Federal Register / Vol. 87, No. 123 / Tuesday, June 28, 2022 / Proposed Rules 38331 

(D) Recordkeeping. The applicant 

must maintain for a period of 10 years, 

the records of all reports of failures in 

implementation of an ACNU and 

associated adverse events known to the 

applicant, including raw data and any 

correspondence relating to a report of a 

failure in implementation of an ACNU. 

* * * * * 

■ 7. Amend § 314.125 by adding 

paragraph (b)(20) to read as follows: 

§ 314.125 Refusal to approve an NDA. 

* * * * * 

(b) * * * 

(20) For an NDA for a nonprescription 

drug product with an additional 

condition for nonprescription use under 

§ 314.56, if FDA has determined the 

application failed to meet the 

requirements in § 314.56 applicable to 

NDAs. 

* * * * * 

■ 8. Amend § 314.127 by adding 

paragraph (a)(15) to read as follows: 

§ 314.127 Refusal to approve an ANDA. 

(a) * * * 

(15) For an ANDA for a 

nonprescription drug product with an 

additional condition for nonprescription 

use under § 314.56, if FDA has 

determined the application failed to 

meet the requirements in § 314.56 

applicable to ANDAs. 

* * * * * 

Dated: June 15, 2022. 

Robert M. Califf, 

Commissioner of Food and Drugs. 

[FR Doc. 2022–13309 Filed 6–27–22; 8:45 am] 

BILLING CODE 4164–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 20 

[REG–130975–08] 

RIN 1545–BI11 

Guidance Under Section 2053 

Regarding Deduction for Interest 

Expense and Amounts Paid Under a 

Personal Guarantee, Certain 

Substantiation Requirements, and 

Applicability of Present Value 

Concepts 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document proposes to 

amend existing regulations issued under 

section 2053 of the Internal Revenue 

Code (Code). The proposed regulations 

provide guidance on the proper use of 

present-value principles in determining 

the amount deductible by an estate for 

funeral expenses, administration 

expenses, and certain claims against the 

estate. In addition, the proposed 

regulations provide guidance on the 

deductibility of interest expense 

accruing on tax and penalties owed by 

an estate, and interest expense accruing 

on certain loan obligations incurred by 

an estate. The proposed regulations also 

amend and clarify the requirements for 

substantiating the value of a claim 

against an estate that is deductible in 

certain cases. Finally, the proposed 

regulations provide guidance on the 

deductibility of amounts paid under a 

decedent’s personal guarantee. The 

proposed regulations will affect estates 

of decedents seeking to deduct funeral 

expenses, administration expenses, and/ 

or certain claims against the estate 

under section 2053. This document also 

provides a notice of a public hearing on 

these proposed regulations. 

DATES: Electronic or written comments 

must be received by September 26, 

2022. The public hearing is being held 

by teleconference on October 12, 2022, 

at 10 a.m. EST. Requests to speak and 

outlines of topics to be discussed at the 

public hearing must be received by 

September 26, 2022. If no outlines are 

received by September 26, 2022, the 

public hearing will be cancelled. 

Requests to attend the public hearing 

must be received by 5:00 p.m. EST on 

October 7, 2022. The telephonic hearing 

will be made accessible to people with 

disabilities. Requests for special 

assistance during the telephonic hearing 

must be received by October 6, 2022. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically. Submit electronic 

submissions via the Federal 

eRulemaking Portal at 

www.regulations.gov (indicate IRS and 

REG–130975–08). Once submitted to the 

Federal eRulemaking Portal, comments 

cannot be edited or withdrawn. The IRS 

expects to have limited personnel 

available to process comments that are 

submitted on paper through the mail. 

The IRS will publish any comments 

submitted electronically, and to the 

extent practicable, comments submitted 

on paper to the public docket. Send 

paper submissions to CC:PA:LPD:PR 

(REG–130975–08), Room 5205, Internal 

Revenue Service, P.O. Box 7604, Ben 

Franklin Station, Washington, DC 

20044. 

For those requesting to speak during 

the hearing, send an outline of topic 

submissions electronically via the 

Federal eRulemaking Portal at 

www.regulations.gov (indicate IRS and 

REG–130975–08). 

Individuals who want to testify (by 

telephone) at the public hearing must 

send an email to publichearings@irs.gov 

to receive the telephone number and 

access code for the hearing. The subject 

line of the email must contain the 

regulation number REG–130975–08 and 

the word TESTIFY. For example, the 

subject line may say: Request to 

TESTIFY at Hearing for REG–130975– 

08. The email should include a copy of 

the speaker’s public comments and 

outline of topics. Individuals who want 

to attend (by telephone) the public 

hearing must also send an email to 

publichearings@irs.gov to receive the 

telephone number and access code for 

the hearing. The subject line of the 

email must contain the regulation 

number REG–130975–08 and the word 

ATTEND. For example, the subject line 

may say: Request to ATTEND Hearing 

for REG–130975–08. To request special 

assistance during the telephonic 

hearing, contact the Publications and 

Regulations Branch of the Office of 

Associate Chief Counsel (Procedure and 

Administration) by sending an email to 

publichearings@irs.gov (preferred) or by 

telephone at (202) 317–5177 (not a tollfree number). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Karlene Lesho or Melissa Liquerman at 

(202) 317–6859; concerning the 

submission of comments, the hearing, or 

to be placed on the building access list 

to attend the hearing, Regina Johnson at 

(202) 317–6901 (not toll-free numbers) 

or by sending an email to 

publichearings@irs.gov. 

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

I. Overview 

This document contains proposed 

amendments to the Estate Tax 

Regulations (26 CFR part 20) under 

section 2053. 

Section 2001(a) imposes a tax on the 

transfer of the taxable estate of every 

decedent who was at death a citizen or 

resident of the United States. Section 

2051 defines the taxable estate as the 

value of the gross estate less the 

deductions provided for in sections 

2053 through 2058. Section 2031(a) 

describes the value of the gross estate of 

the decedent as including the value at 

the time of the decedent’s death of all 

property, real or personal, tangible or 

intangible, wherever situated. 

Under section 2053(a), for Federal 

estate tax purposes, the value of the 


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taxable estate is determined by 

deducting from the value of the gross 

estate the following amounts that are 

allowable by the laws of the 

jurisdiction, whether within or without 

the United States, under which the 

estate is being administered: (1) funeral 

expenses, (2) administration expenses, 

(3) claims against the estate, and (4) 

unpaid mortgages on, or any 

indebtedness in respect of, property 

where the value of the decedent’s 

interest therein, undiminished by such 

mortgage or indebtedness, is included in 

the value of the gross estate. 

Final regulations amending the 

regulations under section 2053 (TD 

9468) were published in the Federal 

Register (74 FR 53652) on October 20, 

2009 (2009 Final Regulations). The 2009 

Final Regulations generally limit the 

deduction for claims and expenses to 

the amount actually paid in settlement 

or satisfaction of that item, with 

exceptions for certain ascertainable 

amounts, claims against the estate, and 

indebtedness. See § 20.2053–1(d)(1) and 

(4); § 20.2053–4(b) and (c); and 

§ 20.2053–7. The 2009 Final Regulations 

also reserve § 20.2053–1(d)(6) to provide 

future guidance on the issue of the 

appropriate application of present-value 

principles in determining the amount 

deductible under section 2053. These 

proposed regulations address this issue. 

In addition, these proposed regulations 

provide or clarify rules under section 

2053 addressing the deductibility of 

interest expense accruing on tax and 

penalties owed by an estate, the 

deductibility of interest expense 

accruing on certain loan obligations 

incurred by an estate, requirements for 

substantiating the value of a claim 

against an estate that is deductible 

under § 20.2053–4(b) or (c), and the 

deductibility of amounts paid under a 

decedent’s personal guarantee. 

II. Application of Present-Value 

Principles to Amount Deductible Under 

Section 2053 

A. Issue Background 

‘‘Present value’’ is a widely accepted 

principle of accounting for the time 

value of money. If a payor can defer 

paying a dollar until a later time, the 

payor can earn income on that dollar 

until the date of payment. The longer a 

payor can defer payment, the more 

income the payor potentially can earn. 

Taxpayers, the IRS, and courts regularly 

employ present-value principles for 

valuation and for other income tax and 

transfer tax purposes. See, e.g., section 

1274(b), §§ 1.642(c)–6, 20.7520–1, and 

25.2512–5; Simpson et al. v. United 

States, 252 U.S. 547 (1920); 

Commissioner v. Estate of Sternberger, 

348 U.S. 187 (1955). 

The deduction allowable under 

section 2053 eliminates from taxation 

under section 2001 that portion of the 

gross estate that the estate expends or 

necessarily will expend in paying 

certain expenses and liabilities of the 

estate and certain claims against the 

estate. The expended portions of the 

gross estate do not pass to the 

decedent’s legatees, beneficiaries, or 

heirs and, therefore, are not subject to 

the estate tax. The 2009 Final 

Regulations implement these principles 

in determining the amount an estate 

may deduct for certain claims and 

expenses. Section 20.2053–1(d)(1) 

generally limits the deduction under 

section 2053 for certain claims and 

expenses to the total amount actually 

paid in settlement or satisfaction of that 

item. Section 20.2053–1(d)(2) clarifies 

that events occurring after the date of a 

decedent’s death will be taken into 

consideration in determining the 

allowable deduction under section 

2053. 

Applying present-value principles to 

determine the allowable deduction 

under section 2053 for payments made 

or to be made after an extended period 

following a decedent’s death is 

consistent with the principles 

underlying section 2053 and the 

approach of the 2009 Final Regulations. 

By limiting the deduction to the 

discounted amount of a payment or 

payments made or to be made after an 

extended period following the 

decedent’s death, the gross estate is 

reduced by a more accurate measure of 

the amounts not passing to the heirs and 

legatees. Accordingly, the Department of 

the Treasury (Treasury Department) and 

the IRS have determined that limiting 

the amount deductible to the present 

value of the amounts paid after an 

extended post-death period will more 

accurately reflect the economic realities 

of the transaction, the true economic 

cost of that expense or claim, and the 

amount not passing to the beneficiaries 

of the estate. Moreover, consistent with 

the 2009 Final Regulations, this 

approach treats the date of payment of 

the otherwise deductible expense or 

claim as a post-death event properly 

taken into account under section 2053. 

Rules applying present-value 

principles to certain long-term 

obligations were provided in proposed 

regulations (REG–143316–03) published 

in the Federal Register (72 FR 20080) on 

April 23, 2007 (2007 Proposed 

Regulations), which preceded the 

issuance of the 2009 Final Regulations. 

Specifically, the 2007 Proposed 

Regulations required the computation of 

the present value of future payments for 

a decedent’s noncontingent recurring 

obligation, such as a noncontingent 

recurring obligation to pay an annuity 

amount under a property settlement 

agreement. See § 20.2053–4(b)(7)(i) of 

the 2007 Proposed Regulations. 

