Which of the following is NOT a permissible deduction for the federal estate tax?

The annual exclusion is a concept applicable to gift taxes rather than estate taxes. In the context of federal estate tax, permissible deductions include debts owed by the estate, funeral expenses, and charitable bequests. These deductions are all considered allowable because they either reduce the value of the taxable estate or are recognized as being made in the interest of public good (in the case of charitable contributions).

Conversely, the annual exclusion pertains to the amount that can be gifted annually without incurring gift tax, which does not apply to the federal estate tax calculation. Therefore, the correct answer identifies the annual exclusion as not being a permissible deduction for federal estate tax purposes.