The purpose of allowing claims against the estate as deductions from the gross estate is to assure that the estate tax is imposed only on the net estate, i.e., on what actually passes in value from the dead to the living. Estate of Courtney v. Commissioner Dec. 32,639, 62 T.C. 317, 321 (1974); Estate of Hagmann v. Commissioner Dec. 32,019, 60 T.C. 465, 467 (1973), affd. 74-1 USTC ¶ 12,996, 492 F.2d 796 (5th Cir. 1974). The deduction is limited to those claims that are valid and enforceable under the laws of the jurisdiction in which the estate is administered.

258 F.3d at 1275 (citations and footnote omitted). The court did note two exceptions, the Government contends, based upon the case Estate of Hagmann v. Commissioner, 60 T.C. 465 (1973), aff'd, 492 F.2d 796 (5th Cir. 1974): (1) where the claim is classified as a "potential claim without an existing claimant," or (2) where the claim is classified as having an "identifiable claimant without a cognizable claim" ("Hagmann exceptions"). See 258 F.3d at 1272 n. 24.

His early death was unexpected at the time of her death. Held, the obligation was fully enforceable as of the date of decedent's death and the estate is therefore entitled to a deduction for the actuarial value of the debt computed without regard to events occurring subsequent to the date of death. Ithaca Trust Co. v. United States, 279 U.S. 151 (1929), and Estate of Lester v. Commissioner, 57 T.C. 503 (1972), followed; Estate of Hagmann v. Commissioner, 60 T.C. 465 (1973), affd. 492 F.2d 796 (5th Cir. 1974), and related cases, distinguished. 2. Decedent held 56,454 shares of a publicly traded stock at her death. Between the date of death and the alternate valuation date, which was elected by the executors for purposes of valuing the gross estate, 42,416 shares were sold in several blocks, all at a court-approved discount of $2 per share.

In examining cases that have previously considered this issue, we have found an irreconcilable split in authority. Compare Commissioner v. Strauss, 77 F.2d 401, 405 (7th Cir. 1935); Russell v. United States, 260 F. Supp. 493, 499 (N.D.Ill. 1966); Winer v. United States, 153 F. Supp. 941 (S.D.N.Y. 1957); Estate of Lester v. Commissioner, 57 T.C. 503 (1972) with Gowetz v. Commissioner, 320 F.2d 874 (1st Cir. 1963); Commissioner v. Estate of Shively, 276 F.2d 372, 374 (2d Cir. 1960); Estate of Courtney, 62 T.C. 317 (1974); Estate of Hagmann v. Commissioner, 60 T.C. 465 (1973), aff'd, 492 F.2d 796 (5th Cir. 1974). Faced with these conflicting views, we have examined the arguments underlying each and conclude that Strauss, Winer and their progeny are more persuasive.

Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970), affd. 445 F.2d 985 (10th Cir. 1971). In Estate of Hagmann v. Commissioner, 60 T.C. 465, 468-469 (1973), affd. 492 F.2d 796 (5th Cir. 1974), certain debts of the decedent constituted bona fide obligations of his estate. No claims against the estate were filed with respect to the debts, however, and the claims became void and unenforceable under state law.

‘ This Court and many others have attempted to formulate a rule pertaining to the effect of post-death events on the allowance of a claim against the estate. See, e.g., Propstra v. United States, 680 F.2d at 1254; Gowetz v. Commissioner, 320 F.2d 874, 876 (1st Cir. 1963); Commissioner v. Shively's Estate, 276 F.2d 372, 374 (2d Cir. 1960); Commissioner v. Strauss, 77 F.2d 401, 405 (7th Cir. 1942); Jacobs v. Commissioner, 34 F.2d 233, 235 (8th Cir. 1929); Estate of Chesterton v. United States, 213 Cl.Ct. 345, 551 F.2d 278, 280 (1977); Estate of Gilford v. Commissioner, 88 T.C. ___ (slip opinion at 21-22) (Jan. 12, 1987); Estate of Van Horne v. Commissioner, 78 T.C. 728, 732-739 (1982), affd. 720 F.2d 1114 (9th Cir. 1983); Estate of Hagmann v. Commissioner, 60 T.C. 465 (1973), affd. 492 F.2d 796 (5th Cir. 1974). In Estate of Van Horne, 78 T.C. at 736-737, we observed that ‘all of the cases in this field dealing with post-death evidence are not easily reconciled with one another, and at times it is like picking one's way through a minefield in seeking to find a completely consistent course of decision * * *.

