Chapter 13 - Deductions from the Gross Estate

Question 1

Allowable Deductions from Gross Estate

Answer 1

Allowable Deductions from Gross Estate
• funeral expenses (reasonable amount)
• administration expenses (court costs, attorney/executor fees)
• claims against estate (decedent’s debts; certain taxes, not including federal or state death taxes)
• unpaid mortgages
• other estate administration expenses
• theft/casualty losses

Question 2

Any expenses that were incurred for the benefit of the heirs individually are not deductible?

Answer 2

True

Question 3

Expenses and debts of community property are 50

percent deductible?

Answer 3

True

Question 4

Medical expenses relating to the decedent’s last illness may be deducted on either the estate tax return or the decedent’s last income tax return, but in the latter case only if the estate files…..

Answer 4

a statement waiving the right to an estate tax deduction.

Question 5

Casualty losses and theft losses

Answer 5

Casualty losses and theft losses are deductible expenses that are incurred during the estate settlement period but only to the extent that these losses are not compensated by insurance. Casualty and theft losses are deductible if the loss arose from fire, flood, storm, shipwreck, or other casualty or theft. The loss must have occurred during the estate settlement process
and before the estate was closed.

Question 6

Are executor fee’s taxable and deductible

Answer 6

All executors are entitled to reasonable compensation for their services. If an executor’s commission is
deductible on the federal estate tax return, it is then received as taxable income whether or not the executor is a beneficiary of the estate. However, if the commission or devise is considered a bequest, it is not deductible by the estate for either estate or income tax purposes. Executors must act promptly to waive any commissions if they find that more tax is saved by receiving the bequest income tax free than is saved by characterizing the executor’s commission as a deductible expense of the estate.

Question 7

Executors’ commissions are considered to be costs of administering property that are included in a decedent’s gross estate and are, therefore, deductible from the gross estate?

Answer 7

True

Question 8

State death taxes are deducted from a decedent’s gross estate to arrive at the adjusted gross estate?

Answer 8

False
State death taxes, while they will reduce federal estate taxes, are not deducted from the gross estate to arrive at the adjusted gross estate.

Question 9

Expenses in the administration of nonprobate assets are deductible if incurred on behalf of assets includible in the gross estate?

Answer 9

True

Question 10

Unpaid mortgages on property included in the gross estate for which the decedent was liable are allowable as deductions from the gross estate in arriving at the adjusted gross estate?

Answer 10

True

Question 11

Funeral expenses are deductible either on the federal estate tax return or on the decedent’s last income tax return?

Answer 11

False

Reasonable funeral expenses are deductible for estate tax purposes only.

Question 12

An executor should consider the tax situation of all beneficiaries of an estate before deciding whether or not to take his or her executor fee?

Answer 12

False
The executor is entitled to reasonable fees and should consider things like his or her own tax rates, the estate tax rate, and if the executor could inherit money from the estate.

Question 13

If a family member steals from the decedent’s estate, the theft, if unreimbursed by insurance, could be deductible from the gross estate?

Answer 13

True