Form 706 (Draft) - United States Estate (And Generation-Skipping Transfer) Tax Return - 2016 Page 34
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55Schedule K—Debts of the
Therefore, be sure to include them as
deductible on Schedule K. For these
income on your individual income tax
claims to be deductible, all of the
Decedent and Mortgages
return.
following conditions must be met:
and Liens
The decedent and the decedent's
Attorney fees. Enter the amount of
spouse must have entered into a written
attorney fees that have actually been
Use Schedule PC to make a
agreement relative to their marital and
paid or that you reasonably expect to be
protective claim for refund for
!
property rights.
paid. If, on the final examination of the
expenses which are not
The decedent and the spouse must
CAUTION
return, the fees claimed have not been
currently deductible under section 2053.
DRAFT AS OF
have been divorced before the
awarded by the proper court and paid,
For such a claim, report the expense on
decedent's death and the divorce must
the deduction will be allowed provided
Schedule K but without a value in the
have occurred within the 3-year period
the Chief, Estate and Gift Tax
last column.
beginning on the date 1 year before the
Examinations, is reasonably satisfied
You must complete and attach
agreement was entered into. It is not
that the amount claimed will be paid and
Schedule K if you claimed deductions
required that the agreement be
that it does not exceed a reasonable
June 16, 2016
on either item 15 or item 16 of Part
approved by the divorce decree.
payment for the services performed,
5—Recapitulation.
The property or interest transferred
taking into account the size and
under the agreement must be
character of the estate and the local law
Income vs. estate tax deduction.
transferred to the decedent's spouse in
and practice. If the fees claimed have
Taxes, interest, and business expenses
settlement of the spouse's marital rights.
not been paid at the time of final
accrued at the date of the decedent's
examination of the return, the amount
death are deductible both on
You may not deduct a claim made
deducted must be supported by an
Schedule K and as deductions in
against the estate by a remainderman
affidavit, or statement signed under the
respect of the decedent on the income
relating to section 2044 property.
penalties of perjury, by the executor or
tax return of the estate.
Section 2044 property is described in
the attorney stating that the amount has
the instructions to line 7 in Part
If you choose to deduct medical
been agreed upon and will be paid.
4—General Information.
expenses of the decedent only on the
Do not deduct attorney fees
estate tax return, they are fully
Include in this schedule notes
incidental to litigation incurred by the
deductible as claims against the estate.
unsecured by mortgage or other lien
beneficiaries. These expenses are
If, however, they are claimed on the
and give full details, including:
charged against the beneficiaries
decedent's final income tax return under
Name of payee,
personally and are not administration
section 213(c), they may not also be
Face and unpaid balance,
expenses authorized by the Code.
claimed on the estate tax return. In this
Date and term of note,
case, you also may not deduct on the
Interest expense. Interest expenses
Interest rate, and
estate tax return any amounts that were
incurred after the decedent's death are
Date to which interest was paid
not deductible on the income tax return
generally allowed as a deduction if they
before death.
because of the percentage limitations.
are reasonable, necessary to the
Include the exact nature of the claim
administration of the estate, and
Debts of the Decedent
as well as the name of the creditor. If the
allowable under local law.
List under “Debts of the Decedent” only
claim is for services performed over a
Interest incurred as the result of a
valid debts the decedent owed at the
period of time, state the period covered
federal estate tax deficiency is a
time of death. List any indebtedness
by the claim.
deductible administrative expense.
secured by a mortgage or other lien on
Example. Edison Electric
Penalties on estate tax deficiencies are
property of the gross estate under the
Illuminating Co., for electric service
not deductible even if they are allowable
heading “Mortgages and Liens.” If the
during December 2015, $150.
under local law.
amount of the debt is disputed or the
subject of litigation, deduct only the
If the amount of the claim is the
Note. If you elect to pay the tax in
unpaid balance due on a contract for the
amount the estate concedes to be a
installments under section 6166, you
purchase of any property included in the
valid claim.
may not deduct the interest payable on
gross estate, indicate the schedule and
Generally, if the claim against the
the installments.
item number where you reported the
estate is based on a promise or
property. If the claim represents a joint
Miscellaneous expenses.
agreement, the deduction is limited to
and separate liability, give full facts and
Miscellaneous administration expenses
the extent that the liability was
explain the financial responsibility of the
necessarily incurred in preserving and
contracted bona fide and for an
co-obligor.
distributing the estate are deductible.
adequate and full consideration in
These expenses include appraiser's
Property and income taxes. The
money or money's worth. However, any
and accountant's fees, certain court
deduction for property taxes is limited to
enforceable claim based on a promise
costs, and costs of storing or
the taxes accrued before the date of the
or agreement of the decedent to make a
maintaining assets of the estate.
decedent's death. Federal taxes on
contribution or gift (such as a pledge or
The expenses of selling assets are
income received during the decedent's
a subscription) to or for the use of a
deductible only if the sale is necessary
lifetime are deductible, but taxes on
charitable, public, religious, etc.,
to pay the decedent's debts, the
income received after death are not
organization is deductible to the extent
expenses of administration, or taxes, or
deductible.
that the deduction would be allowed as
to preserve the estate or carry out
a bequest under the statute that applies.
Keep all vouchers or original records
distribution.
for inspection by the IRS.
Certain claims of a former spouse
against the estate based on the
Allowable death taxes. If you elect to
relinquishment of marital rights are
take a deduction for foreign death taxes
Part Instructions
-33-
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