However, that rule did not apply to 

contingent recurring obligations. Rather, 

amounts payable for a decedent’s 

contingent recurring obligation became 

deductible only as amounts were paid 

by the estate in satisfaction of the claim 

and the amount deductible equaled the 

dollar amount actually paid. No 

computation of present value factored 

into the amount deductible for such 

obligations. See § 20.2053–4(b)(7)(ii) of 

the 2007 Proposed Regulations. 

The preamble to the 2009 Final 

Regulations indicated that the Treasury 

Department and the IRS found 

persuasive criticism of those proposed 

rules by commenters suggesting they 

produced an inconsistent and 

inequitable result. The 2009 Final 

Regulations clarified that the amount 

payable pursuant to a decedent’s 

noncontingent recurring obligation is 

deemed ascertainable with reasonable 

certainty and, hence, deductible in 

advance of payment under the rule in 

§ 20.2053–1(d)(4), while the amount 

payable pursuant to a decedent’s 

contingent recurring obligation is not 

ascertainable with reasonable certainty 

and, hence, the amount deductible is 

limited to amounts actually paid by the 

estate in satisfaction of the claim. See 

§ 20.2053–4(d)(6). However, the 2009 

Final Regulations removed the presentvalue limitation applicable only to 

noncontingent recurring obligations and 

reserved § 20.2053–1(d)(6) to provide 

future guidance on the issue. 

With regard to a decedent’s 

obligations that satisfy the requirements 

for deductibility as described in the 

preceding paragraph, whether such 

obligations are recurring or 

nonrecurring, there is no persuasive 

technical or policy basis for limiting the 

application of present-value principles 

to payments made or to be made only 

under noncontingent obligations. 

Because discounting the amounts 

actually paid or to be paid in the future 

to determine the present value of the 

payments is consistent with the purpose 

of section 2053 of reducing the gross 

estate only by the amounts not passing 

to the heirs and legatees, these proposed 

regulations propose to incorporate 

present-value principles in determining 

the amount deductible under section 

2053. The proposed regulations will 

apply present-value principles 

consistently to expenses and claims 

(whether contingent or noncontingent) 


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that are deductible under section 2053. 

The mechanics of applying presentvalue principles to expenses and claims, 

including expenses and claims that are 

deductible in advance of payment, are 

described in section II.B of this 

Background and Explanation of 

Provisions. 

B. Explanation of Provision 

The Treasury Department and the IRS 

propose to amend the regulations under 

section 2053 to incorporate presentvalue principles in determining the 

amount deductible under section 2053 

for claims and expenses (excluding 

unpaid mortgages and indebtedness 

deductible under § 20.2053–7). The 

Treasury Department and the IRS 

recognize, however, that estates often 

cannot pay every deductible claim and 

expense within a short time after the 

decedent’s death and that sound tax 

administration should balance the 

benefit of more accurately determining 

the amounts not passing to the 

beneficiaries of an estate garnered from 

applying present-value principles with 

the administrative burden of applying 

those principles to deductible claims 

and expenses that occur during a 

reasonable period of administration of 

the estate. The Treasury Department and 

the IRS understand that a significant 

percentage of estates pay most, if not all, 

of their ordinary estate administration 

expenses during the three-year period 

following the decedent’s date of death. 

This three-year period takes into 

account a reasonable time for 

administering and closing the estate. 

The Treasury Department and the IRS 

note that a reasonably short period of 

time between the decedent’s death and 

the payment of a claim prevents the lack 

of a present-value discount from 

significantly distorting the value of the 

net (distributable) estate. Applying 

present-value principles in computing 

the deductible amount of those claims 

and expenses paid more than three 

years after the decedent’s death strikes 

an appropriate balance between benefits 

and burdens. 

Accordingly, the Treasury Department 

and the IRS propose to amend the 

regulations under section 2053 to 

require the discounting to present value 

of certain amounts paid or to be paid in 

settlement or satisfaction of certain 

claims and expenses in determining the 

amount deductible under section 2053. 

Specifically, the rule in these proposed 

regulations requires calculating the 

present value of the amount of a 

deductible claim or expense described 

in section 2053(a) and § 20.2053–1(a) 

that is not paid or to be paid on or 

before the third anniversary of the 

decedent’s date of death, which threeyear period the proposed regulations 

define as the ‘‘grace period.’’ The 

proposed regulations provide the 

general formula for calculating the 

present value of such amounts and state 

that the discount rate to be used in the 

calculation is the applicable Federal rate 

determined under section 1274(d) for 

the month in which the decedent’s date 

of death occurs, compounded annually. 

The length of time from the decedent’s 

death to the date of payment or 

expected date of payment will 

determine whether the Federal rate 

applicable to that amount is the Federal 

mid-term rate or the Federal long-term 

rate. The proposed regulations provide 

that any reasonable assumptions or 

methodology in regard to time period 

measurements may be used in 

calculating the present value. In 

addition, the proposed regulations 

require a supporting statement to be 

filed with the Form 706 showing any 

calculations of present value. 

The proposed regulations explain 

how to calculate present value when the 

amount of a claim or expense is 

deductible in advance of the payment of 

such amount, as under §§ 20.2053– 

1(d)(4) and 20.2053–4(b) and (c). The 

proposed regulations provide that the 

expected date or dates of payment will 

be used in computing present value and 

that the expected date or dates of 

payment will be determined by making 

a fair and reasonable estimate using all 

information reasonably available to the 

taxpayer. For amounts deductible under 

§ 20.2053–4(b) and (c), the proposed 

regulations provide that the expected 

date or dates of payment must be 

identified in a written appraisal 

document. Consistent with the rule in 

§ 20.2053–1(d)(2), which takes into 

consideration events occurring during 

the post-death period described in that 

section, the proposed regulations also 

provide that the computation of present 

value is subject to adjustment if the 

actual date of payment differs from the 

estimate used. 

III. Deductibility of Interest Expense as 

Administration Expense 

A. Issue Background 

Section 2053(a)(2) allows an estate to 

deduct from the value of the gross estate 

the amount of administration expenses 

that are allowable by the law of the 

jurisdiction in which the estate is being 

administered. In some cases, interest 

expense incurred by an estate may be a 

deductible administration expense 

under section 2053(a)(2) if the facts 

support a finding that the expense 

satisfies the requirements of section 

2053 and the regulations thereunder. 

Several statutory and regulatory 

provisions are relevant to the 

deductibility of interest as an 

administration expense under section 

2053(a)(2). 

First, effective for decedents dying 

after December 31, 1997, section 

2053(c)(1)(D) provides that, ‘‘no 

deduction shall be allowed under 

[section 2053] for any interest payable 

under section 6601 on any unpaid 

portion of the [Federal estate tax] for the 

period during which an extension of 

time for payment of such tax is in effect 

under section 6166.’’ 

Second, § 20.2053–3(a) provides that 

the amounts deductible from a 

decedent’s gross estate as administration 

expenses under section 2053(a)(2) are 

limited to such expenses that actually 

and necessarily are incurred in the 

administration of the decedent’s estate. 

The expenses contemplated in the law 

are those that are associated with the 

settlement of an estate and the transfer 

of the property of the estate to 

individual beneficiaries or to a trustee. 

Expenditures not essential to the proper 

settlement of the estate, but incurred for 

the individual benefit of the heirs, 

legatees, or devisees, may not be taken 

as deductions. 

Third, § 20.2053–1(b)(2) provides that 

only expenses that are bona fide in 

nature are deductible under section 

2053. Section 20.2053–1(b)(2) applies to 

any amounts deductible under section 

2053(a) and (b), including deductible 

administration expenses. 

The issue of the extent to which and 

the circumstances under which interest 

expense satisfies the requirements for a 

deductible administration expense 

under section 2053(a)(2) and the 

regulations thereunder is longstanding. 

Over the past half century, a number of 

litigated cases and sub-regulatory 

published guidance items have 

provided some clarity on the legal 

issues surrounding the ability to deduct, 

as an administration expense under 

section 2053(a)(2), interest accruing on 

deferred tax and penalties and on loan 

obligations incurred by an estate. 

Litigation on this fact-driven issue 

continues in regard to interest accruing 

on loan obligations incurred by an 

estate. 

The Treasury Department and the IRS 

consider it appropriate to amend the 

regulations under section 2053 to 

address specifically the issue of interest 

expense as a deductible administration 

expense under section 2053(a)(2). In 

particular, the Treasury Department and 

the IRS propose to address interest 

expense accruing after the death of the 

decedent on any unpaid portion of tax 


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38334 Federal Register / Vol. 87, No. 123 / Tuesday, June 28, 2022 / Proposed Rules 

or penalties and on a loan obligation 

incurred by the estate to pay estate taxes 

or other estate expenses. 

B. Explanation of Provisions 

1. Interest Accruing on Unpaid Tax and 

Penalties 

In general, interest is payable at the 

underpayment rate in section 6621 on 

(i) any amount of unpaid Federal tax, 

and (ii) any unpaid additions to tax, 

additional taxes, and penalties (such 

interest referred to in this preamble as 

‘‘section 6601 interest’’ and such 

additions to tax, additional taxes, and 

penalties collectively referred to in this 

preamble as ‘‘penalties’’). See section 

6601(a) and (e)(2). However, interest 

payable under section 6601 on unpaid 

estate tax deferred under section 6166 

(which includes interest accruing on 

any such deferred payment during any 

period when an extension of time for 

payment is in effect under section 

6161(a)(2)(B) with respect to that 

payment) (referred to in this preamble 

as ‘‘section 6166 interest’’) is subject to 

a more favorable interest rate under 

section 6601(j), and section 

2053(c)(1)(D) provides that such interest 

is not deductible. The statutory 

prohibition of a deduction for section 

6166 interest does not apply to ‘‘nonsection 6166 interest,’’ defined for 

purposes of this preamble as any section 

6601 interest other than section 6166 

interest and interest payable on any 

unpaid portion of state tax and penalties 

pursuant to state law. Thus, non-section 

6166 interest that accrues on and after 

the decedent’s date of death may qualify 

as a deductible administration expense 

under section 2053(a)(2). 

To determine the deductibility of nonsection 6166 interest accruing on and 

after the decedent’s date of death, the 

existing regulatory requirements in 

§§ 20.2053–1(b)(2) and 20.2053–3(a) 

apply. Non-section 6166 interest 

satisfies the ‘‘bona fide’’ requirement in 

§ 20.2053–1(b)(2) because such interest 

accrues pursuant to either Federal or 

state law. Non-section 6166 interest may 

satisfy the ‘‘actually and necessarily 

incurred’’ requirement in § 20.2053– 

3(a), but such determination depends on 

the facts and circumstances. 

