vahania63[at]yahoo.com wrote:

- quote -

You have the basic idea, but it's a bit more complicated.

In computing the "virtual" estate tax without the income
item, you have to subtract ALL income items and add back all
liabilities that are income tax deductible (e.g. accrued but
unpaid real-estate taxes). Once you have the difference
between these two estate tax values, you must then allocate
(simple ratio) that difference across ALL income items,
according to their values listed in gross estate (which for
pensions, annunities, and similar creatures, is most likely
PRESENT VALUE, not the expected amount to be withdrawn).
Then, for an item of income where one hasn't taken the
entire value, the ETD-for-IRD must then be further
protrated.

The computations are laid out in IRC Sections 691(c) and
(d). Even within the IRS, this is a "specialty item" among
employees and who gets trained on it.

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I inherited part of an IRA last year (2003), and paid taxes
on the distribution I took.

The estate, of which the IRA was a part, paid about $30,000
in estate taxes on the entire estate.

I understand that you are allowed to deduct from your own
taxes the part of the estate tax that is "paid on the income
(the IRA)".

My question is, how do you figure out how much of the estate
tax you can deduct? How much of the estate tax is
attributable to the IRA? Is it the entire $30,000 (because
if the IRA had not been part of the estate, the estate would
not have paid taxes at all -- the IRA pushes the total
estate over the $1 million mark)? Or is it only a portion
of the $30,000. And if it is only a portion, how do you
calculate the portion?

Thanks in advance

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