Internal Revenue Bulletin 2009-44 (PDF rendition): IRS Notices

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Bulletin No. 200
9-44
November 2, 2009
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2009–35, page 568.
Federal rates; adjusted federal rates; adjusted federal
long-termrateandthelong-termexemptrate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for November 2009.
Notice 2009–83, page 588.
Credit for carbon dioxide sequestration under section
45Q.This notice sets forth interim guidance, pending the is-
suance of regulations, relating to the credit for carbon diox-
ide sequestration under section 45Q of the Code. Specifically,
the notice provides guidance on determining eligibility for the
credit and the amount of the credit, as well as rules regarding
adequate security measures for secure geological storage of
carbon dioxide. The notice also sets forth a separate reporting
requirement.
EXEMPT ORGANIZATIONS
Announcement 2009–78, page 594.
The IRS has revoked its determination that Concerned Resi-
dents of Southeast, Inc., of Brewster, NY, qualifies as an or-
ganization described in sections 501(c)(3) and 170(c)(2) of the
Code.
ESTATE TAX
T.D. 9468, page 570.
Final regulations under section 2053 of the Code relate to the
amount deductible from a decedent’s gross estate for claims
against the estate. In addition, the regulations update the pro-
visions relating to the deduction for certain state death taxes
to reflect the statutory amendments made in 2001 to sections
2053(d) and 2058.
Notice 2009–84, page 592.
This notice provides a limited administrative exception to the
ability of the Service to examine a Form 706,United States
Estate (and Generation-Skipping Transfer) Tax Return,incon-
nection with certain Code section 2053 protective claims for
refund filed within the time prescribed in section 6511(a).
GIFT TAX
T.D. 9460, page 584.
Final regulations under section 7477 of the Code provide guid-
ance for determining whether a donor may petition the Tax
Court for a declaratory judgment with respect to the value of a
taxablegift,wherethegiftdoesnotgenerateanycurrentgift
tax liability.
(Continued on the next page)
Finding Lists begin on page ii.

ADMINISTRATIVE
T.D. 9460, page 584.
Final regulations under section 7477 of the Code provide guid-
ance for determining whether a donor may petition the Tax
Court for a declaratory judgment with respect to the value of a
taxable gift, where the gift does not generate any current gift
tax liability.
Notice 2009–84, page 592.
This notice provides a limited administrative exception to the
ability of the Service to examine a Form 706,United States
Estate (and Generation-Skipping Transfer) Tax Return,incon-
nection with certain Code section 2053 protective claims for
refund filed within the time prescribed in section 6511(a).
November 2, 20092009–44 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2009–44 I.R.B.November 2, 2009

November 2, 20092009–44 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 42.—L
ow-Income
Housing Credi
t
The adjusted a
pplicable federal short-term, mid-
term, and long
-term rates are set forth for the month
of November 20
09. See Rev. Rul. 2009-35, page
568.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of November 2009. See
Rev. Rul. 2009-35, page 568.
Section 382.—Limitation
on Net Operating Loss
Carryforwa
rds and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of November 2009. See Rev.
Rul. 2009-35, page 568.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2009. See Rev. Rul. 2009-35, page
568.
Section 467.—Certain
Payments for the Use of
Property or Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2009. See Rev. Rul. 2009-35, page
568.
Section 468.—Special
Rules for Mining and Solid
Waste
Reclamation and
Closi
ng Costs
The ad
justed applicable federal short-term, mid-
term,
and long-term rates are set forth for the month
of November 20
09. See Rev. Rul. 2009-35, page
568.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
Federal short-term, mid-term, and long-term rates
are set forth for the month of November 2009. See
Rev. Rul. 2009-35, page 568.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2009. See Rev. Rul. 2009-35, page
568.
Section 642.
—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of November 2009. See
Rev. Rul. 2009-35, page 568.
Section 807.—Rules for
Certain Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2009. See Rev. Rul. 2009-35, page
568.
Section 84
6.—Discounted
Unpaid Los
ses Defined
The adjust
ed applicable federal short-term, mid-
term, and l
ong-term rates are set forth for the month
of Novemb
er 2009. See Rev. Rul. 2009-35, page
568.
Section 1274.
—Determi-
nation of Issu
ePriceinthe
Case of Certai
n Debt Instru-
ments Issued
for Property
(Also Section
s 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807
, 846, 1288, 7520, 7872.)
Federal rates
; adjusted federal rates;
adjusted fed
eral long-term rate and the
long-term ex
empt rate.For purposes of
sections 382
, 642, 1274, 1288, and other
sections of t
he Code, tables set forth the
rates for No
vember 2009.
Rev. Rul. 20
09–35
This revenu
e ruling provides various
prescribed
rates for federal income tax
purposes fo
r November 2009 (the current
month). Ta
ble 1 contains the short-term,
mid-term,
and long-term applicable fed-
eral rates
(AFR) for the current month
for purpos
es of section 1274(d) of the
Internal R
evenue Code. Table 2 contains
the short
-term, mid-term, and long-term
adjusted
applicable federal rates (adjusted
AFR) for t
he current month for purposes
of sectio
n 1288(b). Table 3 sets forth the
adjusted
federal long-term rate and the
long-te
rm tax-exempt rate described in
section
382(f). Table 4 contains the ap-
propria
te percentages for determining the
low-inc
ome housing credit described in
section
42(b)(1) for buildings placed in
servic
e during the current month. How-
ever, u
nder section 42(b)(2), the applicable
percen
tage for non-federally subsidized
new bui
ldings placed in service after July
30, 200
8, and before December 31, 2013,
shall
not be less than 9%. Finally, Table
5cont
ains the federal rate for determining
the pr
esent value of an annuity, an interest
for li
fe or for a term of years, or a remain-
der or
a reversionary interest for purposes
of se
ction 7520.
