Imágenes de páginas
PDF
EPUB

The decision of a local court as to the amount of a claim or administration expense will ordinarily be accepted where the court passes upon the fact upon which deductibility depends."

But it must appear that the court actually passed upon the merits of the case. As an example of claims allowed by a state court but which are nevertheless not deductible for estate tax purposes because the court did not pass upon the fact upon which deductibility depends, the federal regulations suggest a legacy left to an executor in lieu of commissions. In such case the court would allow the legacy as compensation for the executor, but it might not all be justly such an expense of administratorship as could properly be deducted. Only the actual expense would be allowed by the law as a deduction from the gross estate of the decedent for either federal or state tax purposes.

The allowance of the legacy does not establish that the executor's claim for commission is equal to the amount bequeathed, and that this amount is consequently deductible.

Certain items that are deductible from the amount of the gross estate under the federal law are also deductible under the state laws. These are commented on in the following sections.

§ 340. Funeral and Administration Expenses

An executor may deduct such amounts for funeral expenses as are actually expended by him, provided expenditures of this nature are a liability of the estate under the laws of the local jurisdiction. A reasonable expenditure by the executor for a tombstone, monument or mausoleum, or for a burial lot, either for the decedent or his family, may be deducted, provided such an expenditure is made a charge upon the estate by the local law. Included in funeral ex

[blocks in formation]

penses is the transportation of the person bringing the body
to the place of burial.*

Reasonable funeral expenses are deductible in all of the states. (See § 266.) All the ordinary expenses of adminis tratorship are deductible if reasonable. These include, besides the executor's commission, the expense of collection of assets, payment of debts, distribution of the estate, attorney's fees, court costs, surrogate's fees, accountant's fees, appraiser's fees, clerk hire, cost of storing, maintaining, and preserving the property, etc.

Expenditures not essential to the proper settlement of the estate, but incurred for the individual benefit of the heirs, legatees, or devisees, may not be taken as deductions."

None of the allowable items may be deducted after the time has elapsed for which the executor is required to retain the property.

The proper executor's commission may be deducted, subject to the following limitations:

No amount may be deducted as commission in excess of that actually paid, or to be paid. Where the commission has not been allowed by the probate court, it may be deducted if its amount and future allowance are reasonably certain. In such case the executor must furnish satisfactory evidence at the time investigation is made that an account will be filed and the commission claimed. Where the executor does not intend to make any charge upon the estate for his services, or where he does not intend to file any account with the local court, no deduction may be claimed."

No deduction may be made for trustees' commissions, and an executor who acts as trustee is not entitled to deduct the commission he receives for his services in the latter capacity.'

Article 40 of Regulations 37.

Article 41 of Regulations 37.

Gleason and Otis, Inheritance Taxation, pp. 615, 616.
Article 42 of Regulations 37.

§ 341. Claims Against the Estate

The amounts that may be deducted under this heading are such only as represent personal obligations of the decedent existing at the time of his death, whether then matured or not. Obligations contracted by the executor are not deductible under this head. Only such claims as are actually enforcible against the estate may be deducted.

In the list of claims there should be included all accrued liabilities, such as interest, taxes on real property, etc. In reference to taxes on personal property, the regulations are as follows:

Taxes upon personal property are either wholly deductible, or are not deductible at all, depending on whether the tax did, or did not, become the personal obligation of the taxpayer in his lifetime."

The obligation for personal property taxes arises at the date of the assessment of the tax; consequently such taxes are debts of the testator if they were assessed as of a date before his death. Taxes upon both personal and real property are in theory debts due by the owners of the property to the government, although in practice the remedy to collect them may sometimes be confined to a sale of the property taxed without recourse to a personal action against the owner of the property. The amount of all general taxes due and unpaid may be deducted.

In the case of federal taxes upon income, the tax upon income received or accrued during the decedent's lifetime constitutes the personal obligation of the decedent, and is deductible. Taxes upon income received after the decedent's death are not deductible. No estate, succession, legacy, or inheritance tax is deductible."

[blocks in formation]

In computing the state transfer taxes, the federal tax may be deducted in Connecticut, Minnesota, New Jersey, and Illinois. The question has not come up as yet in many of the states.

§ 342. Unpaid Mortgages

The amounts of mortgages are deductible. Under the federal regulations :

The full amount of unpaid mortgages on property included in the gross estate should be deducted . . . including interest which had accrued at the time of death, whether payable at that time or not. Interest should be computed upon the basis of 365 days to the year. The full value of the real estate, without any deduction for mortgages, must be returned as part of the gross estate. As real property situated outside of the United States is not part of the gross estate, the amount of mortgages upon such property should be deducted only where the decedent was personally liable for the mortgage debt."

§ 343. Losses from Casualty or Theft

The federal regulations allow the deduction of losses incurred during the settlement of the estate, arising from fires, storms, shipwreck, or from theft or other losses of a fortuitous and unusual character, such as result from violence or from a disaster which could not be foreseen or prevented by the exercise of reasonable care, when such losses are not compensated by insurance or otherwise. If the loss is partly compensated, the excess of the loss over such compensation may be deducted. Losses due to the death of animals from disease are deductible. In order to be deductible a loss must occur during the settlement of the estate, but losses sustained by reason of depreciation in the value of the assets of the estate subsequent to the decedent's death are not of the nature described and are not deductible.

10 Article 47 of Regulations 37.

§ 344. Support of Decedent's Dependents

The only form of support of the decedent's dependents permitted as a deduction by the federal regulations is money. Furniture and other personal property turned over cannot be deducted. The alleged dependent must have actually required for his support the amount claimed, but if the dependent has lands or other assets which do not yield an income and which he would have to sell or mortgage were it not for the amount paid over from the estate, the amount may be taken as a deduction.

§ 345. Public and Semipublic Bequests

For federal tax purposes there may be deducted:

. . . the amount of all bequests, legacies, devises, or gifts,
to or for the use of the United States, any State, Territory,
any political subdivision thereof, or the District of Columbia,
for exclusively public purposes, or to or for the use of any
corporation organized and operated exclusively for religious,
charitable, scientific, literary, or educational purposes, in-
cluding the encouragement of art and the prevention of
cruelty to children or animals, no part of the net earnings of
which inures to the benefit of any private stockholder or
individual, or to a trustee or trustees exclusively for such
religious, charitable, scientific, literary, or educational pur-
poses."

In order to be exempt, the corporation, trust:

... or association must meet three tests: (1) it must be
organized and operated for one or more of the specified pur-
poses; (2) it must be organized and operated exclusively for
such purposes; and (3) no part of its income must inure to
the benefit of private stockholders or individuals."

The regulations suggest as exempt:

[ocr errors]

an association for the relief of the families of clergymen, even though the latter make a contribution to the fund

11 Revenue Act of 1918, § 403. 12 Article 54 of Regulations 37.

« AnteriorContinuar »