$18,520.00 (d) Credit of B's estate for tax on prior transfers (§ 20.2013−1(c)): Credit for tax on prior transfers=$18,520.00 (lower of paragraphs (b) and (c))× 100 percent (percentage to be taken into account under § 20.2013−1(c)) --Example (2). (a) The facts are the same as those contained in example (1) of this paragraph with the following additions. C died December 1, 1950, leaving a gross estate of $250,000. Expenses, indebtedness, etc., amounted to $50,000. C bequeathed $50,000 to B. C was a citizen of the United States. His estate paid State death taxes equal to the maximum credit allowable for State death taxes. Death taxes were not a charge on the bequest to B. (b) "First limitation” on credit for B's estate (§ 20.2013–2(d)) — (1) With respect to the property received from A: "First limitation"=$36,393.90 (this computation is identical with the one contained in paragraph (b) of example (1) of this section). (2) With respect to the property received from C: $140,000.00-$31,500.00-$1,200.00+$60,000.00 (§ 20.2013–2(c)) (c) "Second limitation" on credit for B's estate (§ 20.2013–3(c)): 110,000.00 140, 000. 00 32, 700.00 1,200.00 31,500.00 9,414. 23 (1) B's net estate tax payable as described in § 20.2013–3(a)(1) (previously taxed transfers included)=$61,780.00 (this computation is identical with the one contained in paragraph (c) (1) of example (1) of this section). (2) B's net estate tax payable as described in § 20.2013–3(a)(2) (previously taxed transfers excluded): Portion of "second limitation" attributable to transfer from A (100/150 of $27,820.00) Portion of "second limitation" attributable to transfer from C (5150 of $27,820.00) (d) Credit of B's estate for tax on prior transfers (§ 20.2013-1 (c)): 1 Credit for tax on transfer from A= tion" computed in paragraph $18,546.67 Credit for tax on transfer from C= $9,273.33 (lower of "first limitation" computed in paragraph (b) (2) and "second limitation" apportioned to B's transfer in paragraph (c) (4)) X 80 percent (percentage to be taken into account under § 20.2013-1 (c)) Total credit for tax on prior transfers.- - § 20.2014 ------- 7, 418. 66 25, 965.33 Statutory provisions; credit for foreign death taxes. SEC. 2014. Credit for foreign death taxes(a) In general. The tax imposed by section 2001 shall be credited with the amount of any estate, inheritance, legacy, or succession taxes actually paid to any foreign country in respect of any property situated within such foreign country and included in the gross estate (not including any such taxes paid with respect to the estate of a person other than the decedent). If the decedent at the time of his death was not a citizen of the United States, credit shall not be allowed under this section unless the foreign country of which such decedent was a citizen or subject, in imposing such taxes, allows a similar credit in the case of a citizen of the United States resident in such country. The determination of the country within which property is situated shall be made in accordance with the rules applicable under subchapter B (sec. 2101 and following) in determining whether property is situated within or without the United States. (b) Limitations on credit. The credit provided in this section with respect to such taxes paid to any foreign country (1) Shall not, with respect to any such tax, exceed an amount which bears the same ratio to the amount of such tax actually 18, 546. 67 9, 273.33 paid to such foreign country as the value of property which is (A) Situated within such foreign country, (B) Subjected to such tax, and (C) Included in the gross estate bears to the value of all property subjected to such tax; and (2) Shall not, with respect to all such taxes, exceed an amount which bears the same ratio to the tax imposed by section 2001 (after deducting from such tax the credits provided by sections 2011 and 2012) as the value of property which is (A) Situated within such foreign country, (B) Subjected to the taxes of such foreign country, and (C) Included in the gross estate bears to the value of the entire gross estate reduced by the aggregate amount of the deductions allowed under sections 2055 and 2056. (c) Valuation of property. (1) The values referred to in the ratio stated in subsection (b) (1) are the values determined for purposes of the tax imposed by such foreign country. (2) The values referred to in the ratio stated in subsection (b) (2) are the values determined under this chapter; but, in applying such ratio, the value of any property described in subparagraphs (A), (B), and (C) thereof shall be reduced by such amount as will properly reflect, in accordance with regulations prescribed by the Secretary or his delegate, the deductions allowed in respect of such property under sections 2055 and 2056 (relating to charitable and marital deductions). (d) Proof of credit. The credit provided in this section shall be allowed only if the taxpayer establishes to the satisfaction of the Secretary or his delegate (1) The amount of taxes actually paid to the foreign country, (2) The amount and date of each payment thereof, (3) The description and value of the property in respect of which such taxes are imposed, and (4) All other information necessary for the verification and computation of the credit. (e) Period of limitation. The credit provided in this section shall be allowed only for such taxes as were actually paid and credit therefor claimed within 4 years after the filing of the return required by section 6018, except that (1) If a petition for redetermination of a deficiency has been filed with the Tax Court within the time prescribed in section 6213 (a), then within such 4-year period or before the expiration of 60 days after the decision of the Tax Court