Non-section 6166 interest may accrue 

on and after the date of a decedent’s 

death on unpaid estate tax in 

connection with an extension granted 

under section 6161 (but not under 

section 6161(a)(2)(B)) or a deferral 

elected under section 6163. A section 

6161 extension is granted upon a 

showing of reasonable cause for 

extending the time for payment. A 

section 6163 deferral is appropriate 

when the value of a reversionary or 

remainder interest is includible in the 

gross estate, but such value is not 

immediately available for payment of 

the estate tax. The nature of both section 

6161 extensions and section 6163 

deferrals indicates they are based on a 

demonstrable need to defer payment. 

Accordingly, the Treasury Department 

and the IRS have determined that 

interest payable under section 6601 on 

unpaid estate tax in connection with an 

extension under section 6161 or a 

deferral under section 6163 is 

necessarily incurred in the 

administration of the estate. 

Non-section 6166 interest may accrue 

on and after the date of a decedent’s 

death on unpaid tax and penalties in 

connection with an underpayment of 

tax or a deficiency (as that term is 

defined in section 6211). In many cases, 

such interest and the underlying 

underpayment of tax or deficiency is 

attributable to the reasonable exercise of 

an executor’s fiduciary duties in 

administering the estate, as may occur 

in cases involving legitimate 

disagreements with the IRS, inadvertent 

errors, or reasonable reliance on a 

qualified professional. The Treasury 

Department and the IRS have 

determined that, generally, such interest 

is actually and necessarily incurred in 

the administration of the estate. 

However, the Treasury Department and 

the IRS are concerned that there are 

some circumstances in which such 

interest expense would not satisfy the 

‘‘actually and necessarily incurred’’ 

requirement in § 20.2053–3(a). For 

instance, when non-section 6166 

interest accrues on unpaid tax and 

penalties in connection with an 

underpayment of tax or deficiency and 

the underlying underpayment or 

deficiency is attributable to an 

executor’s negligence, disregard of the 

rules or regulations (including careless, 

reckless, or intentional disregard of 

rules or regulations) as defined in 

§ 1.6662–3(b)(2), or fraud with intent to 

evade tax, the interest expense is not an 

expense actually and necessarily 

incurred in the administration of the 

estate. Accordingly, the Treasury 

Department and the IRS have 

determined that, when interest accrues 

on any unpaid tax or penalty and the 

interest expense is attributable to an 

executor’s negligence, disregard of the 

rules or regulations, or fraud with intent 

to evade tax, the interest expense is 

neither actually and necessarily 

incurred in the administration of the 

estate nor essential to the proper 

settlement of the estate. Further, the 

Treasury Department and the IRS have 

determined that the rationale 

underlying this determination applies to 

all non-section 6166 interest, whether 

the interest accrues in connection with 

a deferral, underpayment, or deficiency. 

The proposed regulations amend the 

regulations under section 2053 to 

confirm that section 6166 interest on 

estate tax deferred under section 6166, 

including interest accruing on an 

installment under section 6166 during 

the period of an extension of time for 

payment under section 6161(a)(2)(B), is 

not a deductible administration expense 

under section 2053. The proposed 

regulations also provide that nonsection 6166 interest that accrues on or 

after the decedent’s date of death on any 

unpaid tax or penalties may be 

deductible to the extent permitted by 

§§ 20.2053–1 and 20.2053–3(a). The 

proposed regulations further provide 

that non-section 6166 interest on estate 

tax deferred under section 6161 or 

section 6163 is actually and necessarily 

incurred in the administration of the 

estate because the grant of the extension 

was based on a demonstrated need to 

defer payment. Finally, the proposed 

regulations provide that, in general, 

non-section 6166 interest accruing postdeath on any unpaid tax or penalties in 

connection with an underpayment of 

tax or a deficiency is actually and 

necessarily incurred in the 

administration of the estate. However, 

the proposed regulations provide that, 

notwithstanding these rules, nonsection 6166 interest accruing on 

unpaid tax and penalties on and after 

the decedent’s date of death, whether in 

connection with a deferral, 

underpayment, or deficiency, is not 

actually and necessarily incurred in the 

administration of the estate and is not 

deductible to the extent the interest 

expense is attributable to an executor’s 

negligence, disregard of applicable rules 

or regulations (including careless, 

reckless, or intentional disregard of 

rules or regulations) as defined in 

§ 1.6662–3(b)(2), or fraud with intent to 

evade tax. Interest expense is 

attributable to an executor’s negligence, 

disregard of applicable rules or 

regulations, or fraud with intent to 

evade tax to the extent that the 

underlying underpayment, deficiency, 

or penalty is attributable to such 

conduct by the executor. Similarly, even 

when the underlying underpayment, 

deficiency, or penalty is not attributable 

to such conduct by the executor, interest 

expense is attributable to an executor’s 

negligence, disregard of applicable rules 

or regulations, or fraud with intent to 

evade tax to the extent the subsequent 


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accrual of interest is attributable to such 

conduct by the executor. 

The rules in the proposed regulations 

pertaining to whether non-section 6166 

interest satisfies the requirement in 

§ 20.2053–3(a) supplant the rule 

reflected in Rev. Rul. 79–252, 1979–2 

C.B. 333, and in the second holding of 

Rev. Rul. 81–154, 1981–1 C.B. 470. (See 

§ 601.601(d)(2)(ii)(b).) Together, these 

two holdings create an implicit 

presumption that interest accruing on 

any unpaid portion of tax or penalties 

in all cases satisfies the requirements for 

a deductible administration expense, 

which is inconsistent with the 

requirement in § 20.2053–3(a) that the 

expense be actually and necessarily 

incurred in the administration of the 

estate. 

2. Interest Accruing on Certain Loan 

Obligations Incurred by an Estate 

The same requirements that apply for 

deductible interest accruing on unpaid 

tax and penalties also apply for 

deductible interest accruing on loan 

obligations incurred by an estate. 

Interest accruing on a loan obligation 

incurred by an estate satisfies the ‘‘bona 

fide’’ requirement in § 20.2053–1(b)(2) 

when both the interest expense and the 

loan underlying the interest expense are 

bona fide in nature and do not 

constitute a transfer that is essentially 

donative in character. Such interest 

satisfies the ‘‘actually and necessarily 

incurred’’ requirement in § 20.2053–3(a) 

when the loan on which the interest 

expense accrues and its terms are 

necessary to the administration of the 

decedent’s estate and are essential to the 

proper settlement of the decedent’s 

estate. 

Among the reasons an estate might 

enter into a loan arrangement is to 

facilitate the payment of the estate’s 

taxes and other liabilities or the 

administration of the estate. Some 

estates face genuine liquidity issues that 

make it necessary to find a means to 

satisfy their liabilities, and incurring a 

loan obligation on which interest 

accrues may be the only or best way to 

obtain the necessary liquid funds. 

However, if illiquidity has been created 

intentionally (whether in the estate 

planning, or by the estate with 

knowledge or reason to know of the 

estate tax liability) prior to the creation 

of the loan obligation to pay estate 

expenses and liabilities, the underlying 

loan may be bona fide in nature but 

most likely will not be found to be 

actually and necessarily incurred in the 

administration of the estate. 

The issue of the deductibility of 

interest expense accruing on a loan 

obligation incurred by an estate has 

been litigated often, with varying 

results. See, e.g., Estate of Black v. 

Commissioner, 133 T.C. 340 (2009); 

Estate of Graegin v. Commissioner, T.C. 

Memo. 1988–477. In order to provide 

guidance on the deductibility of interest 

accruing on a loan obligation entered 

into by the decedent’s estate to facilitate 

the payment of the estate’s taxes and 

other liabilities or the administration of 

the estate, the Treasury Department and 

the IRS propose to amend the 

regulations under section 2053. The 

proposed regulations provide that 

interest expense is deductible only if: (i) 

the interest accrues pursuant to an 

instrument or contractual arrangement 

that constitutes indebtedness under 

applicable income tax regulations and 

general principles of Federal tax law; (ii) 

both the interest expense and the loan 

on which interest expense accrues 

satisfy the requirement of § 20.2053– 

1(b)(2) that they are bona fide in nature; 

and (iii) the loan on which interest 

accrues and the loan’s terms are actually 

and necessarily incurred in the 

administration of the decedent’s estate 

and are essential to the proper 

settlement of the decedent’s estate 

(within the meaning of § 20.2053–3(a)). 

Finally, the proposed regulations 

include a nonexclusive list of factors to 

consider in determining whether 

interest expense payable pursuant to 

such a loan obligation of an estate 

satisfies the requirements of §§ 20.2053– 

1(b)(2) and 20.2053–3(a). In general, the 

factors suggest that interest accruing on 

a loan obligation may satisfy these 

requirements when the loan and its 

underlying terms are reasonable and 

comparable to an arms-length loan 

transaction and correspond to the 

estate’s ability to satisfy the loan, and 

the loan obligation is entered into by the 

executor with a lender who is not a 

substantial beneficiary of the decedent’s 

estate (or an entity controlled by such a 

beneficiary) at a time when there is no 

viable alternative to obtain the 

necessary liquid funds to satisfy estate 

liabilities. In addition to providing 

guidance on when interest accruing on 

a loan obligation may satisfy the 

requirements of §§ 20.2053–1(b)(2) and 

20.2053–3(a), the list of factors may 

suggest when the opposite is true and 

interest accruing on a loan obligation 

does not satisfy these requirements. For 

instance, if, taken in their entirety, the 

facts and circumstances indicate that 

either the need for the loan or any of the 

loan terms are contrived to generate, or 

increase the amount of, a deduction for 

the interest expense, the interest is not 

deductible. Thus, if the lender is a 

primary beneficiary of the estate (or an 

entity controlled by such beneficiary) 

who may have liability for payment of 

the estate tax or whose share of the 

estate may bear the burden of estate 

taxes and other liabilities, the facts 

indicate the loan is not necessarily 

incurred in the administration of the 

estate and, therefore, indicate that any 

interest accruing on the loan is not 

necessarily incurred in the 

administration of the estate. Further, if 

the loan obligation carries an extended 

loan term with a single balloon payment 

that does not correspond with the 

estate’s ability to satisfy the loan, the 

facts indicate that the interest accruing 

on the loan is not necessarily incurred 

in the administration of the estate. 

IV. Substantiation Requirements for 

Valuations Performed Pursuant to 

§ 20.2053–4(b) and (c) 

A. Issue Background 

Section 20.2053–4(b) and (c) provides 

exceptions to the general rule in 

§ 20.2053–4(a) that an estate may deduct 

only amounts that actually are paid by 

the estate in satisfaction of a claim. 

Section 20.2053–4(b) generally allows a 

deduction for the value of claims and 

counterclaims in a related matter, and 

§ 20.2053–4(c) allows a deduction for 

the value of unpaid claims totaling not 

more than $500,000. In each case, 

certain requirements must be satisfied to 

enable the estate to use these 

exceptions. 

