Before GIBBONS and HUNTER, Circuit Judges, and MUIR, District Judge,
The question in this case is whether executors may deduct for federal estate tax purposes auctioneers' commissions of $490,000 paid by decedent's testamentary trustees in connection with the trustees' sale of decedent's "Americana Collection."
The decedent, a lawyer, died in 1965. He bequeathed to his trustees his "Americana Collection" of 4,800 books, maps, historical manuscripts and similar properties. He directed the trustees to sell the collection and distribute the proceeds within 21 years to 18 charities and his issue. The number of individual beneficiaries entitled to participate was four.
The executors determined to sell the collection at public auction at Parke-Bernet Galleries, Inc., New York City and agreed with the auctioneers to sell the collection in seven auctions over a three-year period.
Nine months after the death, the executors transferred the collection to themselves as trustees. The auctions grossed $3,100,000 from which commissions of $490,000, or approximately 16%, were deducted auctioneers. the auctioneers.
The trustees paid preferred charitable legacies of $414,000 and started to distribute the balance to the individual beneficiaries. They suspended distribution when faced with the current tax controversy and invested in short-term government obligations.
There seems to be little doubt that if the sale had been made by the fiduciaries as executors, the auctioneers' fees would be deductible for federal estate tax purposes.*fn1 The reasonableness of the auctioneers' commissions was not challenged by the government in the court below and the Commissioner's attempt to raise that issue at this appellate level is inappropriate.
The Commissioner's arguments that these fiduciaries should be denied the deduction because they sold as trustees, not as executors, and that the expenses were not essential to the proper settlement of the estate are pure farrago.
The Internal Revenue Code of 1954 in § 2053 provides in part as follows:
"(a) General Rule. - For purposes of the tax imposed by § 2001, the value of the taxable estate shall be determined by deducting from the value of the gross estate such amounts - ...(2) for administration expenses...as are allowable by the laws of the jurisdiction...under which the estate is being administered."
The regulations under this section of the Code in § 20.2053-3 provide in part:
"(a) In general. The amounts deductible from a decedent's gross estate as "administration expenses"...are limited to such expenses as are actually and necessarily incurred in the administration of decedent's estate; that is, in the collection of assets, payment of debts, and distribution of property to the persons entitled to it. The expenses contemplated in the law are such only as attend the settlement of an estate and the transfer of the property of the estate to individual beneficiaries or to a trustee. Expenses not essential to the proper settlement of ...