¹¹However, under Sec. 663(a)(1), specific gifts or bequests are not part of the distribution deduction and do not carry out distributable net income.

¹²In William J. O'Neill, Jr., Irrevocable Trust, 98 TC 227 (1992), rev'd, 994 F2d 302 (6th Cir. 1993), AOD, IRB 1994-38, 4, the IRS unsuccessfully argued that this exception does not apply to investment adviser fees for a trust, stating that such fees are not unique to trusts or estates. The Sixth Circuit disagreed that "uniqueness" was the intent of the statutory language, stating that the trustee's fiduciary obligations required the employment of an investment adviser, even though such adviser would not necessarily be employed by an individual managing his own investments.

¹³ Under Sec. 67(e), "...the adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that...the deductions for costs which are paid or incurred in connection with the administration of the estate or trust and which would not have been incurred if the property were not held in such trust or estate...shall be treated as allowable in arriving at adjusted gross income...."

¹⁴These fees were taken on Form 706 as deductions against the taxable estate; thus, they are not allowed as estate income tax deductions.

¹⁵Both sales will generate long-term capital gain treatment. Although the sales occurred less than one year after the DOD, Sec. 1223(11) prescribes long-term classification for property acquired from a decedent.

¹⁶See the discussion of this regulation in Keene, "Income Tax Issues for Estates (Part I)," 32 The Tax Adviser 26 (February 2001), under "Form 706."

¹⁷For 2000, only $8,650 of estate taxable income is required to reach the 39.6% bracket.

¹⁸The commission is not deductible from taxable income, as it was deducted on Form 706 from the taxable estate.