26 C.F.R. § 20.2014-7 Limitation on credit if a deduction for foreign death taxes is allowed under section 2053(d).
Title 26 - Internal Revenue
If a deduction is allowed under section 2053(d) for foreign death taxes paid with respect to a charitable gift, the credit for foreign death taxes is subject to special limitations. In such a case the property described in subparagraphs (A), (B), and (C) of paragraphs (1) and (2) of section 2014(b) shall not include any property with respect to which a deduction is allowed under section 2053(d). The application of this section may be illustrated by the following example: Example. The decedent, a citizen of the United States, died July 1, 1955, leaving a gross estate of $1,200,000 consisting of: Shares of stock issued by United States corporations, valued at $600,000; bonds issued by the United States Government physically located in the United States, valued at $300,000; and shares of stock issued by a Country X corporation, valued at $300,000. Expenses, indebtedness, etc., amounted to $40,000. The decedent made specific bequests of $400,000 of the United States corporation stock to a niece and $100,000 of the Country X corporation stock to a nephew. The residue of his estate was left to charity. There is no death tax convention in existence between the United States and Country X. The Country X tax imposed was at a 50-percent rate on all beneficiaries. A State inheritance tax of $20,000 was imposed on the niece and nephew. The decedent did not provide in his will for the payment of the death taxes, and under local law the Federal estate tax is payable from the general estate, the same as administration expenses.
First Limitation, §28.2014–2(a) $100,000 (factor C of the ratio stated at §20.2014–2(a)) ÷ $100,000 + $200,000 (factor D of the ratio stated at §20.2014 2(a) × $50,000 + $100,000) (factor B of the ratio stated at §20.2014–2(a)) = $50,000.00 Second Limitation, §28.2014–3(a) $100,000 (factor G of the ratio stated at §20.2014–3(a)) (as limited by section 2014(f)) ÷ $1,200,000 − $423,082.12 (factor H of the ratio stated at §20.2014 3(a) × $172,621.26 − $15,476.72) (factor F of the ratio stated at §20.2014–3(a)) = $20,226.66Z [T.D. 6600, 27 FR 4984, May 27, 1962]
Title 26: Internal Revenue
PART 20—ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954
Credits Against Tax
§ 20.2014-7 Limitation on credit if a deduction for foreign death taxes is allowed under section 2053(d).
Distribution of the Estate Gross estate............................... ........... $1,200,000.00Debts and charges.......................... $40,000.00Bequest of U.S. corporation stock to niece. 400,000.00Bequest of country X corporation stock to 100,000.00 nephew....................................Net Federal estate tax..................... 136,917.88 ------------- ........... 676,917.88 --------------- Residue before country X tax......................... 523,082.12Country X succession tax on charity........ 100,000.00 --------------- Charitable deduction.................... ........... 423,082.12 Taxable Estate and Federal Estate TaxGross estate............................... ........... 1,200,000.00Debts and charges.......................... 40,000.00Deduction of foreign death tax under 100,000.00 section 2053(d)...........................Charitable deduction....................... 423,082.12Exemption.................................. 60,000.00 ------------- ........... 623,082.12 Taxable estate....................................... 576,917.88Gross estate tax........................... 172,621.26Credit for State death taxes............... 15,476.72 -------------- Gross estate tax less credit for State 157,144.54 death taxes.............................Credit for foreign death taxes............. 20,226.66 Net Federal estate tax.................. ........... 136,917.88 Credit for Foreign Death Taxes country x taxSuccession tax on nephew: Value of stock of country X corporation.. ........... 100,000 Tax (50% rate)........................... ........... $50,000Succession tax on charity: Value of stock of country X corporation.. ........... 200,000 Tax (50% rate)........................... ........... 100,000 computation of exclusion under section 2014(b)Value of situated in country X............. ........... 300,000Value of property in respect of which a ........... 200,000 deduction is allowed under section 2053(d) -------------- Value of property situated within country ........... 100,000 X, subjected to tax, and included in gross estate as limited by section 2014(f).................................
