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there is no basis for the double deduction argument. Our analysis is consistent with the design of the statute.

The Commissioner also invites our attention to the legislative history of the marital deduction statute. Assuming for the sake of argument it would have relevance here, it does not support her position. The Senate Report accompanying the statute says:

"The interest passing to the surviving spouse from the decedent is only such interest as the decedent can give. If the decedent by his will leaves the residue of his estate to the surviving spouse and she 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 additional part of the residue passing to the surviving spouse cannot be included in the amount of the marital deduction." S. Rep. No. 1013, 80th Cong., 2d Sess., pt. 2, p. 6 (1948).

The Report supports our analysis. It underscores that valuation for marital deduction purposes occurs on the date of death.

The Commissioner's position is inconsistent with the controlling regulations. The Tax Court and the Court of Appeals were correct in finding for the taxpayer on these facts, and we affirm the judgment.

It is so ordered.

JUSTICE O'CONNOR, with whom JUSTICE SOUTER and JUSTICE THOMAS join, concurring in the judgment.

"Logic and taxation are not always the best of friends." Sonneborn Brothers v. Cureton, 262 U. S. 506, 522 (1923) (McReynolds, J., concurring). In cases like the one before us today, they can be complete strangers. That our tax laws can at times be in such disarray is a discomforting thought. I can understand why the plurality attempts to extrapolate

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a generalized estate tax valuation theory from one regulation and then to apply that theory to resolve this case, perhaps with the hope of making sense out of the applicable law. But where the applicability-not to mention the validity-of that theory is far from clear, the temptation to make order out of chaos at any cost should be resisted, especially when the question presented can be resolved-albeit imperfectlyby reference to more directly applicable sources. While JUSTICE SCALIA, JUSTICE BREYER, and I agree on this point, we disagree on the result ultimately dictated by these sources. I therefore write separately to explain why in my view the plurality's result, though not its reasoning, is correct.

I

When a citizen or resident of the United States dies, the Federal Government imposes a tax on "all [of his] property, real or personal, tangible or intangible, wherever situated.' 26 U. S. C. §§ 2001(a), 2031(a). Specifically excluded from taxation, however, is certain property devised to the decedent's spouse or to charity. Such testamentary gifts may qualify for the marital deduction, § 2056(a), or the charitable deduction, § 2055(a). If they do, they are removed from the decedent's "gross estate" and exempted from the estate tax. § 2051. Calculating the estate tax, however, takes time, as does marshaling the decedent's property and distributing it to the ultimate beneficiaries. During this process, the assets in the estate often earn income and the estate itself incurs administrative expenses. To deal with this eventuality, the Tax Code permits an estate administrator to choose between allocating these expenses to the assets in the estate at the time of death (the estate principal), or to the postmortem income earned by those assets. §642(g). Everyone agrees that when these expenses are charged against a portion of the estate's principal devised to the spouse or charity, that portion of the principal is diverted from the spouse or charity and the marital and charitable deductions are accord

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ingly "reduced" by the actual amount of expenses incurred. See ante, at 104 (plurality opinion); post, at 123 (SCALIA, J., dissenting); Brief for Petitioner 19; Brief for Respondent 6. The question presented here is what becomes of these deductions when the estate chooses the second option under § 642(g) and allocates administrative expenses to the postmortem income generated by the property in the spousal or charitable devise.

The Tax Code itself supplies no guidance. Accord, post, at 127 (SCALIA, J., dissenting). The statute most relevant to this case, 26 U. S. C. § 2056(b)(4)(B), provides:

"[W]here [any interest in property otherwise qualifying for the marital deduction] is encumbered in any manner, or where the surviving spouse incurs any obligation imposed by the decedent with respect to the passing of such interest, such encumbrance or obligation shall be taken into account in the same manner as if the amount of a gift to such spouse of such interest were being determined."

Although an executor's power to burden the postmortem income of the marital bequest with the estate's administrative expenses is arguably an "encumbrance" or an "obligation imposed by the decedent with respect to the passing of such interest," the statute itself says only that the "encumbrance or obligation shall be taken into account." It does not explain how this should be done, however. In my view, it is not possible to tell from § 2056(b)(4)(B) whether allocation of administrative expenses to postmortem income reduces the marital deduction always, sometimes, or not at all.

Nor does the Code's legislative history give shape to its otherwise ambiguous language. The discussion in the Senate Report of § 2056(b)(4)(B)'s predecessor statute reads:

"The interest passing to the surviving spouse from the decedent is only such interest as the decedent can give. If the decedent by his will leaves the residue of his es

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tate to the surviving spouse and she 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 surviving spouse cannot be included in the amount of the marital deduction." S. Rep. No. 1013, 80th Cong., 2d Sess., pt. 2, p. 6 (1948) (emphasis added).

This italicized passage might be helpful if it explicitly referred to "administrative expenses" instead of "claims against the estate." But it is not at all clear from the Senate Report whether the latter term includes the former: The Report nowhere defines the term "claims against the estate," and the immediately preceding paragraph discusses § 2056(b)(4)(B)'s language with reference to mortgages. Ibid. Because mortgages differ from administrative expenses in many ways (e. g., mortgages pre-exist the decedent's death and are fixed in amount at that time), there is a reasonable argument that administrative expenses are not "claims against the estate." In sum, the Code's legislative history is not illuminating.

II

All that remains in this statutory vacuum are the Commissioner's regulations and Revenue Rulings, and it is on these sources that I would decide this issue. The key regulation is 26 CFR § 20.2056(b)-4(a) (1996):

"The value, for the purpose of the marital deduction, of any deductible interest which passed from the decedent to his surviving spouse is to be determined as of the date of the decedent's death. . . . The marital deduction may be taken only with respect to the net value of any deductible interest which passed from the decedent to his surviving spouse, the same principles being applica

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ble as if the amount of a gift to the spouse were being determined. In determining the value of the interest in property passing to the spouse account must be taken of the effect of any material limitations upon her right to income from the property."

The text of the regulation leaves no doubt that only the "net value" of the spousal gift may be deducted. Moreover, there is little doubt that, in assessing this "net value," one should examine how the spousal devise would have been treated if it were instead an inter vivos gift. See 26 U. S. C. § 2056(b)(4)(A) (also referring to treatment of gifts).

The plurality latches onto 26 CFR § 25.2523(a)–1(e) (1996), and to the statutes and regulations to which it refers. Ante, at 101-102 (referring to 26 U. S. C. § 7520; 26 CFR § 20.2031-7 (1996)). In the plurality's view, these regulations define how to "tak[e] [account] of the effect of any material limitations upon [a spouse's] right to income from the property." 26 CFR § 20.2056(b)-4(a) (1996). The plurality frankly admits that these regulations do not speak directly to the antecedent inquiry-when an executor's right to allocate administrative expenses to income constitutes a "material limitation." Ante, at 106. The plurality nevertheless believes that these regulations bear indirectly on this inquiry by implying an underlying estate tax valuation theory that, in the plurality's view, dovetails nicely with our decision in Ithaca Trust Co. v. United States, 279 U. S. 151 (1929). Ante, at 102. It is on the basis of this valuation theory that the plurality is able to conclude that the Tax Court's analysis was wrong because that analysis did not, consistent with the plurality's theory, focus solely on anticipated administrative expenses and anticipated income. Ante, at 107-109. But, as JUSTICE SCALIA points out, the plurality's valuation theory is not universally applicable and, in fact, conflicts with the Commissioner's treatment of some other expenses. See 26 CFR § 20.2056(b)-4(c) (1996); post, at 133-136. Because § 25.2523(a)–1(e) and its accompanying provisions do no more