Lifting the Shroud Obscuring Estate of Hubert: The Logic of the Income and Estate Tax Treatment of Estate Administration Expenses

In Commissioner v. Estate of Hubert, the Supreme Court upheld a Tax Court decision that $1.5 million of estate administration expenses charged against the income of a marital deduction bequest did not reduce the marital deduction for estate tax purposes. In Hubert, the marital deduction bequest was a residuary bequest, and estate administration expenses were payable out of the residue, but the executors had discretion to allocate such expenses between principal and income. Pursuant to what is known as the "section 642(g) election," the expenses charged against income were deducted for purposes of computing the taxable income of the estate as a separate taxpayer, and were not deducted for estate tax purposes. This comment both critiques Hubert on a doctrinal basis and explores what should be the proper income and estate tax consequences of estate administration expenses.