26 USC 691 - Recipients of income in respect of decedents

View all text of Part II [§ 691 - § 692]

§ 691. Recipients of income in respect of decedents

(a) Inclusion in gross income

(1) General rule

The amount of all items of gross income in respect of a decedent which are not properly includible in respect of the taxable period in which falls the date of his death or a prior period (including the amount of all items of gross income in respect of a prior decedent, if the right to receive such amount was acquired by reason of the death of the prior decedent or by bequest, devise, or inheritance from the prior decedent) shall be included in the gross income, for the taxable year when received, of:

(A) the estate of the decedent, if the right to receive the amount is acquired by the decedent’s estate from the decedent;

(B) the person who, by reason of the death of the decedent, acquires the right to receive the amount, if the right to receive the amount is not acquired by the decedent’s estate from the decedent; or

(C) the person who acquires from the decedent the right to receive the amount by bequest, devise, or inheritance, if the amount is received after a distribution by the decedent’s estate of such right.

(2) Income in case of sale, etc.

(3) Character of income determined by reference to decedent

(4) Installment obligations acquired from decedent

In the case of an installment obligation reportable by the decedent on the installment method under section 453, if such obligation is acquired by the decedent’s estate from the decedent or by any person by reason of the death of the decedent or by bequest, devise, or inheritance from the decedent—

(A) an amount equal to the excess of the face amount of such obligation over the basis of the obligation in the hands of the decedent (determined under section 453B) shall, for the purpose of paragraph (1), be considered as an item of gross income in respect of the decedent; and

(B) such obligation shall, for purposes of paragraphs (2) and (3), be considered a right to receive an item of gross income in respect of the decedent, but the amount includible in gross income under paragraph (2) shall be reduced by an amount equal to the basis of the obligation in the hands of the decedent (determined under section 453B).

(5) Other rules relating to installment obligations

(A) In general

In the case of an installment obligation reportable by the decedent on the installment method under section 453, for purposes of paragraph (2)—

(i) the second sentence of paragraph (2) shall be applied by inserting “(other than the obligor)” after “or a transfer to a person”,

(ii) any cancellation of such an obligation shall be treated as a transfer, and

(iii) any cancellation of such an obligation occurring at the death of the decedent shall be treated as a transfer by the estate of the decedent (or, if held by a person other than the decedent before the death of the decedent, by such person).

(B) Face amount treated as fair market value in certain cases

(b) Allowance of deductions and credit

The amount of any deduction specified in section 162, 163, 164, 212, or 611 (relating to deductions for expenses, interest, taxes, and depletion) or credit specified in section 27 (relating to foreign tax credit), in respect of a decedent which is not properly allowable to the decedent in respect of the taxable period in which falls the date of his death, or a prior period, shall be allowed:

(1) Expenses, interest, and taxes

In the case of a deduction specified in section 162, 163, 164, or 212 and a credit specified in section 27, in the taxable year when paid—

(A) to the estate of the decedent; except that

(B) if the estate of the decedent is not liable to discharge the obligation to which the deduction or credit relates, to the person who, by reason of the death of the decedent or by bequest, devise, or inheritance acquires, subject to such obligation, from the decedent an interest in property of the decedent.

(2) Depletion

(1) Allowance of deduction

(A) General rule

(B) Estates and trusts

(2) Method of computing deduction

For purposes of paragraph (1)—

(A) The term “estate tax” means the tax imposed on the estate of the decedent or any prior decedent under section 2001 or 2101, reduced by the credits against such tax.

(B) The net value for estate tax purposes of all the items described in subsection (a)(1) shall be the excess of the value for estate tax purposes of all the items described in subsection (a)(1) over the deductions from the gross estate in respect of claims which represent the deductions and credit described in subsection (b). Such net value shall be determined with respect to the provisions of section 421(c)(2), relating to the deduction for estate tax with respect to stock options to which part II of subchapter D applies.

(C) The estate tax attributable to such net value shall be an amount equal to the excess of the estate tax over the estate tax computed without including in the gross estate such net value.

