[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.691(b)-1]

[Page 335-336]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.691(b)-1  Allowance of deductions and credit in respect to decedents.

    (a) Under section 691(b) the expenses, interest, and taxes described 
in sections 162, 163, 164, and 212 for which the decedent (or a prior 
decedent) was liable, which were not properly allowable as a deduction 
in his last taxable year or any prior taxable year, are allowed when 
paid:
    (1) As a deduction by the estate; or
    (2) If the estate was not liable to pay such obligation, as a 
deduction by the person who by bequest, devise, or inheritance from the 
decedent or by reason of the death of the decedent acquires, subject to 
such obligation, an interest in property of the decedent (or the prior 
decedent).

Similar treatment is given to the foreign tax credit provided by section 
33.

[[Page 336]]

For the purposes of subparagraph (2) of this paragraph, the right to 
receive an amount of gross income in respect of a decedent is considered 
property of the decedent; on the other hand, it is not necessary for a 
person, otherwise within the provisions of subparagraph (2) of this 
paragraph, to receive the right to any income in respect of a decedent. 
Thus, an heir who receives a right to income in respect of a decedent 
(by reason of the death of the decedent) subject to any income tax 
imposed by a foreign country during the decedent's life, which tax must 
be satisfied out of such income, is entitled to the credit provided by 
section 33 when he pays the tax. If a decedent who reported income by 
use of the cash receipts and disbursements method owned real property on 
which accrued taxes had become a lien, and if such property passed 
directly to the heir of the decedent in a jurisdiction in which real 
property does not become a part of a decedent's estate, the heir, upon 
paying such taxes, may take the same deduction under section 164 that 
would be allowed to the decedent if, while alive, he had made such 
payment.
    (b) The deduction for percentage depletion is allowable only to the 
person (described in section 691(a)(1)) who receives the income in 
respect of the decedent to which the deduction relates, whether or not 
such person receives the property from which such income is derived. 
Thus, an heir who (by reason of the decedent's death) receives income 
derived from sales of units of mineral by the decedent (who reported 
income by use of the cash receipts and disbursements method) shall be 
allowed the deduction for percentage depletion, computed on the gross 
income from such number of units as if the heir had the same economic 
interest in the property as the decedent. Such heir need not also 
receive any interest in the mineral property other than such income. If 
the decedent did not compute his deduction for depletion on the basis of 
percentage depletion, any deduction for depletion to which the decedent 
was entitled at the date of his death would be allowable in computing 
his taxable income for his last taxable year, and there can be no 
deduction in respect of the decedent by any other person for such 
depletion.