The IRS and Treasury Department issued proposed regulations last week incorporating present-value principles by which an estate may deduct certain expenses and claims against the estate under Sec. 2053. The proposed regulations, REG-130975-08 had been left reserved at Reg- Sec. 20.2053-1(d)(6) by final regulations issued in 2009.
Rules applying present-value principles to certain long-term obligations of estates were proposed in 2007 in proposed regulations (REG-143316-03). Those proposed rules, which did not apply to contingent recurring obligations, were criticized the AICPA, to produce inconsistent and inequitable results.
The new proposed regulations apply present-value principles to both contingent and noncontingent expenses and claims.
- Ordinary administrative expenses are paid within three years of the decedent’s date of death, the proposed regulations would allow a three-year “grace period” from that date before a present-value calculation is required.
- Proposed regulations also address the deductibility of certain interest expenses as an expense of administering an estate, including (non–Sec. 6166) interest accruing on unpaid tax and penalties.
- The proposed regulations cover substantiation requirements for valuations performed pursuant to Regs. Secs. 20.2053-4(b) and (c) of certain deductible claims against an estate. They also address the deductibility of amounts paid pursuant to a decedent’s personal guarantee.
The proposed regulations would apply to the estates of decedents dying on or after the date of their publication as final.
It all seems a bit complicated but can easily be figured out by your CPA.
