MAJOR CHARACTERISTICS

During the calendar year 1954, a total of 37,672 estate tax returns were filed for estates of citizens and alien decedents. Of these, 973 returns are for estate of nonresident alien decedents and these returns are discussed subsequently.

Returns for estates of citizens and resident alien decedents make up the bulk of returns. The 36,699 returns filed for citizens and residents are two and onehalf times the number of returns filed 10 years ago. Among the returns filed in 1954, there are 24,997 taxable estates with total gross estate of $6.3 billion. The 11,702 nontaxable returns have gross estate valued at $1.1 billion.

The 24,997 taxable estates have net estate of $3 billion subject to the additional tax and $2.3 billion subject to the basic tax. Approximately one-half of these estates have both an additional tax and a basic tax. Gross additional tax is $761 million and gross basic tax is $108 million. Tax credits reduce these to a net tax liability of $779 million.

Tax credits for State inheritance taxes of $86 million, Federal gift taxes of $2 million, and foreign death duties of $2 million are claimed against the gross basic and additional taxes. The total tax credits of $90 million represent slightly more than 10 percent of the combined gross basic and additional taxes of $869 million.

COMPOSITION OF GROSS ESTATE

The total value of gross estate is reported at $7.4 billion. The largest element in gross estate is that of corporate stock amounting to $3 billion which is 40 percent of the total gross estate. Stocks have always constituted the largest item in the gross estates of decedents as a whole. Real estate of $1.6 billion, representing 21 percent of the total gross, is the next largest item. If the value of bonds, $0.8 billion, is combined with that of stocks, then stocks and bonds comprise 51 percent of the total gross estate.

The gross estate value is less than $100,000 on 42 percent of the estate tax returns. Gross estate is appraised at $1 million or more on 714 returns which is 2 percent of the total returns filed.

Deductions of $4.6 billion are claimed against the total gross estate, nearly one-half of which, $2.2 billion, is for specific exemption. The next largest deduction, $1.3 billion, is the so-called marital deduction claimed for bequests to surviving spouse. Charitable bequests deducted amount to less than $0.4 billion.

Fifty-six percent of the decedents were married at time of death. The marital deduction is available to the estates of such decedents where property that qualifies for the deduction passes to the surviving spouse. Thirty-two percent of the returns are for the estates of widows and widowers.

Over two-thirds of the decedents were 65 years of age or over at time of death, many of whom were past 85. In fact, one of every 8 returns filed indicates that the individual had attained the age of 85 or more before death. There are 24,922 returns for the estates of men, 63 percent of whom were 65 years of age or more. 11,777 returns for estates of women show that 79 percent of the fair sex were 65 or more years of age at date of death.

The

ESTATE TAX LAW

Estate tax returns used for the tables in this report were filed during the calendar year 1954, but are subject. to the estate tax law in effect at date of death of the individual and, therefore, are filed under numerous acts amending the Code for specified periods of time. The majority of the returns are subject to the 1939 Code as amended by the 1950 and subsequent acts, prior to the enactment of the 1954 Code. The resume which follows states briefly the more important estate tax provisions of the 1939 Code as amended by the recent acts, affecting the estates of citizens and residents of the United States.

An estate tax return is required for the estate of every citizen or resident of the United States, whose gross estate value at date of death exceeds $60,000. The return is due, as well as the tax thereon, 15 months after the decedent's death. The returns must be filed in the office of the district director of internal revenue in whose district the decedent had his domicile at the time of his death. Extension of time for filing the return and for payment of the tax may be granted upon request.

Value of gross estate may be determined either as of the date of the decedent's death or under the optional valuation, whichever the executor may elect. The optional value is determined as of the date one year after death, except that property distributed, sold, exchanged, or otherwise disposed of within the year, is valued as of the date of disposition. This provision for optional valuation does not affect the minimum value of gross estate for which a return must be filed.

In the computation of net estate to be taxed, deductions from the value of gross estate are allowed for liabilities and indebtedness of the decedent existing at time of death, administrative expenses, losses during administration, property previously taxed, transfers for public, charitable, and religious uses, bequests to surviving spouse, and specific exemption. Of these, the deductions for property previously taxed and specific exemption differ for purposes of the basic tax and the additional tax.

