Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 58-69

1958-1 C.B. 254

Sec. 691

IRS Headnote

Circumstances under which the executor or administrator of an estate may deduct real estate taxes paid by the estate on real property not subject to administration.

Full Text

Rev. Rul. 58-69

Advice has been requested relative to the circumstances under which an executor or administrator of an estate is entitled to deduct real estate taxes paid by the estate on real property not subject to administration.

The question as to the deductibility of real estate taxes arises in those cases where such taxes are a charge against the property at the date of death of the decedent and are paid by the executor or administrator of the estate.

Section 691(b) of the Internal Revenue Code of 1954 provides that the amount of any deduction specified in section 164 (relating to taxes) in respect of a decedent which is not properly allowable to the decedent in respect of the taxable period in which falls the date of his death, or a prior period, shall be allowed to the estate of the decedent for the taxable year in which paid, if the estate is liable to discharge the obligation.

It is well established that the allowance of a deduction for payment of taxes must be based upon liability for such taxes. If the real estate was not subject to the possession of the executor, that is, not subject to administration, then the executor is entitled to a deduction for the real estate taxes paid by the estate only to the extent that such taxes were a charge against the real estate at the date of death of the decedent.

If under the laws of the particular jurisdiction the executor is not required to pay the real estate taxes and has not taken over the property under court order, but pays the taxes, he would not be entitled to a deduction for the taxes. However, if the payment by the executor was in behalf of a beneficiary of the estate who was or would be entitled to income from the estate, then the deduction would be allowable under section 661 of the Code if the payment of the taxes was made by the executor in lieu of a direct payment to the beneficiary.

In view of the foregoing, it is held that in those jurisdictions which require the executor or administrator of the estate of a decedent to pay real estate taxes which, prior to death of the decedent, have become a charge against the real estate of the decedent, the tax so paid by the executor or administrator is allowable under the provisions of section 691(b)(1)(A) of the Code as a deduction on the fiduciary income tax return of the estate for the taxable year in which paid. On the other hand, if the executor or administrator is not required to pay the taxes, but does so, then if the payment was in behalf of a beneficiary entitled to the income from the estate a deduction would be allowable under section 661 of the Code of made in lieu of a direct payment to the beneficiary.