Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 61-59

1961-1 C.B. 418

IRS Headnote

Attorney's fees were incurred in connection with contesting the inclusion in the decedent's gross estate of certain items of property not subject to claims. The contest involved proceedings in the Tax Court of the United States. The fees were paid within 60 days after the Tax Court's decision became final but more than three years after the Federal estate tax return was filed. Held , the attorney's fees constitute an allowable deduction under section 2053(b) of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 61-59

Advice has been requested whether an expense of the type contemplated by section 2053(b) of the Internal Revenue Code of 1954 may be allowable, under the circumstances stated below, even though incurred more than three years after the filing of the Federal estate tax return.

More than three years after the filing of the Federal estate tax return, certain administration expenses, namely an attorney's fees, were incurred and paid. The fees incurred were in connection with contesting the inclusion, in the decedent's gross estate, of certain items of property not subject to claims. The contest involved proceedings in the Tax Court of the United States. The attorney's fees were paid within 60 days after the decision of the Tax Court became final.

Section 2053(b) of the Code provides as follows:

OTHER ADMINISTRATION EXPENSES.-Subject to the limitations in paragraph (1) of subsection (c), there shall be deducted in determining the taxable estate amounts representing expenses incurred in administering property not subject to claims which is included in the gross estate to the same extent such amounts would be allowable as a deduction under subsection (a) if such property were subject to claims, and such amounts are paid before the expiration of the period of limitation for assessment provided in section 6501.

The general rule in section 6501 of the Code which covers the limitations on assessment reads, in part, as follows:

(a) GENERAL RULE.-Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) * * * and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period.

The exceptions referred to in subsection (a) of section 6501 deal with situations involving false returns, willful attempts to evade tax, omission of items of property from the gross estate, etc., where there are provided longer limitation periods or where no limitation is applicable.

Section 6503 of the Code provides for the suspension of the period of limitations under various specified circumstances and, to the extent pertinent here, reads, in part, as follows:

(a) ISSUANCE OF STATUTORY NOTICE OF DEFICIENCY.-

(1) GENERAL RULE.-The running of the period of limitations provided in section 6501 * * * on the making of assessments or the collection by levy or a proceeding in court, in respect of any deficiency as defined in section 6211 * * * shall (after the mailing of a notice under section 6212(a)) be suspended for the period durings which the Secretary of the Treasury  or his delegate is prohibited from making the assessment or from collecting by levy or a proceeding in court (and in any event, if a proceeding in respect of the deficiency is placed on the docket of the Tax Court, until the decision of the Tax Court becomes final), and for 60 days thereafter.

Thus, in determining the expiration of the period of limitation for assessment provided in section 6501 of the Code, there must be taken into account any period of time during which, under the provisions of section 6503(a)(1) of the Code, running of the period of limitations is suspended.

The attorney's fees herein considered were incurred in connection with the contesting of the inclusion in the decedent's gross estate of certain items of property not subject to claims. Since the contest involved proceedings in the Tax Court of the United States, the provisions of section 6503(a)(1) of the Code are applicable.

Accordingly, it is held that the attorney's fees, paid within 60 days after the decision of the Tax Court became final, constitute an allowable deduction under section 2053(b) of the Code.