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Schedule J—Funeral

deduction will be allowed on the final

generally allowed as a deduction if they

examination of the return, provided that:

are reasonable, necessary to the

Expenses and Expenses

•

The Estate and Gift Tax Territory

administration of the estate, and

Manager is reasonably satisfied that the

allowable under local law.

Incurred in

commissions claimed will be paid;

Interest incurred as the result of a

Administering Property

•

The amount entered as a deduction

federal estate tax deficiency is a

is within the amount allowable by the

deductible administrative expense.

Subject to Claims

laws of the jurisdiction where the estate

Penalties are not deductible even if

is being administered; and

General. You must complete and file

they are allowable under local law.

•

It is in accordance with the usually

Schedule J if you claim a deduction on

Note. If you elect to pay the tax in

accepted practice in that jurisdiction for

item 13 of Part 5 — Recapitulation.

installments under section 6166, you

estates of similar size and character.

may not deduct the interest payable on

On Schedule J, itemize funeral

If you have not been paid the

the installments.

expenses and expenses incurred in

commissions claimed at the time of the

administering property subject to

Miscellaneous expenses.

final examination of the return, you

claims. List the names and addresses

Miscellaneous administration expenses

must support the amount you deducted

of persons to whom the expenses are

necessarily incurred in preserving and

with an affidavit or statement signed

payable and describe the nature of the

distributing the estate are deductible.

under the penalties of perjury that the

expense. Do not list expenses

These expenses include appraiser’s

amount has been agreed upon and will

incurred in administering property

and accountant’s fees, certain court

be paid.

not subject to claims on this

costs, and costs of storing or

schedule. List them on Schedule L

You may not deduct a bequest or

maintaining assets of the estate.

instead.

devise made to you instead of

The expenses of selling assets are

commissions. If, however, the decedent

deductible only if the sale is necessary

The deduction is limited to the

fixed by will the compensation payable

to pay the decedent’s debts, the

amount paid for these expenses that is

to you for services to be rendered in the

expenses of administration, or taxes, or

allowable under local law but may not

administration of the estate, you may

to preserve the estate or carry out

exceed:

deduct this amount to the extent it is

distribution.

1. The value of property subject to

not more than the compensation

claims included in the gross estate, plus

allowable by the local law or practice.

Schedule K—Debts of

2. The amount paid out of property

Do not deduct on this schedule

included in the gross estate but not

the Decedent and

amounts paid as trustees’ commissions

subject to claims. This amount must

whether received by you acting in the

Mortgages and Liens

actually be paid by the due date of the

capacity of a trustee or by a separate

estate tax return.

You must complete and attach

trustee. If such amounts were paid in

Schedule K if you claimed deductions

administering property not subject to

The applicable local law under which

on either item 14 or item 15 of Part

claims, deduct them on Schedule L.

the estate is being administered

5 — Recapitulation.

determines which property is and is not

Note. Executors’ commissions are

Income vs. estate tax deduction.

subject to claims. If under local law a

taxable income to the executors.

Taxes, interest, and business expenses

particular property interest included in

Therefore, be sure to include them as

accrued at the date of the decedent’s

the gross estate would bear the burden

income on your individual income tax

death are deductible both on Schedule

for the payment of the expenses, then

return.

K and as deductions in respect of the

the property is considered property

Attorney fees. Enter the amount of

decedent on the income tax return of

subject to claims.

attorney fees that have actually been

the estate.

Unlike certain claims against the

paid or that you reasonably expect to

If you choose to deduct medical

estate for debts of the decedent (see

be paid. If, on the final examination of

expenses of the decedent only on the

the instructions for Schedule K), you

the return, the fees claimed have not

estate tax return, they are fully

cannot deduct expenses incurred in

been awarded by the proper court and

deductible as claims against the estate.

administering property subject to claims

paid, the deduction will be allowed

If, however, they are claimed on the

on both the estate tax return and the

provided the Estate and Gift Tax

decedent’s final income tax return

estate’s income tax return. If you

Territory Manager is reasonably

under section 213(c), they may not also

choose to deduct them on the estate

satisfied that the amount claimed will be

be claimed on the estate tax return. In

tax return, you cannot deduct them on

paid and that it does not exceed a

this case, you also may not deduct on

a Form 1041, U.S. Income Tax Return

reasonable payment for the services

the estate tax return any amounts that

for Estate and Trusts, filed for the

performed, taking into account the size

were not deductible on the income tax

estate. Funeral expenses are only

and character of the estate and the

return because of the percentage

deductible on the estate tax return.

local law and practice. If the fees

limitations.

claimed have not been paid at the time

Funeral expenses. Itemize funeral

Debts of the Decedent

of final examination of the return, the

expenses on line A. Deduct from the

amount deducted must be supported by

expenses any amounts that were

List under “Debts of the Decedent” only

an affidavit, or statement signed under

reimbursed, such as death benefits

valid debts the decedent owed at the

the penalties of perjury, by the executor

payable by the Social Security

time of death. List any indebtedness

or the attorney stating that the amount

Administration and the Veterans

secured by a mortgage or other lien on

has been agreed upon and will be paid.

Administration.

property of the gross estate under the

Do not deduct attorney fees

heading “Mortgages and Liens.” If the

Executors’ commissions. When you

incidental to litigation incurred by the

amount of the debt is disputed or the

file the return, you may deduct

beneficiaries. These expenses are

subject of litigation, deduct only the

commissions that have actually been

charged against the beneficiaries

amount the estate concedes to be a

paid to you or that you expect will be

personally and are not administration

valid claim. Enter the amount in contest

paid. You may not deduct commissions

expenses authorized by the Code.

in the column provided.

if none will be collected. If the amount

of the commissions has not been fixed

Interest expense. Interest expenses

Generally, if the claim against the

by decree of the proper court, the

incurred after the decedent’s death are

estate is based on a promise or

-25-

Part Instructions

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2011 Page 25

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