Claims Against Estates: Proposed Amendments to the Regulations Under Section 2053
In the April 23, 2007 publication of the Federal Register, the U.S. Treasury proposed several amendments to the regulations on claims against estates governed by Section 2053 of the Internal Revenue Code. The most notable proposed changes include:
1. Events occurring after a decedent's death will be considered when determining the amount deductible under all provisions of Section 2053;
2. Deductions under Section 2053 will be limited to amounts actually paid by the estate in satisfaction of deduct able expenses and claims;
3. A protective claim for refund may be filed before the expiration of the period of limitations for claims for refund in order to preserve the estate's right to claim a refund if the amount of a liability will not be ascertainable by the time of the expiration of the period of limitations for claims of refund; and
4. No deduction may be taken on an estate tax return for a claim that is potential, unmatured, or contested at the time the return is filed.
The proposed regulations serve as a reaction to a history of inconsistent case law regarding whether post-death events should be taken into account in valuing claims against an estate. Unlike Section 2031, Section 2053 does not contain a specific directive to value a deductible claim at its date of death value. As a result of this vagueness, courts have gone both ways, resulting in the inconsistent treatment of estates for estate tax purposes. The Treasury hopes that by adopting the proposed regulations, Section 2053 will be construed and applied the same way in all jurisdictions.