This Court and many others have attempted to formulate a rule pertaining to the effect of post-death events on the allowance of a claim against the estate. See, e.g., Propstra v. United States, 680 F.2d at 1254; Gowetz v. Commissioner, 320 F.2d 874, 876 (1st Cir. 1963); Commissioner v. Shively's Estate, 276 F.2d 372, 374 (2d Cir. 1960); Commissioner v. Strauss, 77 F.2d 401, 405 (7th Cir. 1942); Jacobs v. Commissioner, 34 F.2d 233, 235 (8th Cir. 1929); Estate of Chesterton v. United States, 213 Cl. Ct. 345, 551 F.2d 278, 280 (1977); Estate of Gilford v. Commissioner, 88 T.C. at 52-53 (1987); Estate of Van Horne v. Commissioner, 78 T.C. 728, 732-739 (1982), affd. 720 F.2d 1114 (9th Cir. 1983); Estate of Hagmann v. Commissioner, 60 T.C. 465 (1973), affd. 492 F.2d 796 (5th Cir. 1974). In Estate of Van Horne v. Commissioner, 78 T.C. at 736-737, we observed that "all of the cases in this field dealing with post-death evidence are not easily reconciled with one another, and at times it is like picking one's way through a minefield in seeking to find a completely consistent course of decision."

The petitioner concedes that the bank never filed a claim against the estate; accordingly, the Commissioner concludes that the liability of the estate to the bank was extinguished during its administration and that, therefore, no deduction was permissible. See Estate of Hagmann v. Commissioner Dec. 32,019, 60 T.C. 465 (1973), affd, per curiam 74-1 USTC ¶ 12,996, 492 F. 2d 796 (5th Cir. 1974). Section 716, Cal. Prob. Code (West 1956), provides the following special rule for secured claims:

The effect upon the debt obligation in question of events subsequent to decedent's death will be examined pursuant to Indiana law to determine the validity of the claim, and, thus, its deductibility. Estate of Courtney v. Commissioner, 62 T.C. 317 (1974); Estate of Hagmann v. Commissioner, 60 T.C. 465 (1973), affd. per curiam 492 F.2d 796 (5th Cir. 1974); Estate of Shedd v. Commissioner, 37 T.C. 394 (1961), affd. 320 F.2d 638 (9th Cir. 1963); cf. Estate of Lewis v. Commissioner, 49 T.C. 684 (1968). These cases contradict the rationale expressed in Russell v. United States, 260 F. Supp. 493 (N.D. Ill. 1966), and Winer v. United States, 153 F. Supp. 941 (S.D. N.Y. 1957), both of which were cited by the petitioner.

In the following cases interpreting § 2053(a)(3) or its predecessors, the courts refused to consider post-death events: Estate of Van Horne, 720 F.2d 1114 (9th Cir. 1983); Propstra v. United States, 680 F.2d 1248 (9th Cir. 1982); Green v. United States, 447 F. Supp. 885 (N.D. Ill. 1978); Estate of Lester v. Commissioner, 57 T.C. 503 (1972); Russell v. United States, 260 F. Supp. 493 (1966); Winer v. United States, 153 F. Supp. 941 (1957). In the following cases the courts did consider post-death events: Estate of Sachs v. Commissioner, 856 F.2d 1158 (1988); Jacobs v. Commissioner, 34 F.2d 233 (1929); Estate of Kyle v. Commissioner, 94 T.C. 829 (1990); Estate of Hagmann v. Commissioner, 60 T.C. 465 (1973), aff'd per curium, 492 F.2d 796 (5th Cir. 1974); Estate of Cafro v. Commissioner, T.C. Memo. 1989-348, 1989 WL 79310; Estate of Quintard v. Commissioner, 62 T.C. 317 (1974). Propstra v. United States from the Ninth Circuit is a leading case that strictly applies the date-of-death valuation principle to a claim against the estate.