the decedent or a member of the decedent’sfamily at all times during the three-year period ending on the date of thedecedent’s death128 A revenue ruling so holds. Rev. Rul. 69-56, 1969-1 C.B. 224.129 The Court observed that its analysis is consistent with its prior comparable valuation opinions, principallyUnited States v. Stapf, 375 U.S. 118 (1963), and Ithaca Trust Co. v. United States, 279 U.S. 151 (1929).130 An estate may take an estate tax deduction for administration expenses (IRC § 2053(a)(2)) or, if deductible, incomputing taxable income, but it may not do both. IRC § 642(g).131 Commissioner v. Hubert Estate, U.S. (1997).132 Notice 97-63, 1997-47 I.R.B. 6.133 T.D. 8846. See Reg. § 20. 2055-3(b).134 IRC § 2031(c). 243