Net estate is determined by taking the value of gross estate and deducting therefrom the amount of deductions authorized by statute for the basic tax and those authorized for the additional tax, resulting in a net estate for each tax base.

The estate tax is imposed on the transfer of the entire net estate and not on the share received by any particular beneficiary. Each estate is subject to two taxes: the basic estate tax and the additional estate tax. The basic tax applies to the net estate for basic tax, the computation of which allows deductions including a specific exemption of $100,000. The graduated basic tax rates begin at 1 percent of the first $50,000 of net estate for basic tax and increase by 1 percent at each tax bracket to a maximum of 20 percent of the net estate in excess of $10,000,000. The additional tax applies to the net estate for additional tax computed by use of authorized deductions which include a specific exemption of $60,000. The additional tax is the excess of a tentative tax, computed on the net estate for additional tax at the tentative tax rates, over the gross basic tax. The tentative tax rates begin at 3 percent of the first $5,000 of net estate for additional tax and increase irregularly to a maximum of 77 percent of net estate in excess of $10,000,000.

Tax credit is allowed against the gross basic tax for State inheritance taxes paid to any State, Territory, or possession of the United States, or to the District of Columbia, but can not exceed 80 percent of the basic tax. Also, tax credits are allowed against the basic tax for gift

gross estate and for foreign death duties paid on property situated in a foreign country and includible in gross estate. Two tax credits are allowed against the gross additional tax, those for gift taxes and foreign death duties paid on property includible in gross estate.

Members of the armed forces of World War II and of the combat zone of Korea who were killed in action or died as a result of wounds, injuries, or disease suffered while in line of duty are exempt from the additional

estate tax.

Estate tax provisions under the amendments of earlier acts vary somewhat from those stated above. Different provisions control the taxing of nonresident alien estates and are outlined briefly in the text pertaining to those

returns.

Bilateral death duty treaties are in effect between the United States and ten countries, the main purposes of which are to avoid the hardship of double taxation and to provide mutual administrative assistance. The principal means provided by the treaties for the relief of double taxation is a credit device.

RETURNS FROM WHICH DATA ARE
TABULATED

Statistical data are tabulated from estate tax returns, Forms 706 and 706NA, filed during the calendar year 1954 for the estates of residents and citizens of the United States and of nonresident aliens, without regard to the date of death of the individual whose estate is reported or to the revenue act under which the estate is filed. However, returns that show gross estate value less than the statutory amount of gross for which a return is required under the act in effect at time of death are not used.

Of the 36,699 returns for estates of citizens and residents, 36,471 returns show date of death on or after September 24, 1950, and are filed under the 1950 and subsequent acts prior to the 1954 Code; 161 returns show date of death in the period January 1, 1948 through September 23, 1950, and are filed under the 1948 act; 67 returns show date of death prior to January 1, 1948 and are filed under earlier acts-53 under the 1942 act, 1 under the 1941 act, 2 under the 1940 act, 9 under the 1935 act, and 2 under the 1934 act. The 973 returns for estates of nonresident aliens cover an even wider range in dates of death, some as early as 1920.

TABULATED DATA

Data for the estates of citizens and residents whose estate tax returns were filed during 1954 are presented in tables 1 through 8. Taxable and nontaxable returns are not merged in any of these tables. Limited information tabulated from estate tax returns filed for nonresident alien decedents is shown in table 9, which also carries historical data for estate tax returns filed in prior years. Statistics showing total gross estate and its components

erty reported. Also each deduction authorized against gross estate is listed, together with net estate, gross taxes, tax credits, and net tax liability. All of these data are tabulated separately for taxable and nontaxable returns, classified by the revenue act under which the return is filed.

Table 2 contains data from the taxable estate tax returns filed under the 1948 and subsequent acts only. Items of gross estate, deductions, net estate, and taxes (as in table 1) are distributed by 20 net estate before specific exemption classes.

Table 3 contains the same items as table 2, but these data are distributed by 15 gross estate classes.