2009–44 I.R.B.568November 2, 2009

REV. RUL. 2009–35 TABLE 1
Applicable Federal Rates(AFR) for November 2009
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR.71%.71%.71%.71%
110% AFR.78%.78%.78%.78%
120% AFR
.85%.85%.85%.85%
130% AFR.92%.92%.92%.92%
Mid-term
AFR
2.59%2.57%2.56%2.56%
110% AFR
2.85%
2.83%2.82%2.81%
120% AFR3.10%3.08%3.07%3.06%
130% AFR3.37%3.34%3.33%3.32%
150% AFR
3.90%3.86%3.84%3.83%
175% AFR4.55%4.50%
4.47%4.46%
Long-term
AFR4.01%3.97%
3.95%
3.94%
110% AFR4.42%4.37%
4.35%
4.33%
120% AFR4.82%4.76%4.73%4.71%
130% AFR
5.23%5.16%5.13%5.11%
REV. RUL. 2009–35 TABLE 2
Adjusted AFR for November 2009
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted
AFR
.80%.80%.80%.80%
Mid-term adjusted AFR1.89%1.88%1.88%1.87%
Long-term adjusted
AFR
3.92%3.88%3.86%
3.85%
REV. RUL. 2009–35 TABLE 3
Rates Under Section 382 for November 2009
Adjusted federal long-term rate for the current month3.92%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)4.33%
REV. RUL. 2009–35 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for November 2009
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit7.76%
Appropriate percentage for the 30% present value low-income housing credit3.33%
November 2, 20095692009–44 I.R.B.

REV. RUL. 2009–35 TABLE 5
Rate Under Section 7520 for November 2009
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest3.2%
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2009. See Rev. Rul. 2009-35, page
568.
Section 2053.—Expenses,
Indebtedness, and Taxes
26 CFR 20.2053–1: Deductions for expenses, indebt-
edness, and taxes; in general.
This notice provides a limited administrative ex-
ception to the ability of the Internal Revenue Service
to examine a Form 706 (United States Estate (and
Generation-Skipping Transfer) Tax Return) in con-
nection with certain protective claims for refund that
are based on a deduction under section 2053 of the
Internal Revenue Code and are filed within the time
prescribed in section 6511(a) of the Code. See Notice
2009-84, page 592.
T.D. 9468
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 20
Guidance Under Section 2053
Regarding Post-Death Events
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to the amount
deductible from a decedent’s gross estate
for claims against the estate under sec-
tion 2053(a)(3) of the Internal Revenue
Code (Code). In addition, the regulations
update the provisions relating to the de-
duction for certain state death taxes to
reflect the statutory amendments made in
2001 to sections 2053(d) and 2058. The
regulations primarily will affect estates of
decedents against which there are claims
outstanding at the time of the decedent’s
death.
DATES:Effective Date:The regulations
are effective on October 20, 2009.
Applicability Dates:For dates
of applicability, see §§20.2051–1(c),
20.2053–1(f), 20.2053–3(e), 20.2053–
4(f), 20.2053–6(h), 20.2053–9(f), and
20.2053–10(e).
FOR FURTHER INFORMATION
CONTACT: Karlene M. Lesho, (202)
622–3090 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 2001 of the Code imposes a
tax on the transfer of the taxable estate,
determined as provided in section 2051,
of every decedent, citizen, or resident of
the United States. Section 2031(a) gen-
erally provides that the value of the dece-
dent’s gross estate shall include the value
at the time of decedent’s death of all prop-
erty, real or personal, tangible or intangi-
ble, wherever situated. Section 2051 pro-
vides that the value of the taxable estate
is determined by deducting from the value
of the gross estate the deductions provided
for in sections 2051 through 2058. Pur-
suant to section 2053(a), “the value of the
taxable estate shall be determined by de-
ducting from the value of the gross estate
such amounts: (1) for funeral expenses,
(2) for administration expenses, (3) for
claims against the estate, and (4) for un-
paid mortgages on, or any indebtedness in
respect of, property where the value of the
decedent’s interest therein, undiminished
by such mortgage or indebtedness, is in-
cluded in the value of the gross estate, as
are allowable by the laws of the jurisdic-
tion, whether within or without the United
States, under which the estate is being ad-
ministered.”
The amount an estate may deduct
for claims against the estate has been
a highly litigious issue. See the Back-
ground in the notice of proposed rule-
making published in theFederal Register
on April 23, 2007 (REG–143316–03,
2007–1 C.B. 1292 [72 FR 20080]). Unlike
section 2031, section 2053(a) does not
contain a specific directive to value a
deductible claim at its value at the time
of the decedent’s death. Section 2053
specifically contemplates expenses such
as funeral and administration expenses,
which are only determinable after the
decedent’s death.
The lack of consistency in the case law
has resulted in different estate tax treat-
ment of estates that are similarly situated,
depending only upon the jurisdiction in
which the executor resides. The Trea-
sury Department and the IRS believe that
similarly-situated estates should be treated
consistently by having section 2053(a)(3)
construed and applied in the same way in
all jurisdictions.
Accordingly, in an effort to further the
goal of effective and fair administration of
the tax laws, the Treasury Department and
the IRS published proposed regulations in
theFederal Registeron April 23, 2007.
In formulating the proposed rule, the Trea-
sury Department and the IRS carefully
considered: the statutory framework and
legislative history of section 2053 and its
predecessors; the existing regulatory pro-
visions under section 2053, particularly
those that are generally applicable to all
amounts deductible under section 2053;
the numerous judicial decisions involving
an issue under section 2053(a)(3) and the
analysis and conclusion in each; and, the
practical consequences of various possible
alternatives for determining the amount
deductible under section 2053(a)(3).
The proposed regulations proposed
amendments to the regulations under sec-
tion 2053 to clarify that events occurring
after a decedent’s death are to be con-
sidered when determining the amount
deductible under all provisions of section
2053 and that deductions under section
2009–44 I.R.B.570November 2, 2009

2053 generally are limited to amounts
actually paid by the estate in satisfac-
tion of deductible expenses and claims.
The proposed regulations also proposed
amendments to address more specifically
issues involving final court decisions, set-
tlements, protective claims, reimbursed
amounts, claims thatare potential, un-
matured, or contested, claims involving
multiple defendants, claims by a family
member or beneficiary of a decedent’s
estate, unenforceable claims, recurring
payments, and the changes made to sec-
tion 2053(d) in 2001.
Written comments were received on the
proposed regulations and a public hearing
was held on August 6, 2007. After care-
ful consideration of the written and oral
comments, the proposed regulations are
adopted as revised by this Treasury deci-
sion. In addition, the Treasury Department
and the IRS plan to issue additional guid-
ance, including additional proposed regu-
lations, in order to respond to certain com-
ments and emerging issues that the Trea-
sury Department and the IRS believe merit
further consideration, as indicated in the
Summary.
