The parties agree that in determining the numerator, the following amounts should be deducted from the gross estate:

The petitioner argues that these are the only amounts to be taken into consideration in computing the numerator and that the $ 150,182.57 is the value of the property transferred to the decedent. However, the respondent contends that the executor's and attorney's fees which were paid by the estate, 1968 U.S. Tax Ct. LEXIS 71">*80 although not deducted from the gross estate, reduced the value of the estate passing from Irwin T. Gilruth to the decedent, and must also be subtracted from the gross estate in determining the value of the property transferred to the decedent. Thus, the respondent would also subtract the executor's and attorney's fees of $ 23,486.00, resulting in a value of $ 126,696.57 for the property transferred to the decedent. We agree with the respondent.

Irwin T. Gilruth's estate was required to pay the executor's and attorney's fees both by reason of Illinois law and by reason of the will of Mr. Gilruth. Thus, it would have been proper to use a part of the corpus of the estate to pay such expenses. If it was so used, then the residue of the estate which passed to May H. Gilruth was obviously reduced by the amount used to pay the executor's and attorney's fees. However, such expenses may have been paid from income rather than corpus -- the record does not reveal the source. Yet, for our purposes, the result is the same even if other funds were used to pay the executor's and attorney's fees. The Senate Finance Committee report says with respect to section 2013:

The property transferred1968 U.S. Tax Ct. LEXIS 71">*81 to the decedent by the transferor is only such property as the transferor can give. If the transferor by his will leaves the residue 50 T.C. 850">*854 of his estate to the decedent and he pays, or if the estate income is used to pay, claims against the estate so as to increase the residue, such increase in the residue is acquired by purchase and not by bequest. Accordingly, the value of any such additional part of the residue passing to the decedent cannot be included in the value of the property transferred to the decedent. [S. Rept. No. 1622, to accompany H.R. 8300 (Pub. L. 591), 83d Cong., 2d Sess., p. 467 (1954).]

Thus, because the executor's and attorney's fees were a charge upon the residue of Mr. Gilruth's estate, the amount of his estate that could pass to Mrs. Gilruth must be reduced by the amount of such expenses, even though the expenses were paid from income. If income was used to pay such expenses so that Mrs. Gilruth in fact received more of Mr. Gilruth's estate, the excess did not pass to her by bequest from him but was acquired through the action of the estate in using income to pay the expenses. See also Stephens and Maxfield, Federal Estate and Gift Taxes 26 (2d ed. 1968 U.S. Tax Ct. LEXIS 71">*82 1967); Estate of Roswell G. Ackley, 23 T.C. 639">23 T.C. 639 (1955); sec. 20.2013-4(b)(3)(iii), Example (4), Estate Tax Regs.

The petitioner's principal argument is that under section 2013(d), the value of the property is the value used for the purpose of determining the Federal estate tax liability of the estate of the transferor and that since the executor's and attorney's fees were not deducted in computing the gross estate of Mr. Gilruth, such value of the property should be determined without regard to such expenses. However, for the reasons given in the previous paragraph, we have concluded that the property transferred to the decedent did not include the amount of the executor's and attorney's fees. Moreover, the purpose of the requirement of section 2013(d) appears to be merely to provide that the value of the property reported for purposes of the estate of the transferor is to be used as the first step in the computation. The provision thus fixes the method and the time for valuing the property and avoids questions as to how or when it should be valued.

Our result is consistent with the evident purpose of section 2013 (d)(2). If, instead of paying the1968 U.S. Tax Ct. LEXIS 71">*83 executor's and attorney's fees, the estate had distributed the property to the decedent subject to the claims of the executor and the attorney, it is clear that the amount of the claims would have to be deducted from the value of the property transferred. Sec. 2013(d)(2). Such provision does not make an exception in the case where such claims are not deducted from the gross estate but are used as a deduction for purposes of the estate's Federal income tax. This being the case, there is no justification for reaching a different result where the estate pays the claim in the process of administration. See 23 T.C. 639">Estate of Roswell G. Ackley, supra at 645.

Finally, our decision is consistent with the interpretation of similar provisions relating to the marital deduction. As passed by the House, section 2013(d) was in substance very similar to such provision as enacted, 50 T.C. 850">*855 but was differently worded. However, the Senate substituted a provision which uses the same language as section 2056(b)(4), relating to valuation of property passing to the surviving spouse for purposes of the marital deduction. This provision in turn was taken from section 812(e)(1)(E) 1968 U.S. Tax Ct. LEXIS 71">*84 of the 1939 Code. The Senate change was explained as follows:

In order to provide more certain rules under which property is valued for the purposes of computing the credit and the limitation of the credit under this section, your committee struck the provisions in the House bill on this matter and inserted new rules based on the principles established under the estate tax marital deduction. * * * [Emphasis added S. Rept. No. 1622, p. 122.]

In Estate of Newton B. T. Roney, 33 T.C. 801">33 T.C. 801 (1960), affirmed per curiam 294 F.2d 774 (C.A. 5, 1961), the decedent left his residuary estate to his wife. The question was whether, in computing the value of the property bequeathed to the wife for purposes of the marital deduction under section 812(e) of the 1939 Code, administration expenses had to be subtracted from the value of the residue although they had not been claimed as deductions on the decedent's Federal estate tax return. The Court held that the marital deduction is based on the net amount of property transferred to the wife, that the treatment of the expenses for tax purposes was beside the point, and that the expenses1968 U.S. Tax Ct. LEXIS 71">*85 had to be deducted from the residue to determine the value of the marital gift. In view of the clear congressional intent that "value" should be determined for purposes of the credit for tax on prior transfers in the same way as it is for purposes of the marital deduction, that holding is persuasive authority in support of our conclusion.

The petitioner suggests that our holding as to the computation of the numerator fails to carry out the legislative purpose. Since the computation of the denominator begins with the amount of the taxable estate, administration expenses, such as executor's and attorney's fees, are not taken into consideration when they are not deducted from the gross estate. On the other hand, we hold that such expenses are taken into consideration in computing the numerator even when they are not taken from the gross estate. Since the denominator is not reduced by the same amount as the numerator, less than 100 percent of the tax of $ 46,582.18 paid by Mr. Gilruth's estate will be allowed as a basis for a credit under section 2013.

For the reasons already given, we are convinced that our holding is correct as to the computation of the numerator. Therefore, if1968 U.S. Tax Ct. LEXIS 71">*86 our holding fails to carry out the legislative purpose, it results from the method of computing the denominator. The parties, however, have stipulated the amount of the denominator and have made no argument that it 50 T.C. 850">*856 should be computed otherwise than as stipulated. Accordingly, that question is not before us.

We therefore hold for the respondent on the issue presented in this proceeding. In order to reflect other adjustments to the petitioner's estate tax,

Decision will be entered under Rule 50.