(3) Special rule for generation-skipping transfers

(4) Coordination with capital gain provisions

(d) Amounts received by surviving annuitant under joint and survivor annuity contract

(1) Deduction for estate tax

For purposes of computing the deduction under subsection (c)(1)(A), amounts received by a surviving annuitant—

(A) as an annuity under a joint and survivor annuity contract where the decedent annuitant died after the annuity starting date (as defined in section 72(c)(4)), and

(B) during the surviving annuitant’s life expectancy period,

shall, to the extent included in gross income under section 72, be considered as amounts included in gross income under subsection (a).

(2) Net value for estate tax purposes

In determining the net value for estate tax purposes under subsection (c)(2)(B) for purposes of this subsection, the value for estate tax purposes of the items described in paragraph (1) of this subsection shall be computed—

(A) by determining the excess of the value of the annuity at the date of the death of the deceased annuitant over the total amount excludable from the gross income of the surviving annuitant under section 72 during the surviving annuitant’s life expectancy period, and

(B) by multiplying the figure so obtained by the ratio which the value of the annuity for estate tax purposes bears to the value of the annuity at the date of the death of the deceased.

(3) Definitions

For purposes of this subsection—

(A) The term “life expectancy period” means the period beginning with the first day of the first period for which an amount is received by the surviving annuitant under the contract and ending with the close of the taxable year with or in which falls the termination of the life expectancy of the surviving annuitant. For purposes of this subparagraph, the life expectancy of the surviving annuitant shall be determined, as of the date of the death of the deceased annuitant, with reference to actuarial tables prescribed by the Secretary.

(B) The surviving annuitant’s expected return under the contract shall be computed, as of the death of the deceased annuitant, with reference to actuarial tables prescribed by the Secretary.

(e) Cross reference

(Aug. 16, 1954, ch. 736, 68A Stat. 235; Pub. L. 88–272, title II, § 221(c)(2), Feb. 26, 1964, 78 Stat. 75; Pub. L. 88–570, § 1, Sept. 2, 1964, 78 Stat. 854; Pub. L. 94–455, title XIX, §§ 1901(a)(91), 1906(b)(13)(A), 1951(b)(10)(A), title XX, §§ 2005(a)(4), 2006(b)(3), Oct. 4, 1976, 90 Stat. 1779, 1834, 1839, 1876, 1889; Pub. L. 95–600, title VII, § 702(b)(1), Nov. 6, 1978, 92 Stat. 2925; Pub. L. 96–222, title I, § 101(a)(8)(A), Apr. 1, 1980, 94 Stat. 201; Pub. L. 96–223, title IV, § 401(a), Apr. 2, 1980, 94 Stat. 299; Pub. L. 96–471, §§ 2(b)(5), 3, Oct. 19, 1980, 94 Stat. 2254; Pub. L. 97–34, title IV, § 403(a)(2)(C), Aug. 13, 1981, 95 Stat. 301; Pub. L. 98–369, div. A, title IV, § 474(r)(18), July 18, 1984, 98 Stat. 843; Pub. L. 99–514, title III, § 301(b)(8), title XIV, § 1432(a)(3), Oct. 22, 1986, 100 Stat. 2217, 2729; Pub. L. 100–203, title X, § 10202(c)(3), Dec. 22, 1987, 101 Stat. 1330–392; Pub. L. 100–647, title I, § 1011A(g)(10), Nov. 10, 1988, 102 Stat. 3482; Pub. L. 101–239, title VII, § 7841(d)(3), Dec. 19, 1989, 103 Stat. 2428; Pub. L. 101–508, title XI, § 11101(d)(4), Nov. 5, 1990, 104 Stat. 1388–405; Pub. L. 102–318, title V, § 521(b)(27), July 3, 1992, 106 Stat. 312; Pub. L. 103–66, title XIII, § 13113(d)(4), Aug. 10, 1993, 107 Stat. 430; Pub. L. 104–188, title I, §§ 1401(b)(9), 1704(t)(73), Aug. 20, 1996, 110 Stat. 1789, 1891; Pub. L. 105–34, title X, § 1073(b)(1), Aug. 5, 1997, 111 Stat. 948; Pub. L. 108–311, title IV, § 402(a)(4), Oct. 4, 2004, 118 Stat. 1184; Pub. L. 113–295, div. A, title II, § 221(a)(66), Dec. 19, 2014, 128 Stat. 4048; Pub. L. 115–97, title I, § 13001(b)(2)(F), Dec. 22, 2017, 131 Stat. 2096.)