becomes final. (2) If, under section 6161, an extension of time has been granted for payment of the tax shown on the return, or of a deficiency, then within such 4-year period or before the date of the expiration of the period of the extension. Refund based on such credit may (despite the provisions of sections 6511 and 6512) be made if claim therefor is filed within the period above provided. Any such refund shall be made without interest. (1) Additional limitation in cases involving a deduction under section 2053(d). In any case where a deduction is allowed under section 2053 (d) for an estate, succession, legacy, or inheritance tax imposed by and actually paid to any foreign country upon a transfer by the decedent for public, charitable, or religious uses described in section 2055, the property described in subparagraphs (A), (B), and (C) of paragraphs (1) and (2) of subsection (b) of this section shall not include any property in respect of which such deduction is allowed under section 2053(d). (g) Possession of United States deemed a foreign country. For purposes of the credits authorized by this section, each possession of the United States shall be deemed to be a foreign country. [Sec. 2014 as amended by sec. 102(c) (2), Technical Amendments Act 1958 (72 Stat. 1674); sec. 2, Act of Aug. 21, 1959 (Public Law 86-175, 73 Stat. 397)] [T.D. 6296, 23 FR. 4529, June 24, 1958, as amended by T.D. 6526, 26 F.R. 415, Jan. 19, 1961; T.D. 6600, 27 FR. 4983, May 29, 1962] (a) In general. (1) A credit is allowed under section 2014 against the Federal estate tax for any estate, inheritance, legacy, or succession taxes actually paid to any foreign country (hereinafter referred to as "foreign death taxes"). The credit is allowed only for foreign death taxes paid (1) with respect to property situated within the country to which the tax is paid, (ii) with respect to property included in the decedent's gross estate, and (iii) with respect to the decedent's estate. The credit is allowable to the estate of a decedent who was a citizen of the United States at the time of his death. The credit is also allowable to the estate of a decedent who was a resident but not a citizen of the United States the time of his death if the country o which the decedent was a national, in imposing death taxes, allows a simila credit to the estates of citizens of th United States resident in that country See paragraph (b) (1) of § 20.0-1 for def inition of the term "resident". The credit is not allowable to the estate of a decedent who was neither a citizen nor resident of the United States at the tim of his death. The credit is allowable no only for death taxes paid to foreign countries which are states in the inter national sense, but also for death taxe paid to possessions or political subdi visions of foreign states. With respect t the estate of a decedent dying after Sep. tember 2, 1958, the term "foreign coun try", as used in this section and §§ 20.2014-2 to 20.2014-6, includes a possession of the United States. See §§ 20.2011-1 and 20.2011-2 for the allowance of a credit for death taxes paid to a possession of the United States in the case of a decedent dying before September 3, 1958. No credit is allowable for interest or penalties paid in connection with foreign death taxes. (2) In addition to the credit for foreign death taxes under section 2014, similar credits are allowed under death tax conventions with certain foreign countries. If credits against the Federal estate tax are allowable under section 2014, or under section 2014 and one or more death tax conventions, for death taxes paid to more than one country, the credits are combined and the aggregate amount is credited against the Federal estate tax, subject to the limitation provided for in paragraph (c) of § 20.2014 4 For application of the credit in cases involving a death tax convention, see § 20.2014-4. (3) No credit is allowable under section 2014 in connection with property situated outside of the foreign country imposing the tax for which credit is claimed. However, such a credit may be allowable under certain death tax conventions. In the case of a tax imposed by a political subdivision of a foreign country, credit for such tax shall be allowed with respect to property having a situs in that foreign country, even though, under the principles described in this subparagraph, such property has a situs in a political subdivision different from the one imposing the tax. Whether or not particular property of a decedent s situated in the foreign country imDosing the tax is determined in accordince with the same principles that would ›e applied in determining whether or not imilar property of a nonresident decelent not a citizen of the United States s situated within the United States for Federal estate tax purposes. See }§ 20.2104-1 and 20.2105-1. For eximple, under § 20.2104-1, a bond for the payment of money is not within the United States unless it is physically located in the United States. Accordingly, bond is deemed situated in the foreign country imposing the tax only if it is physically located in that country. Simiarly, under § 20.2104-1, shares of stock are deemed to be situated in the United States only if issued by a domestic (United States) corporation. Thus, a share of corporate stock is regarded as situated in the foreign country imposing the tax only if the issuing corporation is incorporated in that country. Further, under § 20.2105–1, moneys deposited with any person carrying on the banking business by or for a nonresident not a citizen of the United States who was not engaged in business in the United States at the time of death are not deemed situated in the United States. Therefore, an account with a foreign bank in the