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The credit is authorized either by

country imposing the tax is determined

A credit claimed under a treaty is in

statute or by treaty. If a credit is

by the same principles that would apply

general computed on Schedule P in the

authorized by a treaty, whichever of the

in determining whether similar property

same manner as the credit is computed

following is the most beneficial to the

of a nonresident not a U.S. citizen is

under the statute with the following

estate is allowed:

situated within the United States for

principal exceptions:

•

The credit computed under the

purposes of the federal estate tax. See

The situs rules contained in the treaty

treaty;

the instructions for Form 706-NA.

apply in determining whether property

•

The credit computed under the

was situated in the foreign country;

•

Computation of Credit Under

statute; or

The credit may be allowed only for

•

The credit computed under the

payment of the death tax or taxes

the Statute

treaty, plus the credit computed under

specified in the treaty (but see the

Item 1. Enter the amount of the estate,

the statute for death taxes paid to each

instructions above for credit under the

inheritance, legacy, and succession

political subdivision or possession of

statute for death taxes paid to each

taxes paid to the foreign country and its

the treaty country that are not directly

political subdivision or possession of

possessions or political subdivisions,

or indirectly creditable under the treaty.

the treaty country that are not directly

attributable to property that is:

or indirectly creditable under the treaty);

Under the statute, the credit is

•

Situated in that country,

If specifically provided, the credit is

authorized for all death taxes (national

•

Subjected to these taxes, and

proportionately shared for the tax

and local) imposed in the foreign

•

Included in the gross estate.

applicable to property situated outside

country. Whether local taxes are the

The amount entered at item 1 should

both countries, or that was deemed in

basis for a credit under a treaty

not include any tax paid to the foreign

some instances situated within both

depends upon the provisions of the

country with respect to property not

countries; and

particular treaty.

•

situated in that country and should not

The amount entered at item 4 of

If a credit for death taxes paid in

include any tax paid to the foreign

Schedule P is the amount shown on

more than one foreign country is

country with respect to property not

line 12 of Part 2 — Tax Computation,

allowable, a separate computation of

included in the gross estate. If only a

less the total of the credits claimed for

the credit must be made for each

part of the property subjected to foreign

federal gift taxes on pre-1977 gifts

foreign country. The copies of Schedule

taxes is both situated in the foreign

(section 2012) and for tax on prior

P on which the additional computations

country and included in the gross

transfers (line 14 of Part 2 — Tax

are made should be attached to the

estate, it will be necessary to determine

Computation). (If a credit is claimed for

copy of Schedule P provided in the

the portion of the taxes attributable to

tax on prior transfers, it will be

return.

that part of the property. Also, attach

necessary to complete Schedule Q

the computation of the amount entered

The total credit allowable in respect

before completing Schedule P.) For

at item 1.

to any property, whether subjected to

examples of computation of credits

tax by one or more than one foreign

under the treaties, see the applicable

Item 2. Enter the value of the gross

country, is limited to the amount of the

regulations.

estate, less the total of the deductions

federal estate tax attributable to the

on items 20 and 21 of Part

Computation of credit in cases

property. The anticipated amount of the

5 — Recapitulation.

where property is situated outside

credit may be computed on the return,

both countries or deemed situated

Item 3. Enter the value of the property

but the credit cannot finally be allowed

within both countries. See the

situated in the foreign country that is

until the foreign tax has been paid and

appropriate treaty for details.

subjected to the foreign taxes and

a Form 706-CE evidencing payment is

included in the gross estate, less those

filed. Section 2014(g) provides that for

Schedule Q—Credit for

portions of the deductions taken on

credits for foreign death taxes, each

Schedules M and O that are

Tax on Prior Transfers

U.S. possession is deemed a foreign

attributable to the property.

country.

General

Item 4. Subtract any credit claimed on

Convert death taxes paid to the

line 15 for federal gift taxes on

foreign country into U.S. dollars by

You must complete Schedule Q and file

pre-1977 gifts (section 2012) from line

using the rate of exchange in effect at

it with the return if you claim a credit on

12 of Part 2 — Tax Computation, and

the time each payment of foreign tax is

Part 2 — Tax Computation, line 14.

enter the balance at item 4 of

made.

The term “transferee” means the

Schedule P.

If a credit is claimed for any foreign

decedent for whose estate this return is

death tax that is later recovered, see

filed. If the transferee received property

Credit Under Treaties

Regulations section 20.2016-1 for the

from a transferor who died within 10

If you are reporting any items on this

notice required within 30 days.

years before, or 2 years after, the

return based on the provisions of a

transferee, a credit is allowable on this

Limitation Period

death tax treaty, you may have to

return for all or part of the federal estate

attach a statement to this return

The credit for foreign death taxes is

tax paid by the transferor’s estate with

disclosing the return position that is

limited to those taxes that were actually

respect to the transfer. There is no

treaty based. See Regulations section

paid and for which a credit was claimed

requirement that the property be

301.6114-1 for details.

within the later of the 4 years after the

identified in the estate of the transferee

filing of the estate tax return, or before

In general. If the provisions of a treaty

or that it exist on the date of the

the date of expiration of any extension

apply to the estate of a U.S. citizen or

transferee’s death. It is sufficient for the

of time for payment of the federal

resident, a credit is authorized for

allowance of the credit that the transfer

estate tax, or 60 days after a final

payment of the foreign death tax or

of the property was subjected to federal

decision of the Tax Court on a timely

taxes specified in the treaty. Treaties

estate tax in the estate of the transferor

filed petition for a redetermination of a

with death tax conventions are in effect

and that the specified period of time

deficiency.

with the following countries: Australia,

has not elapsed. A credit may be

Austria, Canada, Denmark, Finland,

allowed with respect to property

Credit Under the Statute

France, Germany, Greece, Ireland,

received as the result of the exercise or

For the credit allowed by the statute,

Italy, Japan, Netherlands, Norway,

nonexercise of a power of appointment

the question of whether particular

South Africa, Switzerland, and the

when the property is included in the

property is situated in the foreign

United Kingdom.

gross estate of the donee of the power.

-22-

Instructions for Schedules

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2008 Page 22

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