Example.
(1) Country X tax attributable to property situated in Country X and subjected to tax by both countries ($750,000 ÷ $750,000 * $180,000) | $180,000 |
(2) Federal estate tax attributable to property situated in Country X and subjected to tax by both countries-($750,000 ÷ $1,000,000 * $273,440) | 205,080 |
(3) Credit (subdivision (1) or (2), whichever is less) | 180,000 |
(1) "First limitation" computed under § 20.2014-2 ($400,000 ÷ $750,000 * $180,000) | $96,000 |
(2) "Second limitation" computed under § 20.2014-3 ($400,000 ÷ $1,000,000 * $273,440) | 109,376 |
(3) Credit (subdivision (1) or (2), whichever is less) | 96,000 |
whichever is the most beneficial to the estate. The application of this paragraph may be illustrated by the following example:
Example.
(a) "First limitation" with respect to tax imposed by national government of Country X (computed under paragraph (b) of § 20.2014-2 ) | |
(1) Gross Country X death tax attributable to Country X bonds (before allowance of provincial death taxes) (75,000 ÷ $125,000 * $18,750) | $11,250 |
(2) Less credit for Province Y death taxes on such bonds | 5,625 |
(3) Net Country X death tax attributable to such bonds | 5,625 |
(b) "First limitation" with respect to tax imposed by Province Y (computed under paragraph (b) of § 20.2014-2 ) ($75,000 ÷ $75,000 * $6,000) | 6,000 |
(c) Total "first limitation" | 11,625 |
(d) "Second limitation" (computed under paragraph (d) of § 20.2014-3 ) ($75,000 ÷ $250,000 * $38,124) | 11,437 |
$(e) Credit (subdivision (c) or (d), whichever is less) | 11,437 |
(a) Country X tax attributable to property situated in Country X and subject to tax by both countries ($125,000 ÷ $125,000 * $18,750) | $18,750 |
(b) Federal estate tax attributable to property situated in Country X and subjected to tax by both countries ($125,000 ÷ $250,000 * $38,124) | 19,062 |
(c) Credit (subdivision (a) or (b), whichever is less) | 18,750 |
Example. The decedent, a citizen of the United States and a domiciliary of Country X at the time of his death on May 1, 1967, left a taxable estate which included bonds issued by Country Z and physically located in Country X. Each of the three countries involved imposed death taxes on the Country Z bonds. Assume that under the provisions of a treaty between the United States and Country X the estate is entitled to a credit against the Federal estate tax for death taxes imposed by Country X on the bonds in the maximum amount of $20,000. Assume, also, that since the decedent died after November 13, 1966, so that under the situs rules referred to in paragraph (a)(3) of § 20.2014-1 the bonds are deemed to have their situs in Country Z, the estate is entitled to a credit against the Federal estate tax for death taxes imposed by Country Z on the bonds in the maximum amount of $10,000. Finally, assume that the Federal estate tax attributable to the bonds is $25,000. Under these circumstances, the credit allowed the estate with respect to the bonds would be limited to $25,000.
26 C.F.R. §20.2014-4