The comments and revisions to the pro-
posed regulations are discussed in this pre-
amble.
Summary of Comments and
Explanation of Revisions
1.Comments Relating to Prop. Reg.
§20.2051–1
One commentator suggested that the
sentence relating to the computation of
the taxable estate of a decedent who was
not a citizen or resident of the United
States should continue to reference the
regulations under section 2106, and not
the regulations under section 2051. The
final regulations restore the reference to
the regulations under section 2106.
2.Comments Relating to the Standard for
Deductibility Set Forth in the Proposed
Regulation
The proposed regulations generally
provide that only claims actually paid by
the estate may be deducted under sec-
tion 2053(a)(3). Many commentators
disagreed with thisapproach and sug-
gested that claims against a decedent’s
estate be valued on the basis of what was
reasonably known on the date of the dece-
dent’s death. These commentators cited
the line of cases following the decision in
Ithaca Trust v. Commissioner,279U.S.
151 (1929), to support the same valuation
rule for both claims against the estate and
claims for inclusion purposes under sec-
tion 2031. Commentators were concerned
that the approach of the proposed regula-
tions could lengthen the process of estate
administration (on account of the antici-
pated increase in the need for protective
claims), cause tax motivations to factor
into litigation strategy, and produce liquid-
ity shortfalls in estates with both claims
by and claims against a decedent. The
divergence of court opinions on this issue
is evidence that the proper way to deduct
claims against an estate is a very difficult
issue. After giving serious consideration
to the comments submitted on this issue,
the Treasury Department and the IRS con-
tinue to believe that a deduction for claims
under section 2053(a)(3) only for amounts
actually paid by the estate most closely
aligns with the legislative intent behind
section 2053 and its predecessors and best
furthers the goal of effective and fair ad-
ministration of the tax laws. Accordingly,
the final regulations generally maintain
the approach of the proposed regulations.
Notwithstanding the adherence to the
general approach of the proposed regula-
tions, however, the Treasury Department
and the IRS acknowledge that, as was
pointed out in many of the comments,
there are practical difficulties associated
with each of the alternatives, including
the approach taken in the proposed reg-
ulations. In order to make the practical
application of the approach more adminis-
trable, the final regulations include several
exceptions to the approach of the pro-
posed regulations. The final regulations
include an exception for claims against
the estate with respect to which there is an
asset or claim includible in the gross estate
that is substantially related to the claim
against the estate. See paragraph 10 of
this “Summary of Comments and Expla-
nation of Revisions” and §20.2053–4(b).
The final regulations also include an ex-
ception for claims against the estate that,
collectively, do not exceed $500,000 (not
including those deductible as ascertain-
able amounts). See paragraph 5 of this
“Summary of Comments and Explana-
tion of Revisions” and §20.2053–4(c).
Although both exceptions provide an op-
portunity to claim a deduction at the time
of filing theUnited States Estate (and
Generation-Skipping Transfer) Tax Return
(Form 706), in each case, the amount of
the deduction is subject to adjustment to
reflect post-death events, consistent with
the general approach of the regulations.
3.Comments Relating to the Effect
of a Court Decree in Prop. Reg.
§20.2053–1(b)(2)
The proposed regulations changed the
language regarding a court decree from
“the court passes upon the facts upon
which deductibility depends” to “the court
reviewed the facts relating to the expen-
ditures.” A commentator suggested that
such a change in language may give the
unintended impression that this consti-
tutes a substantive change. Thus, these
final regulations remove the language of
the proposed regulations and reinstate the
original language.
A commentator also requested
that an example be added to clarify
that the last sentence of Prop. Reg.
§20.2053–1(b)(2)(i) would apply to ju-
risdictions in which a court approves the
administration of an estate without specif-
ically approving expenses and claims,
absent a challenge from an interested
party. The final regulations include such
an example.
Some commentators recommended the
removal of the requirement that a settle-
ment be within the range of reasonable
outcomes under applicable state law in
order for a settlement amount to be de-
ductible because the requirement places
the Commissioner or a court in the posi-
tion of having to evaluate the legal merits
of a claim adjudicated in another court
proceeding. The commentators also main-
tained that the requirement is superfluous
in light of the existing requirements that
the settlement resolve a bona fide issue
in an active and genuine contest and that
adverse parties negotiate at arm’s length.
The final regulations eliminate the sep-
arate requirement that the settlement be
within the range of reasonable outcomes
under applicable state law.
Some commentators claimed that the
rules relating to settlements did not recog-
nize that, in some instances, the cost of de-
fending a claim and the delay associated
November 2, 20095712009–44 I.R.B.

with litigating the claim will factor into the
decision to settle a claim. The final regu-
lations clarify that a deduction will not be
denied for a settlement amount otherwise
deductible under section 2053 if an estate
can establish that the cost of defending the
claim or contesting the expense, the delay
associated with litigating such claim or ex-
pense, or another significant factor will im-
pose a higher burden on the estate relative
to the amount paid to settle the claim or the
contested expense.
4.Comments Relating to the Rule
for Estimated Amounts in Prop. Reg.
§20.2053–1(b)(4)
The rule provided in Prop. Reg.
§20.2053–1(b)(4)involvingesti-
mated amounts is now provided in
§20.2053–1(d)(4) of these final regu-
lations and the paragraph heading is
changed from “[e]stimated amounts” to
“[e]xception for certain ascertainable
amounts.” The final regulations use a con-
sistent description of the rule contained
in §20.2053–1(d)(4) where applicable in
the remainder of the regulation. No sub-
stantive change is intended; rather, the
modified paragraph heading in the final
regulations is intended to describe the sub-
stance of the rule more accurately.
A commentator noted that use of
thelanguage“willbepaid”inProp.
Reg. §20.2053–1(b)(4) may be incon-
sistent with the language in Prop. Reg.
§20.2053–3(b)(1) (“may reasonably be
expected to be paid”) and in Prop. Reg.
§20.2053–4(b)(7)(i) (claims cannot be es-
timated if there is “reasonable likelihood
that full satisfaction of the liability will not
be made”). The commentator suggested
modification of the language in Prop.
