Court Opinion

ID: 9465035
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:33:51.263402+00
Date Added: 2024-06-11T17:38:56.350163
License: Public Domain

DUNIWAY, Circuit Judge
(concurring):
I concur. I write only to point out that there are sound practical reasons, in addition to those stated by Judge Wallace in his opinion, which require that we construe § 2053(a)(2) of the Internal Revenue Code as permitting the deduction of those expenditures only which are expenses of administration within the meaning of federal estate tax law.
First, in California, and I suspect in most other states, probate proceedings are essentially ex parte in character. While the Probate Code requires an executor or administrator wishing to borrow money to obtain an order of court authorizing the borrowing, see California Probate Code § 830, and while an executor or administrator must account to the court for all receipts and expenditures, see California Probate Code *748§§ 921 and 922, there is no requirement that personal notice be given to any party interested in the estate. Notice is given by posting a notice by the clerk at the courthouse (Probate Code § 1200) and is required to be mailed to an interested party only if that party has filed a request for a special notice (Probate Code §§ 1200 and 1203). Publication in a newspaper of general circulation is also required if the petition is for leave to borrow (§ 1201). The court can require additional notice (§ 1204) but generally does not do so. In this case only one person interested in the estate filed a request for notice and the administrator, because of that notice, regarded that person as “uncooperative.” The petitions for orders of the court authorizing the administrator to borrow, and the accounts of the administrator, were not contested by anyone. There is no inducement to a California state court to restrict the allowance of claimed administrative expenses in order to prevent improper reductions of the federal estate tax. Indeed, many state judges would probably be pleased to assist the representative of the estate and the heirs in thus reducing the estate tax.
Second, as is pointed out in Judge Wallace’s opinion, footnote 1, the Hibernia Bank was on every possible side of the probate proceedings in this case. It was the administrator with the will annexed of the decedent’s estate; it was the trustee of the three testamentary trusts that were each to receive one quarter of the residue of the estate; it borrowed $625,000 from itself, and paid itself over $130,000 in interest. A large block of its stock was the most valuable single asset of the estate, and Hibernia’s management had an interest in not having that stock sold. As administrator, Hibernia had a duty to hold down expenses. As the lender, it had a duty to its shareholders to obtain the highest interest rate that it could lawfully obtain. As the trustee, it had a duty to compel itself as administrator to close the administration of the estate as soon as practicable. As lender, its interest was to have the estate kept open and continue to borrow money and pay interest. As administrator, it owed beneficiaries a duty to minimize estate taxes. No matter which way it turned, it met itself. There was nobody actually before the probate court to question the validity or propriety of any of its expenditures, or to object to any phase of its administration of the estate. Certainly the interest of the United States in collecting its estate tax was not represented before the probate court, and it is doubtful that the United States would have been recognized had it attempted to appear before that court. California Probate Code § 1203 permits the United States to request notice and to appear in a probate proceeding “[w]hen compensation, pension, insurance or other allowance is made or awarded by the United States government, or a department or bureau thereof, to estates of decedents . . ..” There is no other California statute that I know of that authorizes the government of the United States or the Internal Revenue Service to appear in a probate court. Moreover, the United States would be likely to find itself in a hostile forum if it did appear.
I cannot believe that it was the intention of the Congress in adopting § 2053(a)(2) of the Internal Revenue Code to place the federal fisc at the mercy of an essentially ex parte probate proceeding in a California court in which it is possible for one institution to play so many and such inconsistent roles. I do not believe that Congress intended to give the game away in that fashion.