IRS Finalizes Regulations on How Post-Death Events Impact Taxable Estate Value - Guidance on Protective Claim Procedure

October 17, 2011 | Roger McEowen


A decedent’s taxable estate is determined by deducting from the value of the gross estate certain deductions.   That includes deductions for amounts paid for funeral and administration expenses, claims against the estate and unpaid mortgages.   Specifically, the Internal Revenue Code (Code) provides that “the value of the taxable estate shall be determined by deducting from the value of the gross estate…claims against the estate.”   As explained in the applicable Treasury Regulation, “[o]nly claims enforceable against the decedent’s estate may be deducted” from the gross estate.   Under another Treasury Regulation, an item may be entered on the return for deduction even though its exact amount is not then known, provided it is ascertainable with reasonable certainty and will be paid.   Other than that general guidance, neither the Code nor the Treasury Regulations provide any guidance on whether post-death events are relevant in determining the value of claims which may be deducted on an estate tax return. For almost 80 years, the courts have reached different conclusions on the matter through two different schools of thought.

In 2000, IRS gave notice that it would continue to litigate the issue.   Then, in early 2007, IRS issued proposed regulations that provide guidance regarding the extent to which post-death events may be considered in determining the value of a taxable estate.   Now, IRS has finalized the regulations. 

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