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IF . . .

THEN . . .

If you choose to deduct medical

expenses of the decedent only on the

where the employer’s principal place of

estate tax return, they are fully

business is located.

the annuity is under an

state the ratio of the

deductible as claims against the estate.

approved plan,

decedent’s contribution

to the total purchase

If, however, they are claimed on the

Line A. Lump Sum

price of the annuity.

decedent’s final income tax return

Distribution Election

under section 213(c), they may not also

be claimed on the estate tax return. In

the decedent was

state the ratio of the

Note. The following rules have been

employed at the time of

decedent’s contribution

this case, you also may not deduct on

repealed and apply only if the

death and an annuity as to the total purchase

the estate tax return any amounts that

decedent:

described in Definitions, price of the annuity.

were not deductible on the income tax

Annuity, Example 4 on

•

return because of the percentage

On December 31, 1984, was both a

page 18, became

limitations.

payable to any

participant in the plan and in pay status

beneficiary because the

(for example, had received at least one

beneficiary survived the

Debts of the Decedent

benefit payment on or before December

decedent,

31, 1984) and had irrevocably elected

List under “Debts of the Decedent” only

the form of the benefit before July 18,

valid debts the decedent owed at the

an annuity under an

state the ratio of the

1984, or

time of death. List any indebtedness

individual retirement

amount paid for the

•

secured by a mortgage or other lien on

Had separated from service before

account or annuity

individual retirement

became payable to any

account or annuity that

property of the gross estate under the

January 1, 1985, and did not change

beneficiary because that was not allowable as an

heading “Mortgages and Liens.” If the

the form of benefit before death.

beneficiary survived the income tax deduction

amount of the debt is disputed or the

decedent and is payable under section 219 (other

Generally, the entire amount of any

subject of litigation, deduct only the

to the beneficiary for life than a rollover

amount the estate concedes to be a

lump sum distribution is included in the

or for at least 36 months contribution) to the total

following the decedent’s amount paid for the

valid claim. Enter the amount in contest

decedent’s gross estate. However,

death,

account or annuity.

in the column provided.

under this special rule, all or part of a

lump sum distribution from a qualified

Generally, if the claim against the

the annuity is payable

the description should

(approved) plan will be excluded if the

estate is based on a promise or

out of a trust or other

be sufficiently complete

lump sum distribution is included in the

fund,

to fully identify it.

agreement, the deduction is limited to

recipient’s income for income tax

the extent that the liability was

purposes.

contracted bona fide and for an

the annuity is payable

include the duration of

adequate and full consideration in

for a term of years,

the term and the date

If the decedent was born before

on which it began.

money or money’s worth. However, any

1936, the recipient may be eligible to

enforceable claim based on a promise

elect special “10-year averaging” rules

or agreement of the decedent to make

the annuity is payable

include the date of birth

(under repealed section 402(e)) and

a contribution or gift (such as a pledge

for the life of a person

of that person.

capital gain treatment (under repealed

other than the decedent,

or a subscription) to or for the use of a

section 402(a)(2)) in computing the

charitable, public, religious, etc.,

income tax on the distribution. For more

organization is deductible to the extent

the annuity is wholly or

enter the amount

information, see Pub. 575, Pension and

that the deduction would be allowed as

partially excluded from

excluded under

Annuity Income. If this option is

the gross estate,

“Description” and

a bequest under the statute that

available, the estate tax exclusion

explain how you

applies.

computed the exclusion.

cannot be claimed unless the recipient

elects to forego the “10-year averaging”

Certain claims of a former spouse

and capital gain treatment in computing

against the estate based on the

Schedule J—Funeral

the income tax on the distribution. The

relinquishment of marital rights are

recipient elects to forego this treatment

deductible on Schedule K. For these

Expenses and Expenses

claims to be deductible, all of the

by treating the distribution as taxable

Incurred in

following conditions must be met.

on his or her income tax return as

•

described in Regulations section

The decedent and the decedent’s

Administering Property

spouse must have entered into a

20.2039-4(d). The election is

written agreement relative to their

irrevocable.

Subject to Claims

marital and property rights.

See the reverse side of Schedule J on

•

The amount excluded from the gross

The decedent and the spouse must

Form 706.

estate is the portion attributable to the

have been divorced before the

employer contributions. The portion, if

decedent’s death and the divorce must

Schedule K—Debts of

any, attributable to the employee-

have occurred within the 3-year period

decedent’s contributions is always

beginning on the date 1 year before the

the Decedent and

includible. Also, you may not compute

agreement was entered into. It is not

Mortgages and Liens

required that the agreement be

the gross estate in accordance with this

approved by the divorce decree.

election unless you check “Yes” on line

You must complete and attach

•

A and attach the name, address, and

The property or interest transferred

Schedule K if you claimed deductions

under the agreement must be

identifying number of the recipients of

on either item 14 or item 15 of Part

transferred to the decedent’s spouse in

the lump sum distributions. See

5 — Recapitulation.

settlement of the spouse’s marital

Regulations section 20.2039-4.

Income vs. estate tax deduction.

rights.

Taxes, interest, and business expenses

How To Complete Schedule I

accrued at the date of the decedent’s

You may not deduct a claim made

In describing an annuity, give the name

death are deductible both on Schedule

against the estate by a remainderman

and address of the grantor of the

K and as deductions in respect of the

relating to section 2044 property.

annuity. Specify if the annuity is under

decedent on the income tax return of

Section 2044 property is described in

an approved plan.

the estate.

the instructions to line 6 on page 12.

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Instructions for Schedules

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2008 Page 19

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