One such requirement is that the 

value of a claim against the estate that 

may be deducted under either 

§ 20.2053–4(b) or (c) must be 

determined from a ‘‘qualified appraisal’’ 

performed by a ‘‘qualified appraiser’’ 

within the meaning of section 170 and 

the regulations thereunder. The 

Treasury Department and the IRS have 

reconsidered this requirement. The 

definition of ‘‘qualified appraiser’’ and 

‘‘qualified appraisal’’ in the regulations 

under section 170 were drafted in the 

context of appraising an asset being 

donated, and not a liability such as a 

claim against an estate. Certain of the 

elements of a qualified appraisal, 

including references to the ‘‘date of 

contribution,’’ and the requirements 

necessary to meet the definition of a 

‘‘qualified appraiser,’’ do not apply in 

the context of valuing a claim against an 

estate for purposes of determining the 

value to be deducted from the gross 

estate under section 2053. 

The Treasury Department and the IRS 

have determined that the rule in 

§ 20.2053–4(b) and (c) should be 

amended to remove the requirement 

that the value be determined by a 

‘‘qualified appraisal’’ performed by a 


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‘‘qualified appraiser’’ within the 

meaning of section 170 and the 

regulations thereunder. Instead, the 

Treasury Department and the IRS 

propose to amend the regulations under 

section 2053 to provide revised rules for 

valuing claims for purposes of 

§ 20.2053–4(b) and (c). 

B. Explanation of Provision 

The Treasury Department and the IRS 

propose to amend the regulations under 

section 2053 to remove the requirement 

in § 20.2053–4(b)(1)(iv) and (c)(1)(iv) 

that valuations of the claims deductible 

under § 20.2053–4(b) and (c) must be 

supported by a ‘‘qualified appraisal’’ 

performed by a ‘‘qualified appraiser.’’ 

For purposes of determining the 

allowable deduction under § 20.2053– 

4(b) and (c), these proposed regulations 

instead provide new requirements 

intended to facilitate the appropriate 

valuation of these claims. 

Specifically, to determine the current 

value of a claim deductible under 

§ 20.2053–4(b) or (c), the proposed 

regulations require a written appraisal 

that adequately reflects the current 

value of the claim when the Form 706 

is being completed. The current value of 

the claim should take into account postdeath events occurring prior to the time 

a deduction is claimed as well as those 

events reasonably anticipated to occur. 

In addition, the proposed regulations 

require the written appraisal to consider 

all relevant facts and elements of value 

that are known or that can be reasonably 

anticipated at the time of the appraisal. 

The written appraisal must be prepared, 

signed, and dated by a person who is 

qualified to appraise the claim being 

valued, but who is not (i) a family 

member of the decedent, a related entity 

as to the decedent, or a beneficiary of 

the decedent’s estate or revocable trust 

(as those terms are defined in § 20.2053– 

1(b)(2)(iii)), (ii) a family member of a 

beneficiary or a related entity as to a 

beneficiary (as those terms would be 

defined in § 20.2053–1(b)(2)(iii) if 

references therein to the decedent were 

replaced with a reference to such 

beneficiary, and without the limitations 

based on the decedent’s date of death), 

or (iii) an employee or other owner of 

any of them. The appraisal also must 

include a statement describing the basis 

for the person’s qualification to appraise 

the claim being valued. 

V. Deductibility of Amounts Paid 

Pursuant to Decedent’s Personal 

Guarantee 

A. Issue Background 

A commenter responding to the 2007 

Proposed Regulations suggested that the 

final regulations confirm that payments 

made pursuant to a decedent’s personal 

guarantee existing at the decedent’s 

death are deductible in the same 

manner as payments made in 

satisfaction of any other deductible 

claim against a decedent’s estate. 

For payments made pursuant to a 

decedent’s obligation as a guarantor of 

indebtedness to be deductible, the claim 

must represent a personal obligation of 

the decedent existing at the time of the 

decedent’s death, and the claim must be 

enforceable against the decedent’s 

estate. See § 20.2053–4(a)(1). However, 

not all enforceable debts are deductible 

under section 2053. A claim founded 

upon a decedent’s guarantee is 

considered a claim founded upon a 

promise or agreement. Accordingly, the 

deduction for such a claim is limited to 

the extent that the guarantee was 

contracted bona fide and in exchange 

‘‘for an adequate and full consideration 

in money or money’s worth.’’ See 

section 2053(c)(1)(A) and § 20.2053– 

4(d)(5). For a claim founded upon a 

decedent’s guarantee to satisfy the 

‘‘adequate and full consideration in 

money or money’s worth’’ requirement 

and, therefore, be deductible under 

section 2053, the decedent must have 

received a benefit reducible to money 

value in exchange for the decedent’s 

guarantee. See United States v. Stapf, 

375 U.S. 118, 131 (1963) (‘‘Absent such 

an . . . augmentation of the estate, a 

testator could disguise transfers as 

payments in settlement of debts and 

claims and thus obtain deductions for 

transmitting gifts.’’); Commissioner v. 

Wemyss, 324 U.S. 303 (1945) 

(construing the requirement of 

‘‘adequate and full consideration in 

money or money’s worth’’ in the gift tax 

context to require a benefit to the donor 

reducible to money value ‘‘to relieve a 

transfer by him from being a gift.’’); 

Estate of Theis v. Commissioner, 81 T.C. 

741, 745, 748 (1983) (noting the 

amounts at issue must have been 

contracted bona fide and for full and 

adequate consideration), aff’d 770 F.2d 

981 (11th Cir. 1985). 

Guarantor agreements often are 

required in the context of a loan to the 

guarantor’s closely-held business. In 

these cases, the guarantor may be 

motivated to enter into the guarantee 

agreement to preserve the value of the 

guarantor’s interest in the business. The 

Treasury Department and the IRS have 

determined that it is appropriate to 

provide guidance on whether, for 

purposes of section 2053, a guarantor 

agreement is contracted for an adequate 

and full consideration in money or 

money’s worth in such a situation for 

purposes of section 2053. 

When payments pursuant to a 

decedent’s guarantee satisfy the 

requirements for a deductible claim, the 

amount deductible is limited to the 

portion of the total claim due from and 

actually paid by the estate, but reduced 

by the amount recovered, or the amount 

that could have been recovered, from 

another party, insurance, or otherwise. 

See §§ 20.2053–1(d)(1) and (3) and 

20.2053–4(d)(3). Further, to avoid the 

double-counting of a debt that occurs 

when the debt both is taken into 

account in computing the gross estate 

and is taken as a section 2053 

deduction, payments made pursuant to 

the decedent’s guarantee are deductible 

only to the extent that the debt for 

which the guarantee is given has not 

been taken into account in computing 

the value of an asset includible in the 

decedent’s gross estate. 

A regulatory provision specifically 

addressing the deductibility of claims 

founded upon a decedent’s guarantee 

will assist taxpayers in understanding 

and meeting their tax responsibilities 

and will result in consistent treatment 

for similarly situated taxpayers. 

B. Explanation of Provision 

The proposed regulations provide that 

a claim founded upon the decedent’s 

agreement to personally guarantee a 

debt of another is a claim founded on 

a promise and, accordingly, must satisfy 

the applicable requirements in section 

2053(c)(1)(A) and § 20.2053–4(d)(5). 

Specifically, the guarantee must have 

been bona fide and in exchange for 

adequate and full consideration in 

money or money’s worth. The proposed 

regulations confirm that the bona fide 

nature of a claim related to the 

guarantee of a debt of a family member, 

a related entity, or a beneficiary will be 

determined with reference to § 20.2053– 

1(b)(2)(ii). The proposed regulations 

provide a bright line rule that a 

decedent’s agreement to guarantee a 

bona fide debt of an entity in which the 

decedent had control (within the 

meaning of section 2701(b)(2)) at the 

time of the guarantee satisfies the 

requirement that the agreement be in 

exchange for adequate and full 

consideration in money or money’s 

worth. Alternatively, the proposed 

regulations provide that this 

requirement also is satisfied if, at the 

time the guarantee is given, the 

maximum liability of the decedent 

under the guarantee did not exceed the 

fair market value of the decedent’s 

interest in the entity. Finally, the 

proposed regulations provide that the 

estate’s right of contribution or 

reimbursement will reduce the amount 


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deductible in accordance with 

§ 20.2053–1(d)(3). 

Proposed Applicability Date 

The regulations are proposed to apply 

to the estate of each decedent dying on 

or after the date of publication in the 

Federal Register of a Treasury decision 

adopting these rules as final regulations. 

Effect on Other Documents 

Rev. Rul. 79–252 (1979–2 C.B. 333) 

states that interest on a Federal estate 

tax deficiency is a necessary 

administration expense under section 

2053(a)(2) and is deductible to the 

extent allowable under local law. Rev. 

Rul. 81–154 (1981–1 C.B. 470) states, in 

the second holding, that interest 

incurred because of a late payment of 

tax is deductible under section 

2053(a)(2) to the extent it is allowable 

under local law. Rev. Rul. 79–252 will 

be obsoleted and Rev. Rul. 81–154 will 

be modified, effective as of the date that 

a Treasury decision adopting these rules 

as final regulations is published in the 

Federal Register. 

Statement of Availability of IRS 

Documents 

IRS revenue procedures, revenue 

rulings, notices, and other guidance 

cited in this document are published in 

the Internal Revenue Bulletin (or 

Cumulative Bulletin) and are available 

from the Superintendent of Documents, 

U.S. Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at https://www.irs.gov. 

Special Analyses 

Regulatory Planning and Review 

This regulation is not subject to 

review under section 6(b) of Executive 

Order 12866 pursuant to the 

Memorandum of Agreement (April 11, 

2018) between the Treasury Department 

and the Office of Management and 

Budget regarding review of tax 

regulations. Therefore, a regulatory 

impact assessment is not required. 

Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6), it is hereby 

certified that these regulations will not 

have a significant economic impact on 

a substantial number of small entities. 

This certification is based on the fact 

that these regulations primarily affect 

estates of a decedent which generally 

are not small entities under the Act. 

Accordingly, these regulations are not 

expected to have a significant economic 

impact on a substantial number of small 

entities, and a regulatory flexibility 

analysis is not required. 

Pursuant to section 7805(f) of the 

Code, these proposed regulations will be 

submitted to the Chief Counsel for the 

Office of Advocacy of the Small 

Business Administration for comment 

on their impact on small businesses. 

Paperwork Reduction Act 

The collections of information 

contained in this notice of proposed 

rulemaking have been submitted to the 

Office of Management and Budget for 

review in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507(d)), under Form 706, United 

States Estate (and Generation-Skipping 

Transfer) Tax Return, and assigned 

control number 1545–0015. Comments 

on the collection of information should 

be sent to the Office of Management and 

Budget, Attn: Desk Officer for the 

Department of the Treasury, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, and to 

Clearance Officer, SE:CAR:MP:T:T:SP, 

Washington, DC 20224. Comments on 

the collection of information should be 

received by August 29, 2022. Comments 

are specifically requested concerning: 

Whether the proposed collections of 

information are necessary for the proper 

performance of the functions of the IRS, 

including whether the information will 

have practical utility; 

The accuracy of the estimated burden 

associated with the proposed collection 

of information; 

How the quality, utility, and clarity of 

the information to be collected may be 

enhanced; 

How the burden of complying with 

the proposed collections of information 

may be minimized, including through 

the application of automated collection 

techniques or other forms of information 

technology; and 

Estimates of capital or start-up costs 

of operation, maintenance, and 

purchase of services to provide 

information. 