Reg. §20.2053–1(b)(4) to incorporate
the reasonableness standard found in the
other sections and requested conforming
changes throughout the regulation for con-
sistency purposes. The final regulations
do not add a reasonableness component
to the standard for meeting the “will be
paid” requirement, although the final reg-
ulations clarify that a deduction is allowed
under the rule for deducting certain as-
certainable amounts to the extent that the
Commissioner is reasonably satisfied that
the amount to be paid is ascertainable
with reasonable certainty and will be paid.
The final regulations use consistent lan-
guage where applicable in describing the
standard for meeting the “will be paid” re-
quirement in each reference to the rule for
deducting certain ascertainable amounts.
In addition, some commentators re-
quested clarification on whether the
rule previously provided in Prop. Reg.
§20.2053–1(b)(4) applies not only
to claims but to administration ex-
penses as well. The final regulations
make the requested clarification and
§20.2053–1(d)(4) provides that the rule for
deducting certain ascertainable amounts
applies to both a claim and an expense.
A commentator suggested that the
statement in Prop. Reg. §20.2053–1(b)(4)
prohibiting a deduction for “a vague or
uncertain estimate” be omitted because
it puts forth a subjective standard open
to a wide range of interpretations. The
Treasury Department and the IRS believe
that the rule previously provided in Prop.
Reg. §20.2053–1(b)(4), now provided
in §20.2053–1(d)(4) of these final regu-
lations, sets forth clear requirements for
determining the amount allowable as a de-
duction under section 2053. Because the
statement in Prop. Reg. §20.2053–1(b)(4)
merely clarifies this rule, the statement has
been retained in the final regulations.
A commentator suggested that the lan-
guage in Prop. Reg. §20.2053–1(b)(4),
indicating that a deduction in advance of
payment will be disallowed if the pay-
ment is thereafter waived or otherwise left
unpaid, negates the purpose of allowing
a deduction for an estimated amount and
should be deleted. However, the Trea-
sury Department and the IRS believe that
there is an important difference. The
rule for deducting certain ascertainable
amounts previously provided in Prop.
Reg. §20.2053–1(b)(4), and now pro-
vided in §20.2053–1(d)(4) of these final
regulations, provides an estate with the
opportunity to claim a deduction at the
time of filing Form 706, even though the
amount ultimately allowable as a deduc-
tion under this rule will take into account
events occurring after the date of a dece-
dent’s death. The ability to deduct an
ascertainable amount does not change the
general rule that the amount of the deduc-
tion is to reflect post-death events.
Some commentators questioned
whether the proposed regulations impose
a duty on the executor to report amounts
that were claimed as deductions on the
estate tax return, but were subsequently
not paid or not paid in full, and whether
such a duty could be enforced after the
period of limitations on assessment has
expired. The Treasury Department and the
IRS did not intend for the proposed regu-
lations to impose a duty on the executor
that could be enforced after the expiration
of the period of limitations on assessment.
As a result, the final regulations eliminate
this provision. The final regulations also
include a provision clarifying the period
during which post-death events will be
considered.
5.Comments Relating to Protective
Claims
A commentator expressed concern that
the protective claim procedures in the
proposed regulations would result in in-
creased administrative costs and a delay
in the administration of the estate because
filing a protective claim effectively would
keep the period of limitations open to
the extent of the amount of the claim for
refund. The Treasury Department and
the IRS believe that protective claims for
refund are an appropriate and necessary
component of these regulations, as they
provide a mechanism to ensure that the
deductibility rule provided for in these
regulations is implemented in a fair and
equitable manner. Nevertheless, the Trea-
sury Department and the IRS acknowledge
that the commentator’s concern is valid.
In an effort to make the regulation more
administrable for both taxpayers and the
Commissioner, the final regulations in
§20.2053–4(c) include an exception for
claims against the estate that do not ex-
ceed, in the aggregate, $500,000. Because
the purpose of this provision is to provide
certain relief from the need to file a pro-
tective claim, a claim is not eligible for
this provision unless the entire amount of
the claim may be covered within this cap.
This rule allows an estate a deduction on
Form 706 for claims against the estate.
However, consistent with the general ap-
proach of the final regulations, the amount
of the deduction is subject to adjustment
to reflect post-death events. To address
the commentator’s concern regarding the
effect of a protective claim for refund
on the applicable period of limitations,
the Treasury Department and the IRS are
issuing, concurrent with this regulation,
2009–44 I.R.B.572November 2, 2009

a notice announcing the IRS’s decision
to limit the review of a return, in certain
circumstances, when atimely-filed claim
for refund of estate taxes that is based on a
deduction under section 2053 ripens after
the expiration of the limitations period on
assessment.
Some commentators requested more
detailed guidance on the procedures
for filing a protective claim for refund.
In response to this comment, the final
regulations include a provision under
§20.2053–1(d)(5) to explain the protective
claim for refund process. The Treasury
Department and the IRS also intend to
provide, by publication in the Internal
Revenue Bulletin, further procedural guid-
ance on protective claims for refund due
to section 2053 claims or expenses. In
addition, a commentator suggested that
Form 706 be revised to incorporate a pro-
tective claim for refund so that a separate
form need not be filed. The Treasury
Department and the IRS believe this sug-
gestion will make the final regulations
more administrable and are contemplating
amending Form 706 to implement this
suggestion.
Another commentator suggested that
the IRS be lenient in granting extensions
of time to pay the estate tax under sec-
tion 6161 when an estate is confronting a
liquidity issue arising from the inability
to deduct a claim that is the subject of a
protective claim for refund. Although in
many cases the illiquidity resulting from
a not-yet-deductible claim may be rea-
sonable cause for granting an extension
of time to pay the estate tax for purposes
of section 6161, the Treasury Department
and the IRS believe that any regulatory
provision implementing this suggestion
would be outside the scope of this regula-
tion.
6.Comments Relating to the Effect on the
Marital and Charitable Deductions
Some commentators requested clarifi-
cation of the impact of the approach taken
in the proposed regulations on the mar-
ital and charitable deductions in estates
where a claim or expense is payable in
whole or in part from a bequest that qual-
ifies for the marital or charitable deduc-
tion. Commentators requested that the fi-
nal regulations include a rule confirming
that, if a claim or expense is the subject
of a protective claim for refund under sec-
tion 2053 and is payable out of a fund
that meets the requirements for a chari-
table or marital deduction under section
2055 or 2056, respectively, the charita-
ble or marital deduction will not be re-
duced by the amount of the claim or ex-
pense until the amount is actually paid. In
the interest of enhancing the administrabil-
ity of these regulations, such a rule is in-
cluded in §20.2053–1(d)(5)(ii). The Trea-
sury Department and the IRS view this rule
as similar to the rules in the regulations
under sections 2055 and 2056 that pro-
vide, respectively, for the reduction of the
value of the charitable or marital share by
the amount of estate transmission expenses
paid from the charitable or marital share.
