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IRS Form 706—United States Estate (and Generation-Skipping Transfer) Tax Return

Form 706 (Rev. 8-2008)

Instructions for Schedule J—Funeral

support the amount you deducted with an affidavit or

statement signed under the penalties of perjury that the

Expenses and Expenses Incurred in

amount has been agreed upon and will be paid.

Administering Property Subject to Claims

You may not deduct a bequest or devise made to

you instead of commissions. If, however, the decedent

General. You must complete and file Schedule J if you

fixed by will the compensation payable to you for

claim a deduction on item 13 of Part 5—Recapitulation.

services to be rendered in the administration of the

On Schedule J, itemize funeral expenses and expenses

estate, you may deduct this amount to the extent it is not

incurred in administering property subject to claims. List

more than the compensation allowable by the local law or

the names and addresses of persons to whom the

practice.

expenses are payable and describe the nature of the

Do not deduct on this schedule amounts paid as

expense. Do not list expenses incurred in

trustees’ commissions whether received by you acting in

administering property not subject to claims on this

the capacity of a trustee or by a separate trustee. If such

schedule. List them on Schedule L instead.

amounts were paid in administering property not subject

The deduction is limited to the amount paid for these

to claims, deduct them on Schedule L.

expenses that is allowable under local law but may not

Note. Executors’ commissions are taxable income to the

exceed:

executors. Therefore, be sure to include them as income

1. The value of property subject to claims included in

on your individual income tax return.

the gross estate, plus

Attorney fees. Enter the amount of attorney fees that

2. The amount paid out of property included in the

have actually been paid or that you reasonably expect to

gross estate but not subject to claims. This amount must

be paid. If on the final examination of the return, the fees

actually be paid by the due date of the estate tax return.

claimed have not been awarded by the proper court and

The applicable local law under which the estate is being

paid, the deduction will be allowed provided the Estate

administered determines which property is and is not

and Gift Tax Territory Manager is reasonably satisfied that

subject to claims. If under local law a particular property

the amount claimed will be paid and that it does not

interest included in the gross estate would bear the

exceed a reasonable payment for the services performed,

burden for the payment of the expenses, then the

taking into account the size and character of the estate

property is considered property subject to claims.

and the local law and practice. If the fees claimed have

not been paid at the time of final examination of the

Unlike certain claims against the estate for debts of the

return, the amount deducted must be supported by an

decedent (see the instructions for Schedule K in the

affidavit, or statement signed under the penalties of

separate instructions), you cannot deduct expenses

perjury, by the executor or the attorney stating that the

incurred in administering property subject to claims on

amount has been agreed upon and will be paid.

both the estate tax return and the estate’s income tax

return. If you choose to deduct them on the estate tax

Do not deduct attorney fees incidental to litigation

return, you cannot deduct them on a Form 1041 filed for

incurred by the beneficiaries. These expenses are charged

the estate. Funeral expenses are only deductible on the

against the beneficiaries personally and are not

estate tax return.

administration expenses authorized by the Code.

Funeral expenses. Itemize funeral expenses on line A.

Interest expense. Interest expenses incurred after the

Deduct from the expenses any amounts that were

decedent’s death are generally allowed as a deduction if

reimbursed, such as death benefits payable by the Social

they are reasonable, necessary to the administration of

Security Administration and the Veterans Administration.

the estate, and allowable under local law.

Executors’ commissions. When you file the return, you

Interest incurred as the result of a federal estate tax

may deduct commissions that have actually been paid to

deficiency is a deductible administrative expense.

you or that you expect will be paid. You may not deduct

Penalties are not deductible even if they are allowable

commissions if none will be collected. If the amount of

under local law.

the commissions has not been fixed by decree of the

Note. If you elect to pay the tax in installments under

proper court, the deduction will be allowed on the final

section 6166, you may not deduct the interest payable on

examination of the return, provided that:

the installments.

● The Estate and Gift Tax Territory Manager is reasonably

Miscellaneous expenses. Miscellaneous administration

satisfied that the commissions claimed will be paid;

expenses necessarily incurred in preserving and

● The amount entered as a deduction is within the

distributing the estate are deductible. These expenses

amount allowable by the laws of the jurisdiction where

include appraiser’s and accountant’s fees, certain court

the estate is being administered; and

costs, and costs of storing or maintaining assets of the

estate.

● It is in accordance with the usually accepted practice in

that jurisdiction for estates of similar size and character.

The expenses of selling assets are deductible only if the

sale is necessary to pay the decedent’s debts, the

If you have not been paid the commissions claimed at

expenses of administration, or taxes, or to preserve the

the time of the final examination of the return, you must

estate or carry out distribution.

Schedule J—Page 24

158

Instructions For Schedule J - Funeral Expenses And Expenses Incurred In Administering Property Subject To Claims

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