The collections of information in 

these proposed regulations are in 

proposed §§ 20.2053–1(d)(6)(iv) and 

20.2053–4(b)(1)(iv) and (c)(1)(iv). The 

information requested in § 20.2053– 

1(d)(6)(iv) is necessary in order to 

evaluate whether an estate is entitled to 

a deduction in the amount claimed on 

Form 706. The collection of information 

is mandatory to obtain a benefit. The 

information requested in § 20.2053– 

4(b)(1)(iv) and (c)(1)(iv) is necessary in 

order to evaluate whether an estate is 

entitled to a deduction claimed on Form 

706 and, if so, the amount of the 

deduction. The collection of 

information is mandatory to obtain a 

benefit. The likely respondents are 

estates of decedents seeking to deduct 

on Form 706 funeral expenses, 

administration expenses, and/or certain 

claims against the estate under section 

2053. 

Estimated total annual reporting 

burden: 23,661 hours. 

Estimated average annual burden per 

respondent: 3 hours. 

Estimated number of respondents: 

7,887. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless the collection of information 

displays a valid control number 

assigned by the Office of Management 

and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a state, local, or tribal government, in 

the aggregate, or by the private sector, of 

$100 million (updated annually for 

inflation). This proposed rule does not 

include any Federal mandate that may 

result in expenditures by state, local, or 

tribal governments, or by the private 

sector in excess of that threshold. 

Executive Order 13132: Federalism 

E.O. 13132, titled ‘‘Federalism,’’ 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on state and 

local governments, and is not required 

by statute, or preempts state law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

E.O. This proposed rule does not have 

federalism implications and does not 

impose substantial direct compliance 

costs on state and local governments or 

preempt state law within the meaning of 

the E.O. 

Drafting Information 

The principal authors of these 

regulations are Karlene Lesho and 

Melissa Liquerman, Office of the 

Associate Chief Counsel (Passthroughs 

and Special Industries). However, other 

personnel from the Treasury 

Department and the IRS participated in 

their development. 


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Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

comments that are submitted timely to 

the IRS as prescribed in this preamble 

under the ADDRESSES section. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations. 

Any electronic comments submitted, 

and to the extent practicable, any paper 

comments submitted, will be made 

available at www.regulations.gov or 

upon request. 

A public hearing is being held by 

teleconference on October 12, 2022, at 

10:00 a.m. EST unless no outlines are 

received by September 26, 2022. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to comment by telephone at the hearing 

must submit electronic or written 

comments and an outline of the topics 

to be discussed and the time to be 

devoted to each topic by September 26, 

2022 as prescribed in the preamble 

under the ADDRESSES section. A period 

of ten minutes will be allotted to each 

person for making comments (although 

this rule may be waived in unusual 

circumstances or for good cause shown). 

After the deadline for receiving outlines 

has passed, the IRS will prepare an 

agenda containing the schedule of 

speakers. Copies of the agenda will be 

made available at www.regulations.gov, 

search IRS and REG–130975–08. Copies 

of the agenda will also be available by 

emailing a request to publichearings@

irs.gov. Please put ‘‘REG–130975–08 

Agenda Request’’ in the subject line of 

the email. 

Announcement 2020–4, 2020–17 IRB 

667 (April 20, 2020), provides that until 

further notice, public hearings 

conducted by the IRS will be held 

telephonically. Any telephonic hearing 

will be made accessible to people with 

disabilities. 

List of Subjects in 26 CFR Part 20 

Estate taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, the IRS proposes to 

amend 26 CFR part 20 as follows: 

PART 20—ESTATE TAX; ESTATES OF 

DECEDENTS DYING AFTER AUGUST 

16, 1954 

■ Paragraph 1. The authority citation 

for part 20 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805. 

* * * * * 

■ Par. 2. Section 20.2053–1 is amended 

by: 

■ 1. Adding paragraph (d)(6). 

■ 2. Revising the introductory text of 

paragraph (d)(7). 

■ 3. In paragraph (d)(7), Examples 1 

through 3 are designated as paragraphs 

(d)(7)(i) through (iii), respectively. 

■ 4. In newly designated paragraphs 

(d)(7)(i) and (ii): 

■ i. Removing ‘‘ascertainable,’’ and 

adding ‘‘ascertainable.’’ in its place. 

■ ii. Adding a sentence to the end of the 

paragraphs. 

■ 5. In newly designated paragraph 

(d)(7)(iii): 

■ i. Removing ‘‘deduction,’’ and 

‘‘Example 2’’ and adding ‘‘deduction.’’ 

and ‘‘paragraph (d)(7)(ii) of this section 

(Example 2)’’ in their places, 

respectively. 

■ ii. Revising the last sentence of the 

paragraph. 

■ 6. Adding paragraphs (d)(7)(iv) 

through (vi). 

■ 7. Revising paragraph (f). 

The additions and revisions read as 

follows: 

§ 20.2053–1 Deductions for expenses, 

indebtedness, and taxes; in general. 

* * * * * 

(d) * * * 

(6) Limitation on amount deductible— 

(i) Claims and expenses paid after the 

grace period—(A) Definitions. The 

following definitions apply for purposes 

of this paragraph (d): 

(1) Grace period. The grace period is 

the period beginning on the date of the 

decedent’s death and extending through 

the third anniversary of that date. 

(2) Post-grace-period payment. A 

post-grace-period payment is the 

amount of a claim or expense described 

in paragraph (a) of this section not paid 

or to be paid before the end of the grace 

period. 

(B) General rule. To the extent that a 

post-grace-period payment otherwise 

meets the requirements for deductibility 

of a claim or expense under section 

2053 and the regulations in this part 

thereunder, the amount deductible 

under section 2053 is limited to the 

present value, as of the decedent’s date 

of death, of that amount. The present 

value of each post-grace-period payment 

is calculated by discounting it from the 

payment date or expected date of 

payment to the decedent’s date of death. 

The applicable discount rate is the 

applicable Federal rate determined 

under section 1274(d) for the month in 

which the decedent’s death occurs, 

compounded annually. The length of 

time from the decedent’s date of death 

to the date of payment or expected date 

of payment will determine whether the 

Federal rate applicable to that payment 

is the Federal mid-term rate or the 

Federal long-term rate. The Internal 

Revenue Service publishes the 

applicable Federal rates for each month 

in the Internal Revenue Bulletin (see 

§ 601.601(d)(2)(ii) of this chapter). Any 

reasonable assumptions and 

methodology in regard to time period 

measurements may be used to calculate, 

in accordance with paragraph (d)(6)(ii) 

of this section, the present value of the 

post-grace-period payment(s). 

(ii) Calculating present value of 

amounts paid or payable—(A) Single 

post-grace-period payment. The amount 

deductible under section 2053 for a 

single post-grace-period payment is 

computed by calculating the present 

value of such payment as follows: 

Amount of future payment × [1 ÷ (1 + 

i)]t

Where: 

t is the amount of time (expressed in years 

and fractions of years) from the day after 

the decedent’s date of death to the 

payment date or expected date of 

payment; and 

i is the applicable discount rate. 

(B) Multiple post-grace-period 

payments. The amount deductible 

under section 2053 for multiple postgrace-period payments is computed by 

calculating the present value of each 

such payment using the formula in 

paragraph (d)(6)(ii)(A) of this section; 

the sum of the discounted amounts of 

the post-grace-period payments is the 

amount that is deductible for such 

payments. 

(C) Multiple payment dates occurring 

during and after the grace period. A 

claim or expense described in paragraph 

(a) of this section may have at least one 

payment date or expected date of 

payment during the grace period and at 

least one payment date or expected date 

of payment after the grace period. For 

such a claim or expense, the amount 

deductible under section 2053 is 

computed by calculating the present 

value of each separate post-grace-period 

payment using the formula in paragraph 

(d)(6)(ii)(A) of this section, and adding 

the total of these discounted amounts to 

any amount of the claim or expense 

having a payment date or expected date 

of payment during the grace period. Any 

amount having a payment date or 

expected date of payment during the 

grace period is not discounted in 

arriving at the amount deductible. 

(iii) Discounting when actual date of 

payment is unknown. With regard to a 

post-grace-period payment that may be 

deducted in advance of payment under 

paragraph (d)(4) of this section or 

§ 20.2053–4(b) or (c), the amount 


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deductible must be determined by 

computing the present value of the 

amount of that post-grace-period 

payment as if that amount will be paid 

on the expected date of payment. The 

expected date of payment in settlement 

or satisfaction of a claim or expense 

must be determined using all 

information reasonably available to the 

taxpayer to make a fair and reasonable 

estimate of the expected date or dates of 

payment. For amounts deductible under 

§ 20.2053–4(b) or (c), the expected date 

or dates of payment must be identified 

in a written appraisal document of a 

person that is qualified by knowledge 

and experience to appraise the claim 

being valued. See § 20.2053–4(b)(1)(iv) 

and (c)(1)(iv). However, the 

computation of present value is subject 

to adjustment if, within the period 

described in paragraph (d)(2) of this 

section, the actual date or dates of 

payment become known and differ from 

the estimated date or dates of payment. 

See paragraph (d)(6)(vi) of this section. 

(iv) Statement supporting present 

value computation required. A 

deduction under section 2053 for a 

claim or expense that is required to be 

discounted to present value under 

paragraph (d)(6)(i) of this section must 

be supported by a statement to be filed 

with the Form 706 showing the 

computation of the present value of that 

item, including, if applicable, the basis 

for the determination of the expected 

date(s) of payment. 

(v) Ordering rule. In computing the 

amount deductible for a claim or 

expense under paragraph (d) of this 

section, the amount deductible for a 

claim or expense (otherwise determined 

under paragraphs (d)(1) through (4) of 

this section) is discounted to present 

value under paragraph (d)(6) of this 

section before applying the limits in 

§ 20.2053–4(b)(2) and (c). 

(vi) Effect of post-death events. If a 

deduction is claimed for the present 

value of a post-grace-period payment, 

the claimed deduction is subject to 

adjustment to reflect any post-death 

events affecting the amount of such 

post-grace-period payment and any 

change in the expected or actual date of 

payment. See paragraph (d)(2) of this 

section for the period during which 

post-death events are taken into 

account. 

(vii) Exceptions. The rule in 

paragraph (d)(6)(i) of this section does 

not apply to unpaid principal of 

mortgages and other indebtedness 

deductible under § 20.2053–7. 