For purposes of the estate tax charitable
deduction under section 2055, a claim or
expense that is the subject of a protective
claim for refund under section 2053 will
not render the charitable deduction, to the
extent of the amount of that claim or ex-
pense, contingent and thus nondeductible
under section 2055.
7.Comments Relating to Reimbursements,
Prop. Reg. §20.2053–1(b)(3)
The proposed regulations provide that a
deduction is not allowed to the extent that
the expense or claim is or could be com-
pensated for by insurance or is or could
be otherwise reimbursed. A commenta-
tor recommended that the final regulations
explain the method by which an execu-
tor may establish that there is no available
reimbursement either from another party
or insurance. In response to this com-
ment, the final regulations provide that an
executor may certify on Form 706 that
no reimbursement is available for a claim
or expense if the executor neither knows
nor reasonably should have known of the
availability of any such reimbursement.
Additionally, some commentators rec-
ommended that the final regulations reflect
the possibility that the cost of obtaining the
reimbursement might outweigh the benefit
of reimbursement. In response, the final
regulations provide that an executor need
not reduce the amount of a claim or ex-
pense deductible under section 2053 by the
amount of a potential reimbursement if the
executor provides a reasonable explana-
tion on Form 706 for his or her reasonable
determination that the burden of necessary
collection efforts would outweigh the an-
ticipated benefits from those efforts.
8.Comments Relating to Deduction for
Expenses of Administering Estate under
Prop. Reg. §20.2053–3
A commentator recommended remov-
ing from Prop. Reg. §20.2053–3(b) and
(c) any language restating the general re-
quirements for deductibility set forth in
Prop. Reg. §20.2053–1 and the general
rules regarding protective claims. The
commentator suggested that duplicating
the language in Prop. Reg. §20.2053–3(b)
and (c) was unnecessary and perhaps con-
fusing. In response, the final regulations
remove the language that merely restates
the general rules set forth in Prop. Reg.
§20.2053–1.
Some commentators recommended
omitting the sentence in Prop. Reg.
§20.2053–3(d)(3) that prohibits a deduc-
tion for expenses incurred merely for the
purpose of unreasonably extending the
time for payment, or incurred other than
in good faith. The commentators stated
that a situation where litigation has been
intentionally prolonged other than in good
faith is rare and unlikely to occur. Fur-
thermore, the commentators expressed
concern that the rule may subject the
estate’s legal strategy to IRS inquiry. Fi-
nally, the commentators maintained that
it would be extremely difficult to prove
that litigation expenses have not been in-
curred to unreasonably extend the time
for payment or other than in good faith.
The Treasury Department and the IRS find
these comments persuasive and addition-
ally believe that including this sentence
in the final regulations is not necessary
because expenses incurred merely for the
purpose of unreasonably extending the
time for payment or other than in good
faith will not be considered actually and
necessarily incurred in the administration
of the decedent’s estate and, therefore, are
not deductible for that reason.
9.CommentsRelatingtoClaimsAgainst
the Estate, Prop. Reg. §20.2053–4(a)
The proposed regulations provide that
deductible claims against a decedent’s es-
tate are limited to legitimate and bona fide
claims. A commentator stated that the
terms “legitimate” and “bona fide” in Prop.
November 2, 20095732009–44 I.R.B.

Reg. §20.2053–4(a)(1) are redundant. The
final regulations remove the term “legiti-
mate” and provide that deductible claims
against a decedent’s estate are limited to
bona fide claims.
A commentator requested clarification
that the Commissioner shall be bound
in the same manner as the estate to con-
sider events occurring after the date of a
decedent’s death when determining the
amount deductible by the decedent’s es-
tate. The Treasury Department and the
IRS believe that the rule of Prop. Reg.
§20.2053–4(a)(2) sets forth a general prin-
ciple that governs the determination of the
amount deductible against a decedent’s
estate, and that therefore is binding on
both estates and the Commissioner. Ac-
cordingly, no change is believed to be
necessary.
10.Comments Relating to Claims and
Counterclaims
Some commentators, citing fairness
and liquidity concerns, suggested allowing
a deduction for a claim against the estate
on the initial filing of Form 706 if the
value of the gross estate includes a claim in
the same or a substantially-related matter
or includes an asset integrally related or
subject to the claim against the estate. The
Treasury Department and the IRS find this
suggestion persuasive when a decedent’s
substantially-related claim against a third
party or a decedent’s integrally-related
asset constitutes a significant percentage
of the gross estate. The final regulations
under §20.2053–4(b) provide that the
current value of a claim against the es-
tate with respect to which there is one or
more substantially-related claims or inte-
grally-related assets that are included in a
decedent’s gross estate may be deducted
on Form 706, provided that the related
claim or asset of the estate constitutes at
least 10 percent of the decedent’s gross
estate, the value of each such claim against
the estate is determined from a “qualified
appraisal” performed by a “qualified ap-
praiser” (within the meaning of section
170 of the Code and the corresponding
regulations), and the value of each such
claim against the estate is subject to ad-
justment to reflect post-death events. The
deductible amount of each such claim is
limited to the value of the related asset or
claim included in the gross estate. The
amount of the claim against the estate in
excess of this limitation may be the subject
of a protective claim for refund.
11.CommentsRelatingtoProp.
Reg. §20.2053–4(b)(4), Claims by
Family Members, Related Entities, or
Beneficiaries
The proposed regulations include a re-
buttable presumption that claims by a fam-
ily member of the decedent, a related en-
tity, or a beneficiary of the decedent’s es-
tate or a revocable trust are not legitimate
and bona fide. Many commentators re-
quested that the rebuttable presumption be
removed from the regulation. A com-
mentator suggested that the presumption
be replaced by a provision requiring close
scrutiny of claims by family members, re-
lated entities, or beneficiaries. Although
such claims are in fact closely scrutinized
during the examination of a return, the
Treasury Department and the IRS believe
that a regulatory provision prescribing the
level of scrutiny to be given a particular
item is not appropriate for this regulation.