Table 4 presents data from nontaxable estate tax returns filed under the 1948 and subsequent acts only. Gross estate and its nine types of property, authorized deductions against gross estate, and net estate before specific exemption are tabulated by 15 gross estate classes.

A frequency distribution of all estate tax returns is presented in table 5 which shows, by 22 net estate before specific exemption classes, the returns of married, divorced or separated, widowed, and unmarried decedents by 13 age groups. Taxable returns are tabulated separately from nontaxable returns.

In table 6, the number of returns and amount of net estate before specific exemption are tabulated separately for taxable and nontaxable returns, by age of the decedent and by size of net estate before specific exemption.

Number of returns and amount of gross estate are shown in table 7 by size of gross estate and taxable and nontaxable returns, cross-classified by age groups and sex of decedent.

In table 8, estate tax data are presented by the State or Territory in which the return was filed. These data include number of nontaxable returns and, for taxable returns, gross estate, net estate for additional tax, gross tentative tax, and net tax liability. In addition, there is shown the number of returns subject to the basic tax, as well as the net estate, gross basic tax, and State inheritance tax credit for this category of returns.

Table 9 presents significant data from estate tax returns filed in prior years, beginning with returns filed during 1945. Items of gross estate, selected deductions, net estate, and tax, for taxable and nontaxable returns combined, are shown for the estates of citizens and resident aliens. For the estates of nonresident aliens, only the number of returns, gross estate, net estate, and tax liability are available.

Throughout the tables, values in thousand dollars are rounded and, therefore, may not add to the totals.

NONRESIDENT ALIEN ESTATES

There are 973 estate tax returns for the estates of nonresident aliens, which were filed during 1954. Of these, 687 are taxable and 286 are nontaxable. Gross estate in the United States reported on these returns is valued at

is valued at $16.2 million, yielding an estate tax of $3.1 million.

Estate tax returns for nonresident aliens are not classified by applicable revenue acts nor by size of gross estate; however, it was ascertained that the gross estate is $100,000 or more on 40 taxable and 3 nontaxable returns, of which 34 taxable returns show a net estate of $100,000 or

more.

A return is required for the estate of every nonresident not a citizen of the United States if that part of his gross estate (as defined by statute) situated in the United States exceed $2,000 in value at date of death. If death occurred prior to October 22, 1942, a return is required regardless of the gross value. Return Forms 706 and 706NA are provided for the estates of nonresident aliens, the latter form being a simplified form which may be used under certain circumstances. The return is due 15 months after the date of decedent's death, but extension of time may be granted. The return must be filed with the district director of internal revenue in whose district the gross estate in the United States is situated.

The entire gross estate wherever situated is made up in the same way as that of a citizen. However, only the part of the gross estate situated in the United States is subject to tax, and this is the amount that is tabulated.

Gross estate in the United States, as defined by statute, consists of real estate and tangible personal property physically located in this country; stocks of corporations organized in or under the laws of the United States regardless of the location of the certificates; stock of foreign corporations and corporate or other bonds if the certificates of evidence are situated in the United States at time of death; intangible personal property the written evidence of which is not treated as the property itself, such as debts and open accounts, is includible only if the claim is enforceable against a resident of the United States or a domestic corporation; bank deposits and United States obligations issued prior to March 3, 1941, only if the nonresident alien decedent was engaged in business in the United States at time of death; obligations of the United States issued on or after March 3, 1941, owned by nonresident aliens engaged in business in the United States who died prior to October 21, 1951; and such obligations owned by all nonresident aliens who died on or after that date. Life insurance is not included. Death Duty Conventions (treaties) in effect. with ten foreign countries provide variations in type and situs of property to be included. Gross estate is valued. at date of death unless the executor elected to use the optional value.

Deductions, although not tabulated, are allowed the estate of a nonresident alien for that proportion of funeral and administrative expenses, debts, mortgages, and losses during administration that the value of gross estate situated in the United States bears to the entire gross estate wherever situated. In addition, deduction for property previously taxed is allowed where the gross

gift, bequest, or inheritance within 5 years prior to death, upon which gift tax or estate tax was previously paid. Charitable bequests may be deducted if the transfer was to a corporation or association organized in the United States or to trustees for use in the United States. Marital deduction is not available except in the case of a resident of France who died after October 16, 1949. Specific exemption of $2,000 is authorized for both basic tax and additional tax purposes, but under certain of the treaties, may be a prorated portion of the specific exemptions allowed citizens for basic tax and additional tax, thus resulting in larger exemptions. The prorated portions of exemption are based on the relation of gross estate situated in the United States to the entire gross estate wherever situated.