(7) Examples. Assume that the 

amounts described in section 2053(a) 

are payable out of property subject to 

claims and are allowable by the law of 

the jurisdiction governing the 

administration of the estate, whether the 

applicable jurisdiction is within or 

outside of the United States. Assume 

that, unless otherwise provided, the 

claims against the estate are not 

deductible under § 20.2053–4(b) or (c) 

and all amounts are paid during the 

grace period. The following examples 

illustrate the application of this 

paragraph (d): 

(i) * * * However, any amounts that 

will not be paid on or before the third 

anniversary of the date of D’s death (that 

is, are not paid during the grace period) 

are subject to the present value 

limitation in paragraph (d)(6) of this 

section. 

(ii) * * * If the amount of the claim 

will not be paid on or before the third 

anniversary of the date of D’s death (that 

is, the amount is not paid during the 

grace period), the amount deductible is 

subject to the present value limitation in 

paragraph (d)(6) of this section. 

(iii) * * * At that time, a deduction 

will be allowed for the amount that is 

either paid or meets the requirements of 

paragraph (d)(4) of this section for 

deducting certain ascertainable 

amounts, subject to the present value 

limitation in paragraph (d)(6) of this 

section, if applicable. 

(iv) Example 4: Discounting amount 

paid more than three years after 

decedent’s date of death. The facts are 

the same as in paragraph (d)(7)(ii) of this 

section (Example 2) except that E files 

a timely protective claim for refund in 

accordance with paragraph (d)(5) of this 

section to preserve the estate’s right to 

claim a refund, a final judgment in the 

amount of $100x is entered against and 

paid by the estate precisely five years 

after D’s date of death, and the 

applicable Federal (mid-term) rate 

determined under section 1274(d) for 

the month in which D’s date of death 

occurs, compounded annually, is 

2.00%. Within a reasonable period of 

time after the final judgment is entered, 

E notifies the Commissioner that the 

contingency has been resolved. E may 

claim a deduction for the present value 

of the amount paid in satisfaction of the 

claim as of D’s date of death. Under the 

facts in this paragraph (d)(7)(iv), the 

present value of the amount paid in five 

years equals $100x/(1 + .0200)5 or 

$100x/1.104081 or $90.57x. 

(v) Example 5: Discounting amount to 

be paid when actual date of payment 

not known. The facts are the same as in 

paragraph (d)(7)(ii) of this section 

(Example 2) except that the claim is 

deductible under § 20.2053–4(c) because 

all amounts deducted by the estate 

under that paragraph do not exceed 

$500,000. E obtains a written appraisal 

document meeting the requirements of 

§ 20.2053–4(c)(iv) and reasonably 

determines that the future value of the 

claim is $300,000 (that is, before 

discounting the claim to its present 

value). E determines, after considering 

all available information and making 

reasonable assumptions, that the 

expected date of payment of the claim 

is Date X, which is reflected in the 

appraisal. Date X is a date after the third 

anniversary of D’s date of death. E may 

claim a deduction for the present value 

of the claim as of D’s date of death, 

determined by discounting $300,000 for 

the period from the date of death to Date 

X, using the applicable Federal rate 

determined under section 1274(d) for 

the month in which D’s death occurs, 

compounded annually. 

(vi) Example 6: Discounting amount 

to be paid for series of payments 

payable over a period that does not end 

on or before the third anniversary of the 

decedent’s death. Pursuant to the terms 

of a divorce and separation agreement 

entered on June 1 of Year 1, Decedent 

(D) is obligated to make annual 

payments of $100x to Claimant (C) on 

September 1 of year 1 and each 

September 1st thereafter until D has 

made a total of 10 such payments. D 

dies on December 1 of Year 5 after 

having made the first five annual 

payments required under the agreement. 

The applicable Federal (mid-term) rate 

determined under section 1274(d) for 

the month in which D’s death occurs, 

compounded annually, is 2.00%. The 

executor of D’s estate (E) may claim a 

deduction with respect to C’s claim on 

D’s Form 706 under the special rule 

contained in paragraph (d)(4) of this 

section because the deductible amount 

can be ascertained with reasonable 

certainty. E computes the discounted 

deductible amount of the claim by 

adding the undiscounted amount of the 

three payments that will be made before 

the third anniversary of D’s death 

($300x) to the discounted amounts of 

the two payments that will be made 

after the third anniversary of D’s death. 

Accordingly, the amount deductible for 

the claim equals $483.866x ($300x + 

$92.843x + $91.023x). The individual 

calculations for the present values of the 

payments in the last two years of the 

payment obligation are shown in table 

1 to this paragraph (d)(7)(vi). 


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TABLE 1 TO PARAGRAPH (d)(7)(vi) 

(1) (2) (3) (4) (5) 

t 1 + i 1/(1 + i) [1/(1 + i)]t [1/(1 + i)]t × 100x 

Year 9 .......................................................................... 3.75 1.0200 0.980392 0.928430 92.843x 

Year 10 ........................................................................ 4.75 1.0200 0.980392 0.910226 91.023x 

* * * * * 

(f) Applicability date. The rules of this 

section apply to the estates of decedents 

dying on or after [date of publication of 

the final rule in the Federal Register]. 

■ Par. 3. Section 20.2053–3 is amended 

by: 

■ 1. Redesignating paragraphs (d) and 

(e) as paragraphs (e) and (f), 

respectively. 

■ 2. Adding a new paragraph (d). 

■ 3. Revising newly redesignated 

paragraph (f). 

The addition and revision read as 

follows: 

§ 20.2053–3 Deduction for expenses of 

administering estate. 

* * * * * 

(d) Interest expense incurred in 

administering the estate—(1) Interest 

payable under section 6601 on unpaid 

tax—(i) Section 6166 interest. As used 

in paragraph (d)(1) of this section, the 

phrase ‘‘section 6166 interest’’ means 

interest payable under section 6601 on 

unpaid estate tax deferred under section 

6166. This includes interest accruing on 

an installment or other payment under 

section 6166 during the period of an 

extension of time for making that 

payment under section 6161(a)(2)(B). 

Section 6166 interest is not deductible 

pursuant to section 2053(c)(1)(D). 

(ii) Non-section 6166 interest. As used 

in paragraph (d)(1) of this section, the 

phrase ‘‘non-section 6166 interest’’ 

means interest payable under section 

6601 or under state or local law other 

than section 6166 interest. Non-section 

6166 interest that accrues on or after the 

decedent’s date of death on any unpaid 

tax or penalties may be deductible to the 

extent permitted by § 20.2053–1 and 

this section. For purposes of paragraph 

(d)(1) of this section, penalties include 

any unpaid additions to tax, additional 

taxes, and penalties. When non-section 

6166 interest accrues on unpaid estate 

tax deferred under section 6161 or 

section 6163, the interest expense is 

actually and necessarily incurred in the 

administration of the estate for purposes 

of paragraph (a) of this section because 

the extension was based on a 

demonstrated need to defer payment. 

When non-section 6166 interest accrues 

on and after the date of a decedent’s 

death on any unpaid tax or penalties in 

connection with an underpayment of 

tax or a deficiency, the interest expense 

generally is actually and necessarily 

incurred in the administration of the 

estate for purposes of paragraph (a) of 

this section. 

(iii) Exception. Notwithstanding 

paragraph (d)(1)(ii) of this section, nonsection 6166 interest accruing on 

unpaid tax and penalties on and after 

the decedent’s date of death, whether in 

connection with a deferral, 

underpayment, or deficiency, is not 

actually and necessarily incurred in the 

administration of the estate for purposes 

of paragraph (a) of this section and is 

not deductible to the extent the interest 

expense is attributable to an executor’s 

negligence, disregard of applicable rules 

or regulations (including careless, 

reckless, or intentional disregard of 

rules or regulations) as defined in 

§ 1.6662–3(b)(2) of this chapter, or fraud 

with intent to evade tax. Interest 

expense is attributable to an executor’s 

negligence, disregard of applicable rules 

or regulations, or fraud with intent to 

evade tax to the extent that the 

underlying deferral, underpayment, or 

deficiency, is attributable to such 

conduct by the executor. Similarly, even 

when the underlying deferral, 

underpayment, or deficiency is not 

attributable to such conduct by the 

executor, the interest expense is 

attributable to an executor’s negligence, 

disregard of the rules or regulations, or 

fraud with intent to evade tax to the 

extent the subsequent accrual of interest 

is attributable to such conduct by the 

executor. 

(iv) Examples. The following 

examples illustrate the application of 

this paragraph (d)(1). In each example, 

the decedent (D) dies on October 1, Year 

1, and the estate tax return is due July 

1 of the following calendar year, Year 2. 

In each example, except as expressly 

stated, there is no negligence, disregard 

of applicable rules or regulations, or 

fraud on the part of the executor. 

(A) Example 1. On July 1, Year 2, the 

executor of D’s estate (E) timely files the 

estate tax return based on values 

determined in good faith and pays 

$500,000, which is the estate tax shown 

on the return. Upon examination, the 

Internal Revenue Service (IRS) makes an 

adjustment to the value of an asset 

includible in the gross estate, resulting 

in a $25,000 increase in estate tax due. 

E initially contests the adjustment, but 

eventually agrees to the assessment of 

the deficiency in the amount of $25,000. 

Interest on the deficiency is payable 

under section 6601 in the amount of $X. 

E makes a payment in satisfaction of the 

assessed deficiency and interest. For 

purposes of paragraph (a) of this section, 

the interest expense in the amount of $X 

is considered actually and necessarily 

incurred in the administration of D’s 

estate, and its deduction reduces the 

amount of the deficiency. 

(B) Example 2. The executor of D’s 

estate (E) files the estate tax return and 

pays the estate tax shown on the return 

($500,000) on July 1 of Year 3, one year 

after the due date. On August 1, Year 3, 

the IRS assesses interest on the unpaid 

tax under section 6601 in the amount of 

$X, assesses late filing and late payment 

penalties in accordance with section 

6651 in the amount of $Y, and issues a 

notice and demand for payment of $X 

and $Y. On August 1, Year 4, E makes 

payment to the IRS of $Z, which is the 

total amount due for $X and $Y, as well 

as interest that accrued on these 

amounts from August 1, Year 3, to 

August 1, Year 4, payable under section 

6601. The facts establish that E’s failure 

to timely file the return and timely pay 

the tax and failure to pay the assessed 

interest and penalties within the period 

provided in the notice and demand is a 

result of E’s disregard of the rules for 

filing the return and paying the tax and 

any assessed penalties. Under the facts 

in this paragraph (d)(1)(iv)(B), neither 

the interest payable under section 6601 

that accrued on the unpaid tax before 

notice and demand nor the interest that 

accrued on the unpaid tax and penalties 

after notice and demand is an expense 

that is actually and necessarily incurred 

in the administration of D’s estate for 

purposes of paragraph (a) of this section. 