Other commentators stated that the pre-
sumption is inconsistent with the burden
of proof provision of section 7491 and
that such a presumption should apply only
when the facts indicate possible collusion.
After careful consideration, the Treasury
Department and the IRS have concluded
that the rebuttable presumption in the pro-
posed regulations does not conflict with
section 7491.
Some commentators maintained that
the presumption is unfair and unwarranted
because the proposed regulations and the
burden of proof provisions adequately de-
ter the manipulation of claims by family
members, related entities or beneficiaries.
The Treasury Department and the IRS
carefully considered these comments and,
in response to the enumerated concerns
with the creation of a rebuttable presump-
tion, have removed the presumption from
the final regulations. Instead, the final
regulations continue to include the gener-
ally applicable requirement that any claim
or expense deductible under section 2053
must be bona fide in nature, but also in-
clude a paragraph that (as suggested by a
commentator) provides a nonexclusive list
of factors indicative of the bona fide nature
of a claim or expense involving a family
member, related entity, or beneficiary of
the estate of a decedent.
12.Comments Relating to Payments in
Prop. Reg. §20.2053–4(b)(5)
A commentator suggested removing the
rule in Prop. Reg. §20.2053–4(b)(5) pro-
viding that claims that are unenforceable
prior to or at the decedent’s death are not
deductible even if paid. The Treasury De-
partment and the IRS believe that this rule
is mandated by the statutory requirement
that only amounts allowable by the laws
of the jurisdiction under which the estate is
being administered may be deducted from
the value of the gross estate. Therefore,
this suggestion hasnot been adopted.
13.Comments Relating to Recurring
Payments in Prop. Reg. §20.2053–4(b)(7)
The proposed regulations provide that
certain recurring, noncontingent obli-
gations may be deducted as estimated
amounts. Some commentators suggested
that not allowing an estate to deduct the
value of a contingent obligation is inef-
ficient and inequitable because it forces
the estate to remain open unless the es-
tate purchases a commercial annuity. The
Treasury Department and the IRS ac-
knowledge that a contingent obligation
may extend the period of estate admin-
istration unless the estate purchases a
commercial annuity to satisfy the obli-
gation or makes distributions that are
encumbered by the contingent obligation.
However, the Treasury Department and
the IRS believe that allowing a deduction
for a noncontingent recurring payment
as an ascertainable amount (deductible
under §20.2053–1(d)(4) of the final reg-
ulations), but not allowing a deduction
for a contingent recurring payment un-
til paid is a necessary component of the
rules of deductibility provided for in these
regulations. Nevertheless, the Treasury
Department and the IRS believe that the
purchase of a commercial annuity (with a
cost determined by the market and based
on the particular contingency) to fund a
contingent obligation should be deemed
to be substantially equivalent to a reason-
ably ascertainable (and thus deductible)
noncontingent obligation for purposes of
section 2053 and these regulations.
Some commentators requested clarifi-
cation on whether death or remarriage is
2009–44 I.R.B.574November 2, 2009

considered a contingency with respect to
decedent’s obligation to make a recurring
payment. The final regulations clarify
that, for purposes of section 2053, an
obligation subject to death or remarriage
is treated as a noncontingent obligation
under §20.2053–4(d)(6)(i).
Some commentators suggested that the
disparate treatmentafforded noncontin-
gent obligations (deduction for present
value of obligations) versus contingent
obligations (dollar-for-dollar deduction
as paid) is inequitable and produces an
inconsistent result without meaningful jus-
tification. These commentators requested
that the final regulations allow an estate
to choose between deducting the present
value of a noncontingent recurring pay-
ment on the estate tax return, or instead
deducting the amounts paid in the same
manner as provided for a contingent obli-
gation (after filing an appropriate protec-
tive claim for refund). The Treasury De-
partment and the IRS find the arguments
against the disparate treatment of noncon-
tingent and contingent obligations to be
persuasive. The final regulations eliminate
the disparate treatment by removing the
present value limitation applicable only to
noncontingent recurring payments. The
Treasury Department and the IRS believe
that the issue of the appropriate use of
present value in determining the amount
of the deduction allowable under section
2053 merits further consideration. The
final regulations reserve §20.2053–1(d)(6)
to provide future guidance on this issue.
A commentator requested clarifica-
tion on whether the rule in Prop. Reg.
§20.2053–4(b)(7) will or will not apply to
mortgages and other indebtedness under a
note. The final regulations clarify that the
rules applicable to recurring payments do
not apply to payments made in connection
with a mortgage or other indebtedness
described in §20.2053–7.
Finally, a commentator requested fur-
ther guidance on the commercial annuity
provision; specifically, whether the execu-
tor must transfer ownership of the pur-
chased annuity to the creditor or to a third
party who will use the annuity to make
payments to the creditor, or whether grant-
ing the creditor a security interest in the an-
nuity is sufficient in order for the amount
paid for the annuity to be deductible un-
der section 2053. For income tax purposes,
the transfer of the annuity is likely to cause
immediate gain recognition of the entire
amount to the transferee unless the annu-
ity meets several specific requirements. In
light of the purpose and intent of these reg-
ulations, the Treasury Department and the
IRS believe that the purchase of a commer-
cial annuity, and the nonrefundable and
generally significant costs involved in that
purchase, should be sufficient to permit a
deduction of the cost of the annuity for pur-
poses of section 2053. For these reasons,
the final regulations clarify that the estate
may be permitted to own the annuity.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because
these regulations do not impose a collec-
tion of information on small entities, the
Regulatory Flexibility Act (5 U.S.C. chap-
ter 6) does not apply. Therefore, a Regu-
latory Flexibility Analysis is not required.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regula-
tions is Karlene M. Lesho, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). Other personnel
from the IRS and the Treasury Department
participated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 20 is
amended as follows:
PART 20—ESTATE TAX; ESTATES
OF DECEDENTS DYING AFTER
AUGUST 16, 1954
Paragraph 1. The authority citation for
part 20 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 20.2051–1 is revised to
read as follows:
§20.2051–1 Definition of taxable estate.
