Rev. Rul. 83-24

1983-1 C.B. 229, 1983-5 I.R.B. 10.

                       Internal Revenue Service
                                 Revenue Ruling

             ADMINISTRATION EXPENSES;  INTEREST;  FOREIGN DEATH TAX

                          Published: January 31, 1983

26 CFR 20.2053-3: Deductions for expenses of administering estate

  Administration expenses;  interest;  foreign death tax.  Interest paid by the decedent's executor to a foreign taxing authority as a result of late payment of foreign death tax is a deductible administration expense under section 2053(a)(2) of the Code to the extent it is allowable under local law.

ISSUE

  Is interest paid to a foreign taxing authority, incurred as a result of the late payment of a foreign death tax, deductible as an expense of administration under section 2053(a)(2) of the Internal Revenue Code?

FACTS

  D, a resident of State X, died on April 29, 1981.  At the date of death, D owned real property situated in foreign country Y on which Y imposed a death tax.  D's executor paid the tax after the due date for payment and paid an additional amount as interest imposed on the executor's late payment of the tax liability.  Under the law of State X, interest paid on a tax liability is an allowable administration expense of D's estate.

LAW AND ANALYSIS

  Section 2053(a)(2) of the Code provides that the value of the taxable estate is determined by deducting from the value of the gross estate such amounts for administration expenses as are allowable under the laws of the jurisdiction in which the estate is being administered.  Section 20.2053-3(a) of the Estate Tax Regulations provides that deductible administration expenses are those expenses that are actually and necessarily incurred in the administration of the decedent's estate.

  Interest charged to an estate for the estate's late payment of tax is a charge for the use of money and consequently is deductible as a necessary administration expense under section 2053(a)(2) of the Code to the extent allowable under local law.  The interest expense is allowable under section 2053 without regard to the manner in which it was incurred.  See Estate of Bahr. v. Commissioner, 68 T.C. 74 (1977), acq., 1978-1 C.B. 1 and Rev. Rul. 79- 252, 1979-2 C.B. 333.

  In this case the amount paid by D's estate in addition to Country Y's death tax was interest, and under the law of State X, interest on late payment of tax is an allowable administration expense.  Thus, D's estate is entitled to deduct the amount paid as interest on the foreign death tax liability under section 2053(a)(2) of the Code.  The fact that the interest charge was imposed by a foreign country does not affect the characterization of the charge as a proper expense of administration.   See Rev. Rul. 80-260, 1980-2 C.B. 277, which discusses the deduction of administration expenses incurred by an executor in a foreign country, incident to foreign situs property owned by the decedent.

HOLDING

  Interest paid to a foreign taxing authority incurred as a result of a late payment of a foreign death tax is deductible under section 2053(a)(2) of the Code to the extent it is allowable under local law.

Rev. Rul. 83-24, 1983-1 C.B. 229, 1983-5 I.R.B. 10.