(C) Example 3. Prior to D’s death, the 

IRS had assessed an income tax 

deficiency against D for the 2009 tax 

period in the amount of $75,000, and 

penalties in the amount of $X. The 

assessed tax and penalties remained 

unpaid on D’s date of death. On July 1, 

Year 2, the executor of D’s estate (E) 

timely files the estate tax return and 

timely pays the estate tax shown on the 


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Federal Register / Vol. 87, No. 123 / Tuesday, June 28, 2022 / Proposed Rules 38341 

return to be due. On the same date, E 

also pays all claims against and 

liabilities of the estate, except for the 

assessed income tax deficiency and 

penalties for the 2009 tax period. 

Despite E’s awareness that the estate 

had sufficient liquidity and funds to 

satisfy all estate liabilities, including the 

2009 income tax deficiency and 

penalties, E does not pay the assessed 

income tax deficiency, penalties, and 

accrued interest until July 1, Year 4. E’s 

failure to pay the assessed income tax 

deficiency and penalties for the 2009 tax 

period is a result of E’s disregard of 

applicable rules or regulations. Even 

though the underlying income tax 

deficiency is not attributable to E’s 

negligence, disregard of applicable 

rules, or fraud with intent to evade tax, 

the interest that accrued after July 1, 

Year 2, on the assessed deficiency and 

penalties is attributable to E’s disregard 

of applicable rules or regulations. 

Accordingly, the post-July 1, Year 2, 

interest is not an expense that is 

actually and necessarily incurred in the 

administration of D’s estate. 

(2) Interest expense on certain loan 

obligations of the estate. Interest on a 

loan entered into by the estate to 

facilitate the payment of the estate’s tax 

and other liabilities or the 

administration of the estate may be 

deductible depending on all the facts 

and circumstances. To be a deductible 

administration expense, interest 

expense must arise from an instrument 

or contractual arrangement that 

constitutes indebtedness under 

applicable income tax regulations and 

general principles of Federal tax law. In 

addition, the interest expense and the 

loan to which interest expense relates 

must satisfy the requirement of 

§ 20.2053–1(b)(2) that they are bona fide 

in nature based on all the facts and 

circumstances. Further, both the loan to 

which the interest expense relates and 

the loan terms must be actually and 

necessarily incurred in the 

administration of the decedent’s estate 

and must be essential to the proper 

settlement of the decedent’s estate. See 

paragraph (a) of this section. If the facts 

and circumstances establish that the 

interest expense arises from an 

instrument or contractual arrangement 

that constitutes indebtedness under 

general principles of Federal tax law, 

factors that collectively may support a 

finding that the interest expense also 

satisfies the additional requirements 

under § 20.2053–1(b)(2) and paragraph 

(a) of this section include, but are not 

limited to, the following: 

(i) The interest rate on and the terms 

of the underlying loan (whether 

between related or unrelated parties), 

including any prepayment penalty, are 

reasonable given all the facts and 

circumstances and comparable to an 

arms-length loan transaction; 

(ii) The underlying loan is entered 

into by an executor of the decedent’s 

estate acting in the capacity of executor 

or, if no executor is appointed and 

acting, the person accountable for 

satisfying the liabilities of the estate; 

(iii) The lender properly includes 

amounts of paid and/or accrued interest 

(including original issue discount as 

determined under sections 1271 through 

1275 and the regulations in this part 

under those sections, such as original 

issue discount attributable to stated 

interest that is treated as part of the 

stated redemption price at maturity 

because it is not payable at least 

annually) in gross income for Federal 

income tax purposes, particularly if the 

lender is a family member of the 

decedent, a related entity, or a 

beneficiary of the decedent’s estate or 

trust (as defined in § 20.2053– 

1(b)(2)(iii)); 

(iv) The loan proceeds are used to 

satisfy estate liabilities that are essential 

to the proper settlement of the estate, 

including, but not limited to, the 

Federal estate tax liability; 

(v) The loan term and payment 

schedule correspond to the estate’s 

anticipated ability to make the 

payments under, and to satisfy, the loan, 

and the loan term does not extend 

beyond what is reasonably necessary; 

(vi) The only practical alternatives to 

the loan are the sale of estate assets at 

prices that are significantly belowmarket, the forced liquidation of an 

entity that conducts an active trade or 

business, or some similar financially 

undesirable course of action; 

(vii) The underlying loan is entered 

into when the estate’s liquid assets are 

insufficient to satisfy estate liabilities, 

the estate does not have control (within 

the meaning of section 2701(b)(2)) of an 

entity that has liquid assets sufficient to 

satisfy estate liabilities, the estate has no 

power to direct or compel an entity in 

which it has an interest to sell liquid 

assets to enable the estate to satisfy its 

liabilities, and the estate’s assets are 

expected to generate sufficient cash flow 

or liquidity to make the payments 

required under the loan; 

(viii) The estate’s illiquidity does not 

occur after the decedent’s death as a 

result of the decedent’s testamentary 

estate plan to create illiquidity; 

similarly, the illiquidity does not occur 

post-death as a deliberate result of the 

action or inaction of the executor who 

then had both knowledge or reason to 

know of the estate tax liability and a 

reasonable alternative to that action or 

inaction that could have avoided or 

mitigated the illiquidity; 

(ix) The lender is not a beneficiary of 

a substantial portion of the value of the 

estate, and is not an entity over which 

such a beneficiary has control (within 

the meaning of section 2701(b)(2)) or the 

right to compel or direct the making of 

the loan; 

(x) The lender or lenders are not 

beneficiaries of the estate whose 

individual share of liability under the 

loan is substantially similar to his or her 

share of the estate; and 

(xi) The decedent’s estate has no right 

of recovery of estate tax against, or of 

contribution from, the person loaning 

the funds. 

* * * * * 

(f) Applicability date. The rules of this 

section apply to the estates of decedents 

dying on or after [date of publication of 

the final rule in the Federal Register]. 

■ Par. 4. Section 20.2053–4 is amended 

by: 

■ 1. Revising paragraphs (b)(1)(iv), 

(b)(2), and (c)(1)(iv) and (v), the second 

sentence of paragraph (c)(3), paragraph 

(d)(5), and paragraph (d)(7)(iii) 

introductory text. 

■ 2. In paragraph (d)(7)(iii), Examples 1 

through 9 are designated as paragraphs 

(d)(7)(iii)(A) through (I), respectively. 

■ 3. In newly designated paragraph 

(d)(7)(iii)(A), removing ‘‘decision,’’ and 

‘‘§ 20.2053–3(c) or § 20.2053–3(d)(3)’’ 

adding ‘‘decision.’’ and ‘‘§ 20.2053–3(c) 

or (d)(3)’’ in their places, respectively. 

■ 4. In newly designated paragraphs 

(d)(7)(iii)(B) and (C), removing 

‘‘payment,’’, ‘‘Example 1’’, and 

‘‘§ 20.2053–3(c) or § 20.2053–3(d)(3)’’ 

and adding ‘‘payment.’’, ‘‘paragraph 

(d)(7)(iii)(A) of this section (Example 

1)’’, and ‘‘§ 20.2053–3(c) or (d)(3)’’ in 

their places, respectively. 

■ 5. In newly designated paragraph 

(d)(7)(iii)(D), removing ‘‘defendants,’’, 

‘‘Example 1’’, and ‘‘§ 20.2053–3(c) or 

§ 20.2053–3(d)(3)’’ and adding 

‘‘defendants.’’, ‘‘paragraph (d)(7)(iii)(A) 

of this section (Example 1)’’, and 

‘‘§ 20.2053–3(c) or (d)(3)’’ in their 

places, respectively. 

■ 6. In newly designated paragraph 

(d)(7)(iii)(E), removing ‘‘payment,’’, 

‘‘Example 1’’, and ‘‘§ 20.2053–3(c) or 

§ 20.2053–3(d)(3)’’ and adding 

‘‘payment.’’, ‘‘paragraph (d)(7)(iii)(A) of 

this section (Example 1)’’, and 

‘‘§ 20.2053–3(c) or (d)(3)’’ in their 

places, respectively. 

■ 7. In newly designated paragraph 

(d)(7)(iii)(F), removing ‘‘claims,’’ and 

‘‘§ 20.2053–3(c) or § 20.2053–3(d)(3)’’ 

and adding ‘‘claims.’’ and ‘‘§ 20.2053– 

3(c) or (d)(3)’’ in their places, 

respectively. 


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■ 8. In newly designated paragraph 

(d)(7)(iii)(G), removing ‘‘enforceability,’’ 

and adding ‘‘enforceability.’’ in its 

place. 

■ 9. In newly designated paragraph 

(d)(7)(iii)(H), removing ‘‘estate,’’ and 

adding ‘‘estate.’’ in its place. 

■ 10. In newly designated paragraph 

(d)(7)(iii)(I), removing ‘‘satisfaction,’’ 

and adding ‘‘satisfaction.’’ in its place. 

■ 11. Adding paragraph (d)(7)(iii)(J). 

■ 12. Revising paragraph (f). 

The revisions and addition read as 

follows: 

§ 20.2053–4 Deduction for claims against 

the estate. 

* * * * * 

(b) * * * 

(1) * * * 

(iv) The value of each such claim 

against the estate is supported by a 

written appraisal document to be filed 

with the Form 706, United States Estate 

(and Generation-Skipping Transfer) Tax 

Return, or successor form, and the 

written appraisal document— 

(A) Adequately reflects post-death 

events that have occurred prior to the 

date on which a deduction is claimed 

on an estate’s Form 706; 

(B) Reports, considers, and 

appropriately weighs all relevant facts 

and elements of value as are known or 

are reasonably determinable at the time 

of the appraisal, including the 

underlying facts of the claim against the 

estate, potential litigating risks, and the 

current status of the claim and 

procedural history; 

(C) Takes into account post-death 

events reasonably anticipated to occur; 

(D) Identifies an expected date or 

dates of payment (for purposes of 

determining the applicability of the 

present value limitation in § 20.2053– 

1(d)(6)); 

(E) Explains in detail the methods and 

analysis that support the appraisal’s 

conclusions; 

(F) Is prepared, signed under 

penalties of perjury, and dated by a 

person who is qualified by knowledge 

and experience to appraise the claim 

being valued and is not a family 

member of the decedent, a related 

entity, or a beneficiary of the decedent’s 

estate or revocable trust (as those terms 

are defined in § 20.2053–1(b)(2)(iii)), a 

family member of a beneficiary or a 

related entity as to a beneficiary (as 

those terms would be defined in 

§ 20.2053–1(b)(2)(iii) if references 

therein to the decedent were replaced 

with a reference to such beneficiary, and 

without regard to the limitations in 

§ 20.2053–1(b)(2)(iii) based on the 

decedent’s date of death), or an 

employee or other owner of any of them; 

and 

(G) Includes a statement providing the 

basis for the person’s qualifications to 

appraise the claim being valued; 

* * * * * 

(2) Limitation on deduction. The 

deduction under this paragraph (b) is 

limited to the value of the related claims 

or particular assets included in 

decedent’s gross estate. See § 20.2053– 

1(d)(6)(v) for the impact of the present 

value limitation. 

