bol and the part number, arabic number 20 followed by a decimal point (§ 20.); and (3). The sections of the Code are preceded by "Sec.". Each section of the regulations setting forth law or regulations is designated by a number composed of the part number followed by a decimal point (20.) and the number of the corresponding provision of the Internal Revenue Code. In the case of a section setting forth regulations, this designation is followed by a hyphen (-) and a number identifying such section. By use of these designations one can ascertain the sections of the regulations relating to a provision of the Code. Thus, the section of the regulations setting forth section 2012 of the Internal Revenue Code is designated § 20.2012 and the regulations pertaining to section 2012 are designated § 20.2012-1. [T.D. 6296, 23 F.R. 4529, June 24, 1958, as amended by T.D. 6526, 26 F.R. 414, Jan. 19, 1961] § 20.0-2 General description of tax. (a) Nature of tax. The Federal estate tax is neither a property tax nor an inheritance tax. It is a tax imposed upon the transfer of the entire taxable estate and not upon any particular legacy, devise, or distributive share. Escheat of a decedent's property to the State for lack of heirs is a transfer which causes the property to be included in the decedent's gross estate. (b) Method of determining tax; estate of citizen or resident-(1) In general. Subparagraphs (2) to (5) of this paragraph contain a general description of the method to be used in determining the Federal estate tax imposed upon the transfer of the estate of a decedent who was a citizen or resident of the United States at the time of his death. (2) Gross estate. The first step in determining the tax is to ascertain the total value of the decedent's gross estate. The value of the gross estate includes the value of all property to the extent of the interest therein of the decedent at the time of his death. (For certain exceptions in the case of real property situated outside the United States, see paragraphs (a) and (c) of § 20.2031-1.) In addition, the gross estate may include property in which the decedent did not have an interest at the time of his death: A decedent's gross estate for Federal estate tax purposes may therefore be very different from the same decedent's estate for local probate purposes. Examples of items which may be included in a decedent's gross estate and not in his probate estate are the following: certain property transferred by the decedent during his lifetime without adequate consideration; property held jointly by the decedent and others; property over which the decedent had a general power of appointment; proceeds of certain policies of insurance on the decedent's life; annuities; and dower or curtesy of a surviving spouse or a statutory estate in lieu thereof. For a detailed explanation of the method of ascertaining the value of the gross estate, see sections 2031 through 2044, and the regulations thereunder. (3) Taxable estate. The second step in determining the tax is to ascertain the value of the decedent's taxable estate. The value of the taxable estate is determined by subtracting from the value of the gross estate the authorized exemption and deductions. Under various conditions and limitations, deductions are allowable for expenses, indebtedness, taxes, losses, charitable transfers, and transfers to a surviving spouse. For a detailed explanation of the method of ascertaining the value of the taxable estate, see sections 2051 through 2056, and the regulations thereunder. (4) Gross estate tax. The third step is the determination of the gross estate tax. This is accomplished by the application of certain rates to the value of the decedent's taxable estate. In this connection, see section 2001 and the regulations thereunder. (5) Net estate tax payable. The final step is the determination of the net estate tax payable. This is done by subtracting from the gross estate tax the authorized credits against tax. Under certain conditions and limitations, credits are allowable for the following (computed in the order stated below): (i) State death taxes paid in connection with the decedent's estate (section 2011); (ii) Gift taxes paid on inter-vivos transfers by the decedent of property included in his gross estate (section 2012); (iii) Foreign death taxes paid in connection with the decedent's estate (section 2014); and (iv) Federal estate taxes paid on transfers of property to the decedent (section 2013). Sections 2015 and 2016 contain certain further rules for the application of the credits for State and foreign death taxes. For a detailed explanation of the credits against tax, see sections 2011 through 2016, and the regulations thereunder. (c) Method of determining tax; estate of nonresident not a citizen. In general, the method to be used in determining the Federal estate tax imposed upon the transfer of an estate of a decedent who was a nonresident not a citizen of the United States is similar to that described in paragraph (b) of this section with respect to the estate of a citizen or resident. Briefly stated, the steps are as follows: first, ascertain the value of that part of the decedent's "entire gross estate" which at the time of his death was situated in the United States (see If the taxable estate tax isNot over $5,000-- §§ 20.2103-1 and 20.2104-1); second, determine the value of the taxable estate by subtracting from the value of that part of the "entire gross estate" which was situated in the United States at the time of the decedent's death the amount of the allowable deductions (see § 20.2106-1); third, compute the gross estate tax on the taxable estate, using the rates set forth in section 2001 (see § 20.21011); and fourth, subtract from the gross estate tax the total amount of any allowable credits in order to arrive at the net estate tax payable (see § 20.2102-1). [T.D. 6296, 23 F.R. 4529, June 24, 1958, as amended by T.D. 6684, 28 F.R. 11408, Oct. 24, 1963] ESTATES OF CITIZENS OR RESIDENTS TAX IMPOSED § 20.2001 Statutory provisions; rate of tax. SEC. 2001. Rate of tax. A tax computed in accordance with the following table is hereby imposed on the transfer of the taxable estate, determined as provided in section 2051, of every decedent, citizen or resident of the United States dying after the date of enactment of this title: The tax shall be 3 percent of the taxable estate. Over $5,000 but not over $10,000---- Over $2,500,000 but not over $3,000,000__ $998,200, plus 53 percent of excess over $2,500,000.. $1,263,200, plus 56 percent of excess over $3,000,000. $1,543,200, plus 59 percent of excess over $3,500,000.$1,838,200, plus 63 percent of excess over $4,000,000. $2,468,200, plus 67 percent of excess over $5,000,000. $3,138,200, plus 70 percent of excess over $6,000,000. $3,838,200, plus 73 percent of excess over $7,000,000. $4,568,200, plus 76 percent of excess over $8,000,000. $6,088,200, plus 77 percent of excess over $10,000,000. (b) The application of the table may be illustrated by the following example: Example. The decedent died January 1, 1955, having a gross estate of $600,000. The exemption and authorized deductions amount to $75,000, thus leaving a taxable estate of $525,000. Reference to the table discloses that the specified amount in column (A) nearest to and less than the value of the decedent's taxable estate is $500,000. The tax upon this amount as indicated in column (C), is $145,700. The amount by which the taxable estate exceeds the same specified amount is $25,000. The tax upon this amount, computed at the rate of 35 percent indicated in column (D), is $8,750. Thus the total gross estate tax upon a taxable estate of $525,000 is $154,450. From this amount, the credits authorized by sections 2011 through 2014 are subtracted in order to determine the net estate tax payable. § 20.2002 Statutory provisions; liability for payment. SEC. 2002. Liability for payment. The tax imposed by this chapter shall be paid by the executor. § 20.2002-1 Liability for payment of tax. The Federal estate tax imposed both with respect to the estates of citizens or residents and with respect to estates of nonresidents not citizens is payable by the executor or administrator of the decedent's estate. This duty applies to the entire tax, regardless of the fact that the gross estate consists in part of property which does not come within the possession of the executor or administrator. If there is no executor or administrator appointed, qualified and acting in the United States, any person in actual or constructive possession of any property of the decendent is required to pay the entire tax to the extent of the value of the property in his possession. See section 2203, defining the term "executor". The personal liability of the executor or such other person is described in section 3467 of the Revised Statutes (31 U.S.C. 192) as follows: Every executor, administrator, or assignee, or other person, who pays, in whole or in part, any debt due by the person or estate for whom or for which he acts before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate to the extent of such payments for the debts so due to the United States, or for so much thereof as may remain due and unpaid. As used in said section, the word "debt" includes a beneficiary's distributive share of an estate. Thus, if the executor pays a debt due by the decedent's estate or distributes any portion of the estate before all the estate tax is paid, he is personally liable, to the extent of the payment or distribution, for so much of the estate tax as remains due and unpaid. In addition, section 6324 (a) (2) provides that if the estate tax is not paid when due, then the spouse, transferee, trustee (except the trustee of an employee's trust which meets the requirements of section 401 (a)), surviving tenant, person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, who receives, or has on the date of the decedent's death, property included in the gross estate un der section 2034 through 2042, is personally liable for the tax to the extent of the value, at the time of the decedent's death, of such property. See also the following related sections of the Internal Revenue Code: Section 2204, discharge of executor from personal liability; section 2205, reimbursement out of estate; sections 2206 and 2207, liability of life insurance beneficiaries and recipients of property over which decedent had power of appointment; sections 6321 through 6325, concerning liens for taxes; and section 6901 (a) (1), concerning the liabilities of transferees and fiduciaries. If the taxable estate is— Not over $90,000--. Over $90,000 but not over $140,000-‒‒‒ Over $1,040,000 but not over $1,540,000 § 20.2011 CREDITS AGAINST TAX Statutory provisions; credit for State death taxes. SEC. 2011. Credit for State 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 state or Territory or the District of Columbia, in respect of any property included in the gross estate (not including any such taxes paid with respect to the estate of a person other than the decedent). (b) Amount of credit. The credit allowed by this section shall not exceed the appropriate amount stated in the following table: The maximum tax credit shall be810ths of 1 percent of the amount by which the taxable estate exceeds $40,000. $400 plus 1.6 percent of the excess over $90,000. $1,200 plus 2.4 percent of the excess