ESTATE TAX RETURNS

SUMMARY DATA

There are 25,904 estate tax returns for estates of citizens and aliens, which were filed during the calendar year 1949. The total gross estate value reported is $4,957,726,000, the net estate value $2,126,183,000, and estate tax $570,828,000. As compared with data tabulated for the previous year, there is an increase of 1,523 returns, or 6.2 percent; gross estate increase of $166,677,000, or 3.5 percent; net estate decrease of $471,014,000, or 18.1 percent; and tax decrease of $145,704,000, or 20.3 percent.

The 1,352 returns for estates of nonresident aliens show gross estate value of $24,511,000, net estate of $19,356,000, and estate tax of $3,407,000.

The 24,552 returns for estates of citizens and resident aliens show gross estate value of $4,933,215,000, which includes $661,362,000 reported on 7,083 nontaxable returns. The 17,469 taxable returns show gross estate of $4,271,852,000, net estate of $1,626,403,000 subject to basic tax and $2,106,422,000 subject to the additional tax, and tax liability of $567,421,000. The effective tax rate for all taxable returns is 26.9 percent.

Tax credits for State inheritance taxes of $65,831,000, for Federal gift taxes of $562,000, and for foreign death duties of $1,047,000 are claimed against the gross basic and additional taxes. The aggregate of these credits represents 10.6 percent of the combined gross basic and additional taxes.

ESTATE TAX RETURNS INCLUDED

Estate tax returns, Form 706, used for this report are those for estates of citizens and aliens filed during the calendar year 1949, regardless of the date of death of the individual or the revenue act under which the estate is taxed, excluding returns which show a gross estate value below the statutory amount for which a return is required under the revenue act in effect at time of death. Of the 24,552 returns for estates of citizens and resident aliens, 20,681 show date of death on or after January 1, 1948, and are taxed under the 1948 act; 3,812 show date of death in the period October 22, 1942 through December 31, 1947, and are taxed under the 1942 act; the remaining 59 returns are taxed under earlier acts-15 under the 1941 act, 11 under the 1940 act, 27 under the 1935 act, 3 under the 1932 act, and 3 under the 1926 act. No cognizance is given to the act under which the 1,352 returns for estates of nonresident aliens are taxed nor to the date of death shown on these returns, other than to ascertain that there is one return for estate of a nonresident citizen who died prior to May 11, 1934. Previous to this date the estate of a nonresident citizen is subject to the same provisions as apply to the estate of a nonresident alien.

ESTATE TAX LAW

The Federal estate tax, imposed under chapter 3 of the Internal Revenue Code, is neither a property nor an inheritance tax. It is imposed upon the transfer of the entire net estate, not upon any particular legacy, devise, or distributive share, and the transfer of property is taxable although it escheats to the State for lack of heirs.

basic tax, (b) an additional estate tax which is the excess of a tentative tax over the basic tax, and (c) the defense tax restricted to the estates filed under the 1940 act. Both the basic tax and the tentative tax are computed at graduated rates. The basic tax provisions specify rates from 1 percent of the net estate not in excess of $50,000 increasing to 20 percent of the amount over $10,000,000. The tentative tax rates, in effect on and after September 21, 1941, are 3 percent of the net estate not in excess of $5,000, progressing to 77 percent of the amount in excess of $10,000,000. Estate tax under acts prior to the 1932 act corresponds, in general, to the basic tax under the 1932 act and is tabulated as basic tax in the tables for estate tax data. A résumé of the principal estate tax provisions including rates, credits, and specific exemption, applicable under each act from 1916 through 1948, is given on pages 448-452.

An estate tax return is required for the estate of every individual whose gross estate value at date of death exceeds the amount of specific exemption allowable under the act in effect at time of death. Under the 1942 and subsequent acts, an estate tax return is required for the estate of a citizen or resident alien, if the value of the gross estate at date of death exceeds $60,000, while under the 1935 act a return is required if the gross estate exceeds $40,000, and under the 1934 act a return is required if the gross estate exceeds $50,000. Under earlier acts, a return is required for the estate of a resident citizen and resident alien if the value thereof exceeds $50,000 under the 1932 act, $100,000 under the 1926 act, and $50,000 under the 1924 or prior acts. Under the 1942 act, the increase from $40,000 to $60,000 in gross estate value for which a return is required is the result of an equivalent increase in specific exemption. The increased specific exemption compensates in some measure for the provision that life insurance not in excess of $40,000 payable to beneficiaries other than the estate, formerly excluded, is included in the gross estate under the 1942 and subsequent acts.

An estate tax return is required for the estate of a nonresident alien who died on or after October 22, 1942, only if the part of his gross estate (as defined by statute) situated in the United States exceeds $2,000 in value at time of death. However, if death occurred before this date, a return is required if any part of the gross estate, regardless of value, is situated in the United States. The estate of a nonresident citizen who died prior to May 11, 1934, also is subject to the latter requirement.

The estate tax return is due 15 months after the date of death; however, an extension of time for filing may be granted by the Commissioner of Internal Revenue. The return for the estate of a resident decedent must be filed with the collector in whose district the decedent had his domicile at time of death; and the return for the estate of a nonresident decedent must be filed with the collector in whose district the gross estate in the United States is situated. Regardless of when the return is filed, the estate is subject to the statutory provisions in effect at date of death.