* * * * * 

(c) * * * 

(1) * * * 

(iv) The value of each such claim 

against the estate is supported by a 

written appraisal document to be filed 

with the Form 706, United States Estate 

(and Generation-Skipping Transfer) Tax 

Return, or successor form, and the 

written appraisal document— 

(A) Adequately reflects post-death 

events that have occurred prior to the 

date on which a deduction is claimed 

on an estate’s Form 706; 

(B) Reports, considers and 

appropriately weighs all relevant facts 

and elements of value as are known or 

reasonably determinable at the time of 

the appraisal, including the underlying 

facts of the claim against the estate, 

potential litigating risks, and the current 

status of the claim and procedural 

history; 

(C) Takes into account post-death 

events reasonably anticipated to occur; 

(D) Identifies an expected date or 

dates of payment (for purposes of 

determining the applicability of the 

present value limitation in § 20.2053– 

1(d)(6)); 

(E) Explains in detail the methods and 

analysis that support the appraisal’s 

conclusions; 

(F) Is prepared, signed under 

penalties of perjury, and dated by a 

person who is qualified by knowledge 

and experience to appraise the claim 

being valued, and is not a family 

member of the decedent, a related 

entity, or a beneficiary of the decedent’s 

estate or revocable trust (as those terms 

are defined in § 20.2053–1(b)(2)(iii)), a 

family member of a beneficiary or a 

related entity as to a beneficiary (as 

those terms would be defined in 

§ 20.2053–1(b)(2)(iii) if references 

therein to the decedent were replaced 

with a reference to such beneficiary, and 

without regard to the limitations in 

§ 20.2053–1(b)(2)(iii) based on the 

decedent’s date of death), or an 

employee or other owner of any of them; 

and 

(G) Includes a statement providing the 

basis for the person’s qualifications to 

appraise the claim being valued; 

(v) The total amount deducted by the 

estate under paragraph (c) of this section 

does not exceed $500,000 (see 

§ 20.2053–1(d)(6)(v) for the impact of 

the present value limitation); 

* * * * * 

(3) * * * Assume that each claim is 

paid within three years after the 

decedent’s death, and that the value of 

each claim is determined from a written 

appraisal document that meets the 

requirements of paragraph (c)(1)(iv) of 

this section. * * * 

(d) * * * 

(5) Claims founded upon a promise— 

(i) In general. To be deductible, a claim 

founded on a promise must represent a 

personal obligation of the decedent 

existing at the time of the decedent’s 

death, and the claim must be 

enforceable against the decedent’s 

estate. In addition, except with regard to 

pledges or subscriptions (see § 20.2053– 

5), the deduction for a claim founded 

upon a promise or agreement is limited 

to the extent that the promise or 

agreement was bona fide and in 

exchange for adequate and full 

consideration in money or money’s 

worth; that is, the promise or agreement 

must have been bargained for at arm’s 

length and the price must have been an 

adequate and full equivalent reducible 

to money value. 

(ii) Decedent’s promise to guarantee a 

debt. A deduction for a claim founded 

upon a decedent’s agreement to 

guarantee a debt of another is a claim 

founded on a promise and is subject to 

the limitation in paragraph (d)(5)(i) of 

this section. For purposes of section 

2053, a decedent’s agreement to 

guarantee a debt of an entity in which 

the decedent had an interest at the time 

the guarantee was given satisfies the 

requirement that the agreement be in 

exchange for adequate and full 

consideration in money or money’s 

worth if, at the time the guarantee was 

given, the decedent had control (within 

the meaning of section 2701(b)(2)) of the 

entity. Alternatively, this requirement is 

satisfied to the extent the maximum 

liability of the decedent under the 

guarantee did not exceed, at the time the 

guarantee was given, the fair market 

value of the decedent’s interest in the 

entity. The bona fide nature of the 

decedent’s agreement to guarantee a 

debt of a family member, a related 

entity, or a beneficiary (as defined in 

§ 20.2053–1(b)(2)(iii)) is determined in 

accordance with § 20.2053–1(b)(2)(ii). 

For a claim otherwise deductible under 

this paragraph (d)(5)(ii), the estate’s 

right of contribution or reimbursement 

will reduce the amount deductible in 

accordance with § 20.2053–1(d)(3). 

Payments made pursuant to the 

decedent’s guarantee of a debt are 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 87, No. 123 / Tuesday, June 28, 2022 / Proposed Rules 38343 

1OSHA’s standard for lead in general industry 

expresses blood lead in units of mg/100g of whole 

blood. The standard for lead in construction 

expresses blood lead in units of mg/dL, which the 

agency explained is essentially equivalent to mg/ 

100g of whole blood (29 CFR 1926.62, Appendix A, 

II.B.3: Health Protection Goals of the Standard). For 

simplicity, this ANPRM expresses blood lead in 

units of mg/dL throughout. 

deductible only to the extent that the 

debt for which the guarantee is given 

has not been taken into account in 

computing the value of the gross estate 

under § 20.2053–7 or otherwise. 

* * * * * 

(7) * * * 

(iii) The claimant (C) is not a family 

member, related entity, or beneficiary of 

the estate of decedent (D), unless 

otherwise provided, and is not the 

executor (E). 

* * * * * 

(J) Example 10: Guarantee. On Date 1, 

D entered into a guarantee agreement 

with Bank (C) to secure financing for a 

closely-held business (LLC) in which D 

had a controlling interest. LLC was 

solvent at the time LLC executed a 

promissory note in the amount of $100x 

in favor of C. Prior to D’s death, LLC 

became insolvent and stopped making 

payments on the note. After D’s death, 

C filed a claim against D’s estate for 

payment of the remaining balance due 

under the note and E paid the full 

amount due. Although E had a right of 

contribution against LLC for primary 

payment of the indebtedness, LLC was 

insolvent and no part of the debt was 

collectible at the time E deducted the 

payment. D’s estate may deduct the 

amount paid to C in satisfaction of D’s 

liability under the guarantee agreement. 

The guarantee agreement is considered 

to have been contracted for an adequate 

and full consideration in money or 

money’s worth. The result would be the 

same if D did not have control of LLC 

as long as the fair market value of D’s 

interest in the LLC on Date 1 was at least 

$100x. 

* * * * * 

(f) Applicability date. The rules of this 

section apply to the estates of decedents 

dying on or after [date of publication of 

the final rule in the Federal Register]. 

Paul J. Mamo, 

Acting Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2022–13706 Filed 6–24–22; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF LABOR 

29 CFR Parts 1910 and 1926 

[Docket No. OSHA–2018–0004] 

RIN 1218–AD10 

Advance Notice of Proposed Rule 

Making (ANPRM)—Blood Lead Level 

for Medical Removal 

AGENCY: Occupational Safety and Health 

Administration (OSHA), Labor. 

ACTION: Advance Notice of Proposed 

Rulemaking (ANPRM). 

SUMMARY: OSHA is considering 

rulemaking to revise its standards for 

occupational exposure to lead based on 

medical findings since the issuance of 

OSHA’s lead standards that adverse 

health effects in adults can occur at 

Blood Lead Levels (BLLs) lower than the 

medical removal level (≥60 mg/dL in 

general industry, ≥50 mg/dL in 

construction) and lower than the level 

required under current standards for an 

employee to return to their former job 

status (<40 mg/dL).1 The agency is 

seeking input on reducing the current 

BLL triggers in the medical surveillance 

and medical removal protection 

provisions of the general industry and 

construction standards for lead. The 

agency is also seeking input about how 

current ancillary provisions in the lead 

standards can be modified to reduce 

worker BLLs. 

DATES: Submit comments on or before 

August 29, 2022. 

ADDRESSES: You may submit comments 

and attachments, identified by Docket 

No. OSHA–2018–0004, electronically at 

www.regulations.gov, which is the 

Federal e-Rulemaking Portal. Follow the 

instructions online for making 

electronic submissions. 

Instructions: All submissions must 

include the agency’s name and the 

docket number for this ANPRM (Docket 

No. OSHA–2018–0004). When 

uploading multiple attachments into 

Regulations.gov, please number all of 

your attachments because 

www.regulations.gov will not 

automatically number the attachments. 

For example, Attachment 1—title of 

your document, Attachment 2—title of 

your document, Attachment 3—title of 

your document, etc. When submitting 

comments or recommendations on the 

issues that are raised in this ANPRM, 

commenters should explain their 

rationale and, if possible, provide data 

and information to support their 

comments or recommendations. 

Wherever possible, please indicate the 

title of the person providing the 

information and the type and number of 

employees at your worksite. 

All comments, including any personal 

information you provide, will be placed 

in the public docket without change and 

will be publicly available online at 

www.regulations.gov. Therefore, OSHA 

cautions commenters about submitting 

information they do not want to be 

made available to the public or 

submitting materials that contain 

personal information (either about 

themselves or others) such as Social 

Security Numbers and birthdates. 

Docket: To read or download 

comments or other material in the 

docket, go to Docket No. OSHA–2018– 

0004 at www.regulations.gov. All 

comments and submissions are listed in 

the www.regulations.gov index; 

however, some information (e.g., 

copyrighted material) is not publicly 

available to read or download through 

that website. All submissions, including 

copyrighted material, are available for 

inspection at the OSHA Docket Office. 

Documents submitted to the docket by 

OSHA or stakeholders are assigned 

document identification numbers 

(Document ID) for easy identification 

and retrieval. The full Document ID is 

the docket number plus a unique fourdigit code. OSHA is identifying 

supporting information in this ANPRM 

by author name and publication year, 

when appropriate. This information can 

be used to search for a supporting 

document in the docket at https://

www.regulations.gov. Contact the OSHA 

Docket Office at 202–693–2350 (TTY 

number: 877–889–5627) for assistance 

in locating docket submissions. 

FOR FURTHER INFORMATION CONTACT:

Press Inquiries: Contact Frank 

Meilinger, Director, Office of 

Communications, U.S. Department of 

Labor; telephone (202) 693–1999; email 

meilinger.francis2@dol.gov. 

General and technical information: 

Contact Andrew Levinson, Acting 

Director, Directorate of Standards and 

Guidance, U.S. Department of Labor; 

telephone (202) 693–1950; email 

Levinson.andrew@dol.gov. 

SUPPLEMENTARY INFORMATION: The 

Supplementary Information section 

follows this outline: 

Table of Contents 

I. Background 

A. Events Leading to This Action 

B. Industry Profile Information 

C. Health Effects of Lead Exposure 

II. Request for Input 

A. Blood Lead Triggers for Medical 

Removal Protection 

B. Medical Surveillance Provisions 

C. Permissible Exposure Limit (PEL) 

D. Personal Protective Equipment (PPE), 

Hygiene, and Training 

E. Safe Harbor Compliance Protocols 

F. Environmental Effects 

G. Duplicative, Overlapping, or Conflicting 

Rules 


khammond on DSKJM1Z7X2PROD with PROPOSALS