Question

what self employment items are listed on schedule K of form 706

Answer 1

SCHEDULE K—Debts of the Decedent, and Mortgages and Liens:

Income vs. estate tax deduction. Taxes, interest, and business expenses accrued at the date of the decedent's death are deductible both on Schedule K and as deductions in respect of the decedent on the income tax return of the estate. If you choose to deduct medical expenses of the decedent only on the estate tax return, they are fully deductible as claims against the estate. If, however, they are claimed on the decedent's final income tax return under section 213(c), they also may not be claimed on the estate tax return. In this case, you also may not deduct on the estate tax return any amounts that were not deductible on the income tax return because of the percentage limitations.

Debts of the Decedent List under Debts of the Decedent only valid debts the decedent owed at the time of death. List any indebtedness secured by a mortgage or other lien on property of the gross estate under Mortgages and Liens. If the amount of the debt is disputed or the subject of litigation, deduct only the amount the estate concedes to be a valid claim. Generally, if the claim against the estate is based on a promise or agreement, the deduction is limited to the extent that the liability was contracted bona fide and for an adequate and full consideration in money or money's worth. However, any enforceable claim based on a promise or agreement of the decedent to make a contribution or gift (such as a pledge or a subscription) to or for the use of a charitable, public, religious, etc., organization is deductible to the extent that the deduction would be allowed as a bequest under the statute that applies. Certain claims of a former spouse against the estate based on the relinquishment of marital rights are deductible on Schedule K. For these claims to be deductible, all of the following conditions must be met. The decedent and the decedent's spouse must have entered into a written agreement relative to their marital and property rights. The decedent and the spouse must have been divorced before the decedent's death and the divorce must have occurred within the 3-year period beginning on the date 1 year before the agreement was entered into. It is not required that the agreement be approved by the divorce decree. The property or interest transferred under the agreement must be transferred to the decedent's spouse in settlement of the spouse's marital rights.

Property and income taxes. The deduction for property taxes is limited to the taxes accrued before the date of the decedent's death.

Allowable death taxes. If you elect to take a deduction for foreign death taxes under section 2053(d) rather than a credit under section 2014, the deduction is subject to the limitations described in section 2053(d) and its regulations.

Mortgages and Liens Under Mortgages and Liens list only obligations secured by mortgages or other liens on property included in the gross estate at its full value or at a value that was undiminished by the amount of the mortgage or lien. If the debt is enforceable against other property of the estate not subject to the mortgage or lien, or if the decedent was personally liable for the debt, include the full value of the property subject to the mortgage or lien in the gross estate under the appropriate schedule and deduct the mortgage or lien on the property on this schedule.

Notes and other obligations secured by the deposit of collateral, such as stocks, bonds, etc., also should be listed under Mortgages and Liens.