(a)General rule. The taxable estate of
a decedent who was a citizen or resident
(see §20.0–1(b)(1)) of the United States
at death is determined by subtracting the
total amount of the deductions authorized
by sections 2053 through 2058 from the
total amount which must be included in the
gross estate under sections 2031 through
2044. These deductions are in general as
follows—
(1) Funeral and administration ex-
penses and claims against the estate
(including certain taxes and charitable
pledges) (section 2053).
(2) Losses from casualty or theft dur-
ing the administration of the estate (section
2054).
(3) Charitable transfers (section 2055).
(4) The marital deduction (section
2056).
(5) Qualified domestic trusts (section
2056A).
(6) Family-owned business interests
(section 2057) to the extent applicable to
estates of decedents.
(7) State death taxes (section 2058) to
the extent applicable to estates of dece-
dents.
(b)Special rules. See section 2106 and
the corresponding regulations for special
rules regarding the computation of the tax-
able estate of a decedent who was not a cit-
izen or resident of the United States. See
also §1.642(g)–1 of this chapter concern-
ing the disallowance for income tax pur-
poses of certain deductions allowed for es-
tate tax purposes.
(c)Effective/applicability date.This
section applies to the estates of decedents
dying on or after October 20, 2009.
Par. 3. Section 20.2053–1 is amended
by:
1. Revising paragraphs (a), (b)(2),
(b)(3), and adding paragraph (b)(4).
2. Redesignating paragraph (d) as para-
graph (e).
3. Adding paragraphs (d) and (f).
The revisions and additions read as fol-
lows:
November 2, 20095752009–44 I.R.B.

§20.2053–1 Deductions for expenses,
indebtedness, and taxes; in general.
(a)General rule. In determining the
taxable estate of a decedent who was a
citizen or resident of the United States
at death, there are allowed as deductions
under section 2053(a) and (b) amounts
falling within the following two categories
(subject to the limitations contained in
this section and in §§20.2053–2 through
20.2053–10)—
*****
(b) * * *
(2)Bona fide requirement—(i)In gen-
eral. Amounts allowed as deductions un-
der section 2053(a) and (b) must be ex-
penses and claims that are bona fide in na-
ture. No deduction is permissible to the
extent it is founded on a transfer that is
essentially donative in character (a mere
cloak for a gift or bequest) except to the ex-
tent the deduction is for a claim that would
be allowable as a deduction under section
2055 as a charitable bequest.
(ii)Claims and expenses involving fam-
ily members. Factors indicative (but not
necessarily determinative) of the bona fide
nature of a claim or expense involving a
family member of a decedent, a related en-
tity, or a beneficiary of a decedent’s estate
or revocable trust, in relevant instances,
may include, but are not limited to, the fol-
lowing—
(A) The transaction underlying the
claim or expense occurs in the ordinary
course of business, is negotiated at arm’s
length, and is free from donative intent.
(B) The nature of the claim or expense
is not related to an expectation or claim of
inheritance.
(C) The claim or expense originates
pursuant to an agreement between the
decedent and the family member, related
entity, or beneficiary, and the agreement
is substantiated with contemporaneous
evidence.
(D) Performance by the claimant is pur-
suant to the terms of an agreement between
the decedent and the family member, re-
lated entity, or beneficiary and the perfor-
mance and the agreement can be substan-
tiated.
(E) All amounts paid in satisfaction or
settlement of a claim or expense are re-
ported by each party for Federal income
and employment tax purposes, to the ex-
tent appropriate, in a manner that is consis-
tent with the reported nature of the claim or
expense.
(iii)Definitions. The following defini-
tions apply for purposes of this paragraph
(b)(2):
(A)Family membersinclude the spouse
of the decedent; the grandparents, par-
ents, siblings, and lineal descendants of
the decedent or of the decedent’s spouse;
and the spouse and lineal descendants of
any such grandparent, parent, and sibling.
Family members include adopted individ-
uals.
(B) Arelated entityis an entity in which
the decedent, either directly or indirectly,
had a beneficial ownership interest at the
time of the decedent’s death or at any time
during the three-year period ending on the
decedent’s date of death. Such an en-
tity, however, shall not include a publicly-
traded entity nor shall it include a closely-
held entity in which the combined ben-
eficial interest, either direct or indirect,
of the decedent and the decedent’s family
members, collectively, is less than 30 per-
cent of the beneficial ownership interests
(whether voting or non-voting and whether
an interest in stock, capital and/or profits),
as determined at the time a claim described
in this section is being asserted. Notwith-
standing the foregoing, an entity in which
the decedent, directly or indirectly, had any
managing interest (for example, as a gen-
eral partner of a partnership or as a manag-
ing member of a limited liability company)
at the time of the decedent’s death shall be
considered a related entity.
(C)Beneficiariesof a decedent’s estate
include beneficiaries of a trust of the dece-
dent.
(3)Court decrees and settlements—(i)
Court decree. If a court of competent
jurisdiction over the administration of an
estate reviews and approves expenditures
for funeral expenses, administration ex-
penses, claims against the estate, or unpaid
mortgages (referred to in this section as a
“claim or expense”), a final judicial deci-
sion in that matter may be relied upon to
establish the amount of a claim or expense
that is otherwise deductible under section
2053 and these regulations provided that
the court actually passes upon the facts on
which deductibility depends. If the court
does not pass upon those facts, its decree
may not be relied upon to establish the
amount of the claim or expense that is oth-
erwise deductible under section 2053. It
must appear that the court actually passed
upon the merits of the claim. This will be
presumed in all cases of an active and gen-
uine contest. If the result reached appears
to be unreasonable, this is some evidence
that there was not such a contest, but it
mayberebuttedbyprooftothecontrary.
Any amount meeting the requirements of
this paragraph (b)(3)(i) is deductible to the
extent it actually has been paid or will be
paid, subject to any applicable limitations
in this section.
(ii)Claims and expenses where court
approval not required under local law.A
deduction for the amount of a claim or ex-
pense that is otherwise deductible under
section 2053 and these regulations will not
be denied under section 2053 solely be-
cause a local court decree has not been
entered with respect to such amount, pro-
vided that no court decree is required under
applicable law to determine the amount or
allowability of the claim or expense.
(iii)Consent decree. A local court de-
cree rendered by consent may be relied
on to establish the amount of a claim or
expense that is otherwise deductible un-
der section 2053 and these regulations pro-
vided that the consent resolves a bona fide
issue in a genuine contest. Consent given
by all parties having interests adverse to
that of the claimant will be presumed to re-
solve a bona fide issue in a genuine contest.
