Instructions For Form 706 - 2016 Page 33
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54Schedule K—Debts of the
cannot deduct expenses incurred in
income on your individual income tax
administering property subject to claims
return.
Decedent and Mortgages
on both the estate tax return and the
Attorney fees. Enter the amount of
and Liens
estate's income tax return. If you choose
attorney fees that have actually been
to deduct them on the estate tax return,
Use Schedule PC to make a
paid or that you reasonably expect to be
you cannot deduct them on a Form
protective claim for refund for
paid. If, on the final examination of the
!
1041, U.S. Income Tax Return for
expenses which are not
return, the fees claimed have not been
Estate and Trusts, filed for the estate.
CAUTION
currently deductible under section 2053.
awarded by the proper court and paid,
Funeral expenses are only deductible
For such a claim, report the expense on
the deduction will be allowed provided
on the estate tax return.
Schedule K but without a value in the
the Chief, Estate and Gift Tax
last column.
Funeral expenses. Itemize funeral
Examinations, is reasonably satisfied
expenses on line A. Deduct from the
that the amount claimed will be paid and
You must complete and attach
expenses any amounts that were
that it does not exceed a reasonable
Schedule K if you claimed deductions
reimbursed, such as death benefits
payment for the services performed,
on either item 15 or item 16 of Part
payable by the Social Security
taking into account the size and
5—Recapitulation.
Administration or the Veterans
character of the estate and the local law
Income vs. estate tax deduction.
Administration.
and practice. If the fees claimed have
Taxes, interest, and business expenses
not been paid at the time of final
Executors' commissions. When you
accrued at the date of the decedent's
examination of the return, the amount
file the return, you may deduct
death are deductible both on
deducted must be supported by an
commissions that have actually been
Schedule K and as deductions in
affidavit, or statement signed under the
paid to you or that you expect will be
respect of the decedent on the income
penalties of perjury, by the executor or
paid. Do not deduct commissions if
tax return of the estate.
the attorney stating that the amount has
none will be collected. If the amount of
been agreed upon and will be paid.
If you choose to deduct medical
the commissions has not been fixed by
expenses of the decedent only on the
Do not deduct attorney fees
decree of the proper court, the
estate tax return, they are fully
incidental to litigation incurred by the
deduction will be allowed on the final
deductible as claims against the estate.
beneficiaries. These expenses are
examination of the return, provided that:
If, however, they are claimed on the
charged against the beneficiaries
The Chief, Estate and Gift Tax
decedent's final income tax return under
personally and are not administration
Examinations, is reasonably satisfied
section 213(c), they may not also be
expenses authorized by the Code.
that the commissions claimed will be
claimed on the estate tax return. In this
paid;
Interest expense. Interest expenses
case, you also may not deduct on the
The amount entered as a deduction is
incurred after the decedent's death are
estate tax return any amounts that were
within the amount allowable by the laws
generally allowed as a deduction if they
not deductible on the income tax return
of the jurisdiction where the estate is
are reasonable, necessary to the
because of the percentage limitations.
being administered; and
administration of the estate, and
It is in accordance with the usually
Debts of the Decedent
allowable under local law.
accepted practice in that jurisdiction for
Interest incurred as the result of a
List under “Debts of the Decedent” only
estates of similar size and character.
federal estate tax deficiency is a
valid debts the decedent owed at the
If you have not been paid the
deductible administrative expense.
time of death. List any indebtedness
commissions claimed at the time of the
Penalties on estate tax deficiencies are
secured by a mortgage or other lien on
final examination of the return, you must
not deductible even if they are allowable
property of the gross estate under the
support the amount you deducted with
under local law.
heading “Mortgages and Liens.” If the
an affidavit or statement signed under
amount of the debt is disputed or the
the penalties of perjury that the amount
Note. If you elect to pay the tax in
subject of litigation, deduct only the
has been agreed upon and will be paid.
installments under section 6166, you
amount the estate concedes to be a
may not deduct the interest payable on
You may not deduct a bequest or
valid claim.
the installments.
devise made to you instead of
Generally, if the claim against the
commissions. If, however, the decedent
Miscellaneous expenses.
estate is based on a promise or
fixed by will the compensation payable
Miscellaneous administration expenses
agreement, the deduction is limited to
to you for services to be rendered in the
necessarily incurred in preserving and
the extent that the liability was
administration of the estate, you may
distributing the estate are deductible.
contracted bona fide and for an
deduct this amount to the extent it is not
These expenses include appraiser's
adequate and full consideration in
more than the compensation allowable
and accountant's fees, certain court
money or money's worth. However, any
by the local law or practice.
costs, and costs of storing or
enforceable claim based on a promise
Do not deduct on this schedule
maintaining assets of the estate.
or agreement of the decedent to make a
amounts paid as trustees' commissions
The expenses of selling assets are
contribution or gift (such as a pledge or
whether received by you acting in the
deductible only if the sale is necessary
a subscription) to or for the use of a
capacity of a trustee or by a separate
to pay the decedent's debts, the
charitable, public, religious, etc.,
trustee. If such amounts were paid in
expenses of administration, or taxes, or
organization is deductible to the extent
administering property not subject to
to preserve the estate or carry out
that the deduction would be allowed as
claims, deduct them on Schedule L.
distribution.
a bequest under the statute that applies.
Note. Executors' commissions are
Certain claims of a former spouse
taxable income to the executors.
against the estate based on the
Therefore, be sure to include them as
relinquishment of marital rights are
Part Instructions
-33-
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