[Code of Federal Regulations]
[Title 26, Volume 14]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR20.0-2]

[Page 237-238]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 20_ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 
1954--Table of Contents
 
Sec.  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 Sec.  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,

[[Page 238]]

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 25.2701-5 and 25.2702-6 of this chapter contain rules that 
provide additional adjustments to mitigate double taxation in cases 
where the amount of the decedent's gift was previously determined under 
the special valuation provisions of sections 2701 and 2702. For a 
detailed explanation of the credits against tax, see sections 201l 
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 sum of 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 Sec.  Sec.  20.2103-1 and 20.2014-1) and, in the case of an 
estate of an expatriate to which section 2107 applies, any amounts 
includible in his gross estate under section 2107(b) (see paragraph (b) 
of Sec.  20.2107-1); second, determine the value of the taxable estate 
by subtracting from the amount determined under the first step the 
amount of the allowable deductions (see Sec.  20.2106-1); third, compute 
the gross estate tax on the taxable estate (see Sec.  20.2106-1); 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 
Sec.  20.2102-1 and paragraph (c) of Sec.  20.2107-1).

[T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6684, 28 FR 
11408, Oct. 24, 1963; T.D. 7296, 38 FR 34191, Dec. 12, 1973; T.D. 8395, 
57 FR 4254, Feb. 4, 1992]

                    Estates of Citizens or Residents

                               Tax Imposed