[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: 26CFR20.2014-7]

[Page 260]
 
                       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.  20.2014-7  Limitation on credit if a deduction for foreign death 
taxes is allowed under section 2053(d).

    If a deduction is allowed under section 2053(d) for foreign death 
taxes paid with respect to a charitable gift, the credit for foreign 
death taxes is subject to special limitations. In such a case the 
property described in subparagraphs (A), (B), and (C) of paragraphs (1) 
and (2) of section 2014(b) shall not include any property with respect 
to which a deduction is allowed under section 2053(d). The application 
of this section may be illustrated by the following example:

    Example. The decedent, a citizen of the United States, died July 1, 
1955, leaving a gross estate of $1,200,000 consisting of: Shares of 
stock issued by United States corporations, valued at $600,000; bonds 
issued by the United States Government physically located in the United 
States, valued at $300,000; and shares of stock issued by a Country X 
corporation, valued at $300,000. Expenses, indebtedness, etc., amounted 
to $40,000. The decedent made specific bequests of $400,000 of the 
United States corporation stock to a niece and $100,000 of the Country X 
corporation stock to a nephew. The residue of his estate was left to 
charity. There is no death tax convention in existence between the 
United States and Country X. The Country X tax imposed was at a 50-
percent rate on all beneficiaries. A State inheritance tax of $20,000 
was imposed on the niece and nephew. The decedent did not provide in his 
will for the payment of the death taxes, and under local law the Federal 
estate tax is payable from the general estate, the same as 
administration expenses.

                       Distribution of the Estate
Gross estate...............................  ...........   $1,200,000.00
Debts and charges..........................   $40,000.00
Bequest of U.S. corporation stock to niece.   400,000.00
Bequest of country X corporation stock to     100,000.00
 nephew....................................
Net Federal estate tax.....................   136,917.88
                                            -------------
                                             ...........      676,917.88
                                                         ---------------
   Residue before country X tax.........................      523,082.12
Country X succession tax on charity.....................      100,000.00
                                                         ---------------
   Charitable deduction....................  ...........      423,082.12

                  Taxable Estate and Federal Estate Tax

Gross estate...............................  ...........    1,200,000.00
Debts and charges..........................    40,000.00
Deduction of foreign death tax under          100,000.00
 section 2053(d)...........................
Charitable deduction.......................   423,082.12
Exemption..................................    60,000.00
                                            -------------
                                             ...........      623,082.12
   Taxable estate.......................................      576,917.88
Gross estate tax........................................      172,621.26
Credit for State death taxes............................       15,476.72
                                            --------------
   Gross estate tax less credit for State death taxes...      157,144.54
Credit for foreign death taxes..........................       20,226.66
   Net Federal estate tax..................  ...........      136,917.88

                     Credit for Foreign Death Taxes

                              country x tax

Succession tax on nephew:
  Value of stock of country X corporation..  ...........         100,000
  Tax (50% rate)...........................  ...........         $50,000
Succession tax on charity:
  Value of stock of country X corporation..  ...........         200,000
  Tax (50% rate)...........................  ...........         100,000

             computation of exclusion under section 2014(b)

Value of situated in country X.............  ...........         300,000
Value of property in respect of which a      ...........         200,000
 deduction is allowed under section 2053(d)
                                            --------------
  Value of property situated within country  ...........         100,000
   X, subjected to tax, and included in
   gross estate as limited by section
   2014(f).................................


                  First Limitation, Sec.  28.2014-2(a)

$100,000 (factor C of the ratio stated at Sec.  20.2014-2(a)) / $100,000 
          + $200,000 (factor D of the ratio stated at Sec.  20.2014 2(a) 
          x $50,000 + $100,000) (factor B of the ratio stated at Sec.  
          20.2014-2(a)) = $50,000.00

                  Second Limitation, Sec.  28.2014-3(a)

$100,000 (factor G of the ratio stated at Sec.  20.2014-3(a)) (as 
          limited by section 2014(f)) / $1,200,000 - $423,082.12 (factor 
          H of the ratio stated at Sec.  20.2014 3(a) x $172,621.26 - 
          $15,476.72) (factor F of the ratio stated at Sec.  20.2014-
          3(a)) = $20,226.66Z

[T.D. 6600, 27 FR 4984, May 27, 1962]