The Revenue Act of 1948, dated April 2, 1948, amended the estate tax provisions of the Code in several respects, among which are:

(a) Repeal of the provisions requiring the entire value of community property to be included in the gross estate, with the result that only

the gross estate of an individual who died on or after January 1, 1948. However, the estate tax liability on an estate of an individual whose death occured on or after January 1, 1948, but before April 3, 1948, shall not exceed that which would be imposed under the 1942 act.

(b) A deduction, referred to as a marital deduction, is allowed for the computation of the net estate of a citizen or resident alien whose death occurred after December 31, 1947. The marital deduction is allowed with respect to certain property interests included in the gross estate which pass or have passed from the decedent to the surviving spouse and which qualify for such deduction, but the deduction cannot exceed 50 percent of the adjusted gross estate value.

(c) Deduction for property previously taxed cannot include property received from a spouse who died after December 31, 1947, nor property received as gifts after April 2, 1948, from a donor who at time of gift was the decedent's spouse, nor property acquired in exchange for either. If the property received by gift from other married persons was considered to bave been made one-half by the donor and one-half by the donor's spouse, then one-half of the gift shall be considered as received by the decedent from each such spouse.

(d) Credit allowed against the estate tax for gift taxes paid under the gift tax provisions of the 1932 act with respect to property included in the gross estate is limited, as under the estate tax provisions prior to the 1948 act, to the smaller of: (1) the amount of gift tax paid in respect to such gifts, or (2) the amount of basic and additional estate taxes attributable to such gifts. In computing the limitations for this credit under the 1948 act, however, the value of gifts included in the gross estate is reduced so as to give effect to the gift tax provisions for the marital deduction respecting gifts to spouse and for the "split gifts" made to third parties, as well as to the estate tax provision for marital deduction.

BASIC ITEMS

Gross estate for estates of citizens and resident aliens consists of real estate, tangible personal property, and intangible personal property. Under each category there is tabulated the vaue of jointly owned property, property transferred during the decedent's life, property subject to and/or transferred under powers of appointment, property previously taxed, and miscellaneous property. The amount tabulated for each is the value as reported in the gross estate for estate tax purposes.

The value of gross estate may be determined, either as of the date of death or as of the date 1 year after death, at the election of the executor, under the 1935 and subsequent acts. When the value subsequent to date of death is elected, it is referred to as the optional value. Under the optional value, the entire gross estate is valued as of 1 year after death, except that property distributed, sold, exchanged, or otherwise disposed of within the year, is valued as of the date of disposition. The gross estate is tabulated at whatever value the executor used for tax purposes. This provision does not affect the minimum value of gross estate for which a return must be filed, the basis of which is the value at time of death. Under the 1934 and prior acts, the value of gross estate is determined as of the date of

In the case of jointly owned property, the entire property is prima facie a part of the decedent's gross estate. But it is not the intent of the statute there should be included a greater part thereof than is represented by an outlay of funds, which, in the first instance, were the decedent's own, or more than a fractional part equal to that of each of the other joint owners if none of them have parted with any consideration in its acquirement. Whether the entire jointly owned property, or any part, or none of it, enters into the make-up of gross estate depends on the actual circumstances of acquisition and of ownership.

Property transferred during the decedent's life by means other than a bona fide sale for adequate and full consideration in money or money's worth is subject to estate tax if the transfer is one of several types which include transfers in contemplation of death, transfers conditioned upon the decedent's death, transfers under which the decedent reserved or retained the use or possession of the property or income therefrom, transfers under which the decedent retained the right to designate who shall possess or enjoy the property or income therefrom, and transfers under which the enjoyment of the transferred property is subject, at decedent's death, to change through the exercise of power to alter, amend, revoke, or terminate.

All property subject to powers of appointment, with the exception of certain limited powers and certain powers created prior to October 22, 1942, is includible in gross estate, if the decedent had the power of appointment at time of death, or if he exercised or released the power during his lifetime in contemplation of death, by a disposition intended to take effect at or after death, or by a disposition under which he retained possession or enjoyment of the property, or the right to the income therefrom, or under which he retained the right to designate the persons who shall possess or enjoy the property or the income therefrom. However, if the decedent died prior to October 22, 1942, there is included only the property passing under a general power of appointment exercised by the decedent.

Property previously taxed includes property received by the decedent by gift within 5 years prior to death, or received by gift, bequest, or inheritance from any person who died within 5 years prior to the death of the decedent, or property acquired in exchange therefor, with respect to which a deduction is authorized because a gift tax was paid by the donor or an estate tax was paid in behalf of the prior estate.

The entire amount of life insurance is included in the gross estate under the 1942 and subsequent acts, whether receivable by the estate or by beneficiaries other than the estate. On returns for estates taxed under the 1941 and prior acts, a negligible number of returns show an amount of tax-exempt insurance receivable by beneficiaries other than the estate, not exceeding in aggregate $40,000 for any one estate. The 1942 act eliminated this exemption.

Marital deduction is authorized, under the 1948 act, in computing the net estate of citizens or resident aliens who died on or after January 1, 1948. The deduction is allowed with respect to property interests included in the gross estate, which pass or have passed from the decedent to the surviving spouse and which qualify for this de