26 C.F.R. § 20.2011-2
If a deduction is allowed under section 2053(d) for State death taxes paid with respect to a charitable gift, the credit for State death taxes is subject to special limitations. Under these limitations, the credit cannot exceed the least of the following:
The application of this section may be illustrated by the following example:
Example. The decedent died January 1, 1955, leaving a gross estate of $925,000. Expenses, indebtedness, etc., amounted to $25,000. The decedent bequeathed $400,000 to his son with the direction that the son bear the State death taxes on the bequest. The residuary estate was left to a charitable organization. Except as noted above, all Federal and State death taxes were payable out of the residuary estate. The State imposed death taxes of $60,000 on the son's bequest and death taxes of $75,000 on the bequest to charity. No death taxes were imposed by a foreign country with respect to any property in the gross estate. The decedent's taxable estate (determined without regard to the limitation imposed by section 2011(e)(2)(B) is computed as follows:
| Gross estate | $925,000.00 | |||
| Expenses, indebtedness, etc. | $25,000.00 | |||
| Exemption | 60,000.00 | |||
| Deduction under section 2053(d) | 75,000.00 | |||
| Charitable deduction: | ||||
| Gross estate | $925,000.00 | |||
| Expenses, etc | $25,000.00 | |||
| Bequest to son | 400,000.00 | |||
| State death tax paid from residue | 75,000.00 | |||
| Federal estate tax paid from residue | 122,916.67 | 622,916.67 | 302,083.33 | 462,083.33 |
| Taxable estate | 462,916.67 |
If the deduction under section 2053(d) were not allowed, the decedent's taxable estate would be computed as follows:
| Gross estate | $925,000.00 | |||
| Expenses, indebtedness, etc. | $25,000.00 | |||
| Exemption | 60,000.00 | |||
| Charitable deduction: | ||||
| Gross estate | $925,000.00 | |||
| Expenses, etc | $25,000.00 | |||
| Bequest to son | 400,000.00 | |||
| State death tax paid from residue | 75,000.00 | |||
| Federal estate tax paid from residue | 155,000.00 | 655,000.00 | 270,000.00 | 355,000.00 |
| Taxable estate | 570,000.00 |
On a taxable estate of $570,000, the maximum credit allowable under section 2011(b) would be $15,200. Under these facts, the credit for State death taxes is determined as follows:
| (1) Amount of State death taxes paid other than those for which a deduction is allowed under section 2053(d) ($135,000-$75,000) | $60,000.00 |
| (2) Amount indicated in section 2011(b) to be the maximum credit allowable with respect to the decedent's taxable estate of $462,916.67 | 10,916.67 |
| (3) Amount determined by use of the ratio described in paragraph (c) above [($60,000 ÷ $135,000) * $15,200] | 6,755.56 |
| (4) Credit for State death taxes (least of subparagraphs (1) through (3) above) | 6,755.56 |
26 C.F.R. §20.2011-2