Estate Tax-“Disallowance of Double Deductions” in I.R.C. Section 642 (g) Applies Only to “Statutory Deductions”-Estate of Bray

Petitioners, as executors for a substantial estate, had to sell a large amount of securities in order to pay administration expenses incurred by the estate. The estate received $2,250,000 from this sale, which was $50,000 in excess of the value of the stock at the time of decedent’s death and thus as reported on the estate tax return. The brokerage commissions and taxes on the sale, which totaled $23,000, were deducted from the value of the gross estate as administration expenses pursuant to section 2053(a)(2) of the 1954 Internal Revenue Code. The same $23,000 was also subtracted from the $50,000 received above the value of the stock at the time of decedent’s death, so that petitioners reported only $27,000 on the estate’s income tax return as the gain realized from the sale. The Commissioner of Internal Revenue disallowed the use of the brokerage expenses as a reduction in computing the estate’s taxable income on the grounds that a waiver of the right to use these same expenses as an estate tax deduction had not been filed in accordance with section 642(g). The Tax Court, overruling the Commissioner, held that the petitioners did not have to comply with section 642(g) which disallows double deductions because the brokerage commissions were an offset against the selling price of the securities and not a deduction for income tax purposes.