Frequently Asked Questions
Who is eligible for the Estate Administration and Indebtedness Deduction?
Expenses must be allowable under local jurisdiction laws and incurred during the administration of the estate.
How does the Estate Administration and Indebtedness Deduction work?
Deducts funeral expenses, administration costs, claims against the estate, and unpaid mortgages from the gross estate to determine the taxable estate.
What law authorizes the Estate Administration and Indebtedness Deduction?
The Estate Administration and Indebtedness Deduction is authorized under IRC §2053 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §2053
Source: Internal Revenue Code, Title 26, United States Code
§ 2053. Expenses, indebtedness, and taxes(a) General ruleFor purposes of the tax imposed by section 2001, the value of the taxable estate shall be determined by deducting from the value of the gross estate such amounts—(1) for funeral expenses,
(2) for administration expenses,
(3) for claims against the estate, and
(4) for unpaid mortgages on, or any indebtedness in respect of, property where the value of the decedent’s interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate,
as are allowable by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered.
(b) Other administration expensesSubject to the limitations in paragraph (1) of subsection (c), there shall be deducted in determining the taxable estate amounts representing expenses incurred in administering property not subject to claims which is included in the gross estate to the same extent such amounts would be allowable as a deduction under subsection (a) if such property were subject to claims, and such amounts are paid before the expiration of the period of limitation for assessment provided in section 6501.
(c) Limitations(1) Limitations applicable to subsections (a) and (b)(A) Consideration for claimsThe deduction allowed by this section in the case of claims against the estate, unpaid mortgages, or any indebtedness shall, when founded on a promise or agreement, be limited to the extent that they were contracted bona fide and for an adequate and full consideration in money or money’s worth; except that in any case in which any such claim is founded on a promise or agreement of the decedent to make a contribution or gift to or for the use of any donee described in section 2055 for the purposes specified therein, the deduction for such claims shall not be so limited, but shall be limited to the extent that it would be allowable as a deduction under section 2055 if such promise or agreement constituted a bequest.
(B) Certain taxesAny income taxes on income received after the death of the decedent, or property taxes not accrued before his death, or any estate, succession, legacy, or inheritance taxes, shall not be deductible under this section.
(C) Certain claims by remaindermenNo deduction shall be allowed under this section for a claim against the estate by a remainderman relating to any property described in section 2044.
(D) Section 6166 interestNo deduction shall be allowed under this section for any interest payable under section 6601 on any unpaid portion of the tax imposed by section 2001 for the period during which an extension of time for payment of such tax is in effect under section 6166.
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