Net estate to be taxed is the excess of gross estate in the United States over the deductions allowed against that gross. If the nonresident alien's estate is subject to both basic and additional taxes, the net estate tabulated is the net estate for additional tax purposes.

Tax rates for estates of nonresident aliens are the same as those for citizens. Tax credits are allowable against the gross tax liability. Only the net tax liability is tabulated.

EXPLANATION OF CLASSIFICATIONS AND TERMS

Classification of Estate Tax Returns

Estate tax returns are classified as estates of citizens and residents of the United States and as estates of nonresident aliens; both are also classified as taxable and nontaxable returns. Returns for estates of citizens and residents are further classified by applicable revenue acts, by gross estate classes, by net estate before specific exemption classes, by age, sex, and marital status of decedent, and by States and Territories in which the returns were filed. In addition, returns subject to the basic tax are classified separately for one table.

Citizens and residents, and nonresident aliens.Estates of citizens in the United States or residing abroad at date of death and resident aliens are taxed under provisions differing from those governing the estates of nonresident aliens and are segregated for that reason.

Applicable revenue acts.-Estate tax returns of citizens and residents are classified according to the revenue act under which the estate is filed, that is, the act in effect on the date of death of the individual whose estate is reported. Returns filed under the 1950 and subsequent acts (date of death on or after September 24, 1950) are distinguished from those filed under the 1948 act (date of death in period January 1, 1948 through September 23, 1950); and returns filed under the 1942 and prior acts (date of death before January 1, 1948) although filed under different acts, are grouped together for this classification. None of the returns are filed under the 1932 or

Taxable and nontaxable returns.-This classification is based on the existence or nonexistence of a gross tax liability (whether basic or additional) before the allowance of tax credits for State inheritance taxes, Federal gift taxes, and foreign death duties.

Net estate before specific exemption classes.-These classes for estates of citizens and residents are based on the value of net estate plus the amount of specific exemption, the net estate and exemption for additional tax being used if the estate is subject to both basic and additional taxes. If the combined result is a negative amount or zero, the class is designated "No net estate” and appears as the first class under nontaxable returns.

Gross estate classes.-The value of the entire estate of citizens and residents serves as the base for this classification; the value may be either the date of death value or the optional value, whichever is elected by the executor for estate tax purposes.

Age of decedent.-Age of the citizen or resident decedent is determined from dates of birth and death, which are required data in the general information schedule of the return. When these data are not given, the age is unknown.

Marital status of decedent.-The classification by marital status of citizen and resident decedents at date of death as married, divorced or separated, widow or widower, and unmarried is determined from statements in the general information schedule. In some cases, the status is not specified.

Sex of decedent.-Classification of estates of men and of women is judged from the given name of the citizen. or resident decedent and any other relevant information.

Returns subject to basic tax. These returns are selected on the basis of an existing gross basic tax before tax credits, irrespective of the additional tax liability. This category of returns indicates estates of citizens and residents that are large enough to have a net estate remaining after allowable deductions including the $100.000 specific exemption authorized for purpose of the basic tax. It thus sets apart estates that pay the basic tax and are entitled to a tax credit for State inheritance taxes paid.

States and Territories.-This classification provides for the distribution of estate tax returns of citizens and residents by 48 States, Alaska, Hawaii, and the District of Columbia. The segregation of returns by States and Territories is determined by the location of the internal revenue district in which the estate tax return is filed. except that for Alaska and District of Columbia the segregation is determined by the residence (domicile) of the individual at time of death. Internal revenue districts. or groups of such districts, are coextensive with States and Territories, except that Alaska comprises a part of the internal revenue district of Washington and the District of Columbia is a part of the internal revenue district of Maryland. New York includes Puerto Rico and