over $140,000. $3,600 plus 3.2 percent of the excess over $240,000. $10,000 plus 4 percent of the excess over $440,000. $18,000 plus 4.8 percent of the excess over $640,000. $27,600 plus 5.6 percent of the excess over $840,000. $38,800 plus 6.4 percent of the excess over $1,040,000. Over $1,540,000 but not over $2,040,000 --- $70,800 plus 7.2 percent of the excess Over Over $2,040,000 but not over $2,540,000--- $1,540,000. $106,800 plus 8 percent of the excess over $2,040,000. $146,800 plus 8.8 percent of the excess over $2,540,000. Over $3,040,000 but not over $3,540,000 $190,800 plus 9.6 percent of the excess over $3,040,000. Over $3,540,000 but not over $4,040,000 $238,800 plus 10.4 percent of the $3, 540,000. excess over Over $4,040,000 but not over $5,040,000 $290,800 plus 11.2 percent of the excess over Over $5,040,000 but not over $6,040,000--- $402,800 plus 12 percent of the excess over Over $6,040,000 but not over $7,040,000--- $522,800 plus 12.8 percent of the excess $4,040,000. Over $7,040,000 but not over $8,040,000--- $650,800 plus 13.6 percent of the over excess over Over $8,040,000 but not over $9,040,000 $786,800 plus 14.4 percent of the excess $8,040,000. over Over 89,040,000 but not over $10,040,000-- $930,800 plus 15.2 percent of the excess over Over $10,040,000‒‒‒ $9,040,000. $1,082,000 plus 16 percent of the excess over $10,040,000. (c) Period of limitations on credit. The credit allowed by this section shall include only 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. (3) If a claim for refund or credit of an overpayment of tax imposed by this chapter has been filed within the time prescribed in section 6511, then within such 4-year period or before the expiration of 60 days from the date of mailing by certified mail or regis tered mail by the Secretary or his delegate to the taxpayer of a notice of the disallowance of any part of such claim, or before the expiration of 60 days after a decision by any court of competent jurisdiction becomes final with respect to a timely suit instituted upon such claim, whichever is later. Refund based on the credit may (despite the provisions of section 6511 and 6512) be made if claim therefor is filed within the period above provided. Any such refund shall be made without interest. (d) Basic estate tax. The basic estate tax and the estate tax imposed by the Revenue Act of 1926 shall be 125 percent of the amount determined to be the maximum credit provided by subsection (b). The additional estate tax shall be the difference between the tax imposed by section 2001 or 2101 and the basic estate tax. (e) Limitation in cases involving 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 a State or Territory or the District of Columbia upon a transfer for public, charitable, or religious uses described in section 2055 or 2106(a) (2), the allowance of the credit under this section shall be subject to the following conditions and limitations: (1) The taxes described in subsection (a) shall not include any estate, succession, legacy, or inheritance tax for which such deduction is allowed under section 2053(d). (2) The credit shall not exceed the lesser of (A) The amount stated in subsection (b) on a taxable estate determined by allowing such deduction authorized by section 2053 (d), or (B) That proportion of the amount stated in subsection (b) on a taxable estate determined without regard to such deduction authorized by section 2053 (d) as (1) the amount of the taxes described in subsection (a), as limited by the provisions of paragraph (1) of this subsection, bears to (ii) the amount of the taxes described in subsection (a) before applying the limitation contained in paragraph (1) of this subsection. (3) If the amount determined under subparagraph (B) of paragraph (2) is less than the amount determined under subparagraph (A) of that paragraph, then for purposes of subsection (d) such lesser amount shall be the maximum credit provided by subsection (b). [Sec. 2011 as amended by sec. 3, Act of Feb. 20, 1956 (Public Law 414, 84th Cong., 70 Stat. 24); secs. 65(a) and 102(c) (1), Technical Amendments Act 1958 (72 Stat. 1657, 1674); sec. 3, Act of Aug. 21, 1959 (Public Law 86175, 73 Stat. 397) ] [T.D. 6296, 23 F.R. 4529, June 24, 1958, as amended by T.D. 6526, 26 F.R. 414, Jan. 19, 1961; T.D. 6600, 27 F.R. 4983, May 29, 1962] § 20.2011 Credit for State death taxes. (a) In general. A credit is allowed under section 2011 against the Federal estate tax for estate, inheritance, legacy or succession taxes actually paid to any State, Territory, or the District of Columbia, or, in the case of decedents dying before September 3, 1958, any possession of the United States (hereinafter referred to as "State death taxes"). The credit, however, is allowed only for State death taxes paid (1) with respect to property included in the decedent's gross estate, and (2) with respect to the decedent's estate. The amount of the credit is subject to the limitation described in paragraph (b) of this section. It is subject to further limitations described in § 20.2011-2 if a deduction is allowed under section 2053 (d) for State death taxes paid with respect to a charitable gift. See paragraph (a) of § 20.2014-1 as to the allowance of a credit for death taxes paid to a possession of the United States in a case where the decedent died after September 2, 1958. (b) Amount of credit. (1) If the decedent's taxable estate does not exceed $40,000, the credit for State death taxes is zero. If the decedent's taxable estate does exceed $40,000, the credit for State death taxes is limited to an amount computed in accordance with the following table: TABLE FOR COMPUTATION OF MAXIMUM CREDIT FOR STATE DEATH TAXES |