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agreement, the deduction is limited to

the decedent’s death. Federal taxes on

amount, the unpaid balance, the rate of

the extent that the liability was

income received during the decedent’s

interest, and date to which the interest

contracted bona fide and for an

lifetime are deductible, but taxes on

was paid before the decedent’s death.

adequate and full consideration in

income received after death are not

Schedule L—Net Losses

money or money’s worth. However, any

deductible.

enforceable claim based on a promise

Keep all vouchers or original records

During Administration

or agreement of the decedent to make

for inspection by the IRS.

a contribution or gift (such as a pledge

and Expenses Incurred

Allowable death taxes. If you elect to

or a subscription) to or for the use of a

in Administering

take a deduction for foreign death taxes

charitable, public, religious, etc.,

under section 2053(d) rather than a

organization is deductible to the extent

Property Not Subject to

credit under section 2014, the

that the deduction would be allowed as

deduction is subject to the limitations

Claims

a bequest under the statute that

described in section 2053(d) and its

applies.

You must complete Schedule L and

regulations. If you have difficulty

Certain claims of a former spouse

file it with the return if you claim

figuring the deduction, you may request

against the estate based on the

deductions on either item 18 or item 19

a computation of it. Send your request

relinquishment of marital rights are

of Part 5 — Recapitulation.

within a reasonable amount of time

deductible on Schedule K. For these

before the due date of the return to:

Net Losses During

claims to be deductible, all of the

Department of the Treasury

following conditions must be met:

Administration

•

Commissioner of Internal Revenue

The decedent and the decedent’s

You may deduct only those losses from

Washington, DC 20224.

spouse must have entered into a

thefts, fires, storms, shipwrecks, or

written agreement relative to their

other casualties that occurred during

marital and property rights.

the settlement of the estate. You may

•

Attach to your request a copy of the

The decedent and the spouse must

deduct only the amount not reimbursed

will and relevant documents, a

have been divorced before the

by insurance or otherwise.

statement showing the distribution of

decedent’s death and the divorce must

the estate under the decedent’s will,

have occurred within the 3-year period

Describe in detail the loss sustained

and a computation of the state or

beginning on the date 1 year before the

and the cause. If you received

foreign death tax showing any amount

agreement was entered into. It is not

insurance or other compensation for the

payable by a charitable organization.

required that the agreement be

loss, state the amount collected.

approved by the divorce decree.

Identify the property for which you are

Mortgages and Liens

•

The property or interest transferred

claiming the loss by indicating the

List under “Mortgages and Liens” only

under the agreement must be

particular schedule and item number

obligations secured by mortgages or

transferred to the decedent’s spouse in

where the property is included in the

settlement of the spouse’s marital

other liens on property that you

gross estate.

included in the gross estate at its full

rights.

If you elect alternate valuation, do

value or at a value that was

You may not deduct a claim made

not deduct the amount by which you

undiminished by the amount of the

against the estate by a remainderman

reduced the value of an item to include

mortgage or lien. If the debt is

relating to section 2044 property.

it in the gross estate.

enforceable against other property of

Section 2044 property is described in

Do not deduct losses claimed as a

the estate not subject to the mortgage

the instructions to line 6.

deduction on a federal income tax

or lien, or if the decedent was

Include in this schedule notes

return or depreciation in the value of

personally liable for the debt, you must

unsecured by mortgage or other lien

securities or other property.

include the full value of the property

and give full details, including:

subject to the mortgage or lien in the

Expenses Incurred in

•

Name of payee,

gross estate under the appropriate

•

Administering Property Not

Face and unpaid balance,

schedule and may deduct the mortgage

•

Date and term of note,

or lien on the property on this schedule.

Subject to Claims

•

Interest rate, and

However, if the decedent’s estate is

You may deduct expenses incurred in

•

Date to which interest was paid

not liable, include in the gross estate

administering property that is included

before death.

only the value of the equity of

in the gross estate but that is not

Include the exact nature of the claim

redemption (or the value of the property

subject to claims. You may only deduct

as well as the name of the creditor. If

less the amount of the debt), and do

these expenses if they were paid

the claim is for services performed over

not deduct any portion of the

before the section 6501 period of

a period of time, state the period

indebtedness on this schedule.

limitations for assessment expired.

covered by the claim.

Notes and other obligations secured

The expenses deductible on this

Example. Edison Electric

by the deposit of collateral, such as

schedule are usually expenses incurred

Illuminating Co., for electric service

stocks, bonds, etc., also should be

in the administration of a trust

during December 2009, $150.

listed under “Mortgages and Liens.”

established by the decedent before

death. They may also be incurred in the

If the amount of the claim is the

Description

unpaid balance due on a contract for

collection of other assets or the transfer

Include under the “Description” column

or clearance of title to other property

the purchase of any property included

the particular schedule and item

included in the decedent’s gross estate

in the gross estate, indicate the

schedule and item number where you

number where the property subject to

for estate tax purposes, but not

the mortgage or lien is reported in the

included in the decedent’s probate

reported the property. If the claim

gross estate.

estate.

represents a joint and separate liability,

give full facts and explain the financial

Include the name and address of the

The expenses deductible on this

responsibility of the co-obligor.

mortgagee, payee, or obligee, and the

schedule are limited to those that are

Property and income taxes. The

date and term of the mortgage, note, or

the result of settling the decedent’s

deduction for property taxes is limited to

other agreement by which the debt was

interest in the property or of vesting

the taxes accrued before the date of

established. Also include the face

good title to the property in the

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Part Instructions

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2011 Page 26

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