Message Font: Serif | Sans-Serif
No. of Recommendations: 4
Please note that the deduction is actually for "estate tax on income in respect of a decedent." That is the proportionate amount of the estate tax that applied to items that were:

1. Included in the decedent's taxable estate; AND
2. Taxable income, either to the estate or to the heirs after his/her death.

Note that there actually has to be an estate tax liability for this deduction to be available. And for that, the taxable estate (and total lifetime gifts) has to be over $5 million.

Income on an annuity is one such double-taxed item. Others would include:

. IRAs and other Retirement plan benefits
. Accrued dividends after the record date
. Accrued interest on bonds, including savings bonds
. Unpaid wages and benefits to which the deceased was entitled, including stock options.

Then these are offset by "deductions in respect of the decedent", which are the accrued amount of deductible expenses. Examples include accrued property taxes and business expenses.

Medical expenses are deductible on the final 1040, even if paid after death, so they wouldn't count.

So - if there was no estate tax liability, this would not apply to you. If there was, you need to be talking to whoever did the estate tax return. And if all you received was the $20,000 annuity, and there actually was an estate tax, your share of the deduction would be quite small.

So if you were looking for a simple definition, this is as close as I can come.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.