¹For state law purposes, an estate would not be created following a death if, for example, a living trust containing dispositive provisions owned all of the decedent's property. Although such a trust would preclude a probate court from having jurisdiction over the administration of the decedent's property, the income tax rules applicable to the (then irrevocable) trust would be similar to those for an estate. Further, the trust could elect under Sec. 645 to be treated as an estate for income tax purposes. Two of the advantages of such an election are the opportunity for the trust to (1) choose a fiscal, rather than calendar, year-end and (2) avoid payment of estimated taxes for its first two tax years.

²An exception applies to income in respect of a decedent (IRD) property; such property takes a carryover basis under Sec. 1014(c)

³The Hubert regulations (Regs. Sec. 20.2056(b)-4) are beyond the scope of this article; for a discussion, see Whitlock, "Significant Recent Developments in Estate Planning," 31 The Tax Adviser 576 (August 2000), p. 577. These rules provide that an estate's marital or charitable deduction may be reduced by certain administration expenses if paid from the marital or charitable share. Practitioners should become familiar with these regulations and consider their potential effect on the decision to take deductions on Form 706 or 1041.

⁴Although the Federal estate income tax rate begins at 15%, the 39.6% rate is reached when income reaches $8,650 (for tax years ending in 2000). Accordingly, in all but the smallest estates (or larger estates with minimal income), the 39.6% rate will generally apply.

⁵State income taxes may increase this percentage.

⁶Lists of the various types of miscellaneous expenses and the form(s) on which to report them can be found in tax treatises.

⁷If the decedent was on the accrual basis, the income tax deduction would have been allowed before his death; thus, the deduction would not be again allowed to his estate or other successor-in-interest.

⁸See Sec. 213(c) for more information on this election.

⁹NOLs can also be carried out to estate beneficiaries in the estate's final year, if unused during estate administration.

¹⁰See Keene, "Maximizing Excess Deductions on Termination," 29 The Tax Adviser 472 (July 1998).