CFR > Title 26 - Internal Revenue > CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY > SUBCHAPTER B—ESTATE AND GIFT TAXES (Parts 20–27) > PART 20—ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 > 20.2014-7—Limitation on credit if a deduction for foreign death taxes is allowed under section 2053(d).

20.2014-7—Limitation on credit if a deduction for foreign death taxes is allowed under section 2053(d).

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:

Code of Federal Regulations

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.
Distribution of the Estate
Gross estate $1,200,000.00
Debts and charges $40,000.00
Bequest of U.S. corporation stock to niece 400,000.00
Bequest of country X corporation stock to nephew 100,000.00
Net Federal estate tax 136,917.88
676,917.88
Residue before country X tax 523,082.12
Country X succession tax on charity 100,000.00
Charitable deduction 423,082.12
Taxable Estate and Federal Estate Tax
Gross estate 1,200,000.00
Debts and charges 40,000.00
Deduction of foreign death tax under section 2053(d) 100,000.00
Charitable deduction 423,082.12
Exemption 60,000.00
623,082.12
Taxable estate 576,917.88
Gross estate tax 172,621.26
Credit for State death taxes 15,476.72
Gross estate tax less credit for State death taxes 157,144.54
Credit for foreign death taxes 20,226.66
Net Federal estate tax 136,917.88
Credit for Foreign Death Taxes
country x tax
Succession tax on nephew:
Value of stock of country X corporation 100,000
Tax (50% rate) $50,000
Succession 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 300,000
Value of property in respect of which a deduction is allowed under section 2053(d) 200,000
Value of property situated within country X, subjected to tax, and included in gross estate as limited by section 2014(f) 100,000
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
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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

Code of Federal Regulations

[T.D. 6600, 27 FR 4984, May 27, 1962]