country imposing the tax is not considered to be situated in that country under corresponding circumstances. (4) Where 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 further limitations as explained in § 20.2014-7. (b) Limitations on credit. The credit for foreign death taxes is limited to the smaller of the following amounts: (1) The amount of a particular foreign death tax attributable to property situated in the country imposing the tax and included in the decedent's gross estate for Federal estate tax purposes, computed as set forth in § 20.2014-2; or (2) The amount of the Federal estate tax attributable to particular property situated in a foreign country, subjected to foreign death tax in that country, and included in the decedent's gross estate for Federal estate tax purposes, computed as set forth in § 20.2014-3. [T.D. 6296, 23 F.R. 4529, June 24, 1958, as amended by T.D. 6526, 26 F.R. 415, Jan. 19, 1961; T.D. 6600, 27 F.R. 4983, May 29, 1962] § 20.2014–2 "First limitation”. (a) The amount of a particular foreign death tax attributable to property situated in the country imposing the tax and included in the decedent's gross estate for Federal estate tax purposes is the "first limitation." Thus, the credit for any foreign death tax is limited to an amount, A, which bears the same ratio to B (the amount of the foreign death tax without allowance of credit, if any, for Federal estate tax) as C (the value of the property situated in the country imposing the foreign death tax, subjected to the foreign death tax, included in the gross estate and for which a deduction is not allowed under section 2053 (d)) bears to D (the value of all property subjected to the foreign death tax). Stated algebraically, the "first limitation" (A) equals Value of property in foreign country subjected to foreign death tax, included in gross estate and for which a deduction is not allowed under section 2053 (d) (C) Value of all property subjected to foreign death tax (D) The values used in this proportion are the values determined for the purpose of the foreign death tax. The amount of the foreign death tax for which credit is allowable must be converted into United States money. The application of this paragraph may be illustrated by the following example: Example. At the time of his death, the decedent, a citizen of the United States owned stock in X Corporation (a corporation organized under the laws of Country Y) X Amount of foreign death tax (B) valued at $80,000. In addition he owned bonds issued by X Corporation valued at $80,000. The stock and bond certificates were in the United States. Decedent left by will $20,000 of the stock and $50,000 of the bonds in X Corporation to his surviving spouse. He left the rest of the stock and bonds to his son. Under the situs rules referred to in paragraph (a) (3) of § 20.2014-1 the stock is deemed situated in Country Y while the bonds are deemed to have their situs in the United States. There is no death tax convention in existence between the United States and Country Y. The laws × ($11,200+$14,400) (factor B of the ratio stated at § 20.2014—2(a)) = $12,8 (b) If a foreign country imposes more than one kind of death tax or impos taxes at different rates upon the several shares of an estate, or if a foreign count and a political subdivision or possession thereof each imposes a death tax, a “fi limitation" is to be computed separately for each tax or rate and the results add in order to determine the totai “first limitation." The application of this paragra may be illustrated by the following example: Example. The facts are the same as those contained in the example set forth in paragra (a) of this section, except that the tax of the surviving spouse was computed at a 10 perce rate and amounted to $7,000, and the tax of the son was computed at a 20 percent rate a amounted to $18,000. In this case, the "first limitation" on the credit for foreign dea taxes is computed as follows: "First limitation" with respect to inheritance tax of surviving spouse: -X $7,000 (factor B of the ratio stated at § 20.2014–2(a)) = $2,00 "First limitation" with respect to inheritance tax of son: X $18,000 (factor B of the ratio stated at § 20.2014–2(a))=$12,00 14,0 Total "first limitation" on the credit for foreign death taxes...... [T.D. 6296, 23 F.R. 4529, June 24, 1958, as amended by T.D. 6600, 27 F.R. 4984, May 29, 196 T.D. 6684, 28 F.R. 11408, Oct. 24, 1963] § 20.2014-3 "Second limitation”. (a) The amount of the Federal estate tax attributable to particular proper situated in a foreign country, subjected to foreign death tax in that country, an included in the decedent's gross estate for Federal estate tax purposes is the "secon limitation." Thus, the credit is limited to an amount, E, which bears the sam ratio to F (the gross Federal estate tax, reduced by any credit for State death tax under section 2011 and by any credit for gift tax under section 2012) as G (th "adjusted value of the property situated in the foreign country, subjected to foreig death tax, and included in the gross estate", computed as described in paragrap (b) of this section) bears to H (the value of the entire gross estate, reduced by th total amount of the deductions allowed under sections 2055 (charitable deduction and 2056 (marital deduction)). Stated algebraically, the "second limitation" (F equals "Adjusted value of the property situated in the foreign country, subjected to foreign death taxes, and included in the gross estate” (G) Value of entire gross estate, less charitable and marital deductions (H) Gross Federal estate tax, less credits for State death taxes and gift tax (F The values used in this proportion are the values determined for the purpose of th Federal estate tax. |