Any amount meeting the requirements of
this paragraph (b)(3)(iii) is deductible to
the extent it actually has been paid or will
be paid, subject to any applicable limita-
tions in this section.
(iv)Settlements. A settlement may be
relied on to establish the amount of a claim
or expense (whether contingent or non-
contingent) that is otherwise deductible
under section 2053 and these regulations,
provided that the settlement resolves a
bona fide issue in a genuine contest and is
the product of arm’s-length negotiations
by parties having adverse interests with re-
spect to the claim or expense. A deduction
will not be denied for a settlement amount
paid by an estate if the estate can establish
that the cost of defending or contesting the
claim or expense, or the delay associated
with litigating the claim or expense, would
impose a higher burden on the estate than
the payment of the amount paid to settle
the claim or expense. Nevertheless, no de-
duction will be allowed for amounts paid
in settlement of an unenforceable claim.
2009–44 I.R.B.576November 2, 2009

For this purpose, to the extent a claim ex-
ceeds an applicable limit under local law,
the claim is deemed to be unenforceable.
However, as long as the enforceability
of the claim is at issue in a bona fide
dispute, the claim will not be deemed to
be unenforceable for this purpose. Any
amount meeting the requirements of this
paragraph (b)(3)(iv) is deductible to the
extent it actually has been paid or will be
paid, subject to any applicable limitations
in this section.
(v)Additional rules.Notwithstand-
ing paragraph (b)(3)(i) through (iv) of
this section, additional rules may apply
to the deductibility of certain claims and
expenses. See §20.2053–2 for additional
rules regarding the deductibility of funeral
expenses. See §20.2053–3 for additional
rules regarding the deductibility of ad-
ministration expenses. See §20.2053–4
for additional rules regarding the de-
ductibility of claims against the estate. See
§20.2053–7 for additional rules regarding
the deductibility of unpaid mortgages.
(4)Examples. Unless otherwise pro-
vided, assume that the amount of any claim
or expense is paid out of property sub-
ject to claims and is paid within the time
prescribed for filing theUnited States Es-
tate (and Generation-Skipping Transfer)
Tax Return,Form 706. The following
examples illustrate the application of this
paragraph (b):
Example 1.Consent decree at variance with the
law of the State. Decedent’s (D’s) estate is probated
in State. D’s probate estate is valued at $100x. State
law provides that the executor’s commission shall not
exceed 3 percent of the probate estate. A consent de-
cree is entered allowing the executor’s commission
in the amount of $5x. The estate pays the executor’s
commission in the amount of $5x. For purposes of
section 2053, the executor may deduct only $3x of
the $5x expense paid for the executor’s commission
because the amount approved by the consent decree
in excess of $3x is in excess of the applicable limit
for executor’s commissions under local law. There-
fore, for purposes of section 2053, the consent decree
may not be relied upon to establish the amount of the
expense for the executor’s commission.
Example 2.Decedent’s (D’s) estate is probated
in State. State law grants authority to an executor to
administer an estate without court approval, so long
as notice of and a right to object to a proposed ac-
tion is provided to interested persons. The executor
of D’s estate (E) proposes to sell property of the es-
tate in order to pay the debts of D. E gives requisite
notice to all interested parties and no interested per-
son objects. E sells the real estate and pays a real es-
tate commission of $20x to a professional real estate
agent. The amount of the real estate commission paid
does not exceed the applicable limit under State law.
Provided that the sale of the property was necessary
to pay D’s debts, expenses of administration, or taxes,
to preserve the estate, or to effect distribution, the ex-
ecutor may deduct the $20x expense for the real estate
commission under section 2053 even though no court
decree was entered approving the expense.
Example 3.Claim by family member.Forape-
riod of three years prior to D’s death, D’s niece (N)
provides accounting and bookkeeping services on D’s
behalf. N is a CPA and provides similar accounting
and bookkeeping services to unrelated clients. At the
end of each month, N presents an itemized bill to D
for services rendered. The fees charged by N conform
to the prevailing market rate for the services rendered
and are comparable to the fees N charges other clients
for similar services. The amount due is timely paid
each month by D and is properly reported for Federal
income and employment tax purposes by N. In the
six months prior to D’s death, D’s poor health pre-
vents D from making payments to N for the amount
due. After D’s death, N asserts a claim against the es-
tate for $25x, an amount representing the amount due
for the six-month period prior to D’s death. D’s es-
tate pays $25x to N in satisfaction of the claim before
the return is timely filed and N properly reports the
$25x received by E for income tax purposes. Barring
any other relevant facts or circumstances, E may rely
on the following factors to establish that the claim is
bona fide: (1) N’s claim for services rendered arose
in the ordinary course of business, as N is a CPA
performing similar services for other clients; (2) the
fees charged were deemed to be negotiated at arm’s
length, as the fees were consistent with the fees N
charged for similar services to unrelated clients; (3)
the billing records and the records of D’s timely pay-
ments to N constitute contemporaneous evidence of
an agreement between D and N for N’s bookkeep-
ing services; and (4) the amount of the payments to
N is properly reported by N for Federal income and
employment tax purposes. E may deduct the amount
paid to N in satisfaction of the claim.
*****
(d)Amount deductible—(1)General
rule. To take into account properly events
occurring after the date of a decedent’s
death in determining the amount de-
ductible under section 2053 and these
regulations, the deduction for any claim
or expense described in paragraph (a) of
this section is limited to the total amount
actually paid in settlement or satisfaction
of that item (subject to any applicable
limitations in this section). However, see
paragraph (d)(4) of this section for the
rules for deducting certain ascertainable
amounts; see §20.2053–4(b) and (c) for
the rules regarding the deductibility of
certain claims against the estate; and see
§20.2053–7 for the rules regarding the de-
ductibility of unpaid mortgages and other
indebtedness.
(2)Application of post-death events.In
determining whether and to what extent a
deduction under section 2053 is allowable,
events occurring after the date of a dece-
dent’s death will be taken into considera-
tion—
(i) Until the expiration of the applicable
period of limitations on assessment pre-
scribedinsection6501(includingwith-
out limitation at all times during which the
running of the period of limitations is sus-
pended); and
(ii) During subsequent periods, in deter-
mining the amount (if any) of an overpay-
ment of estate tax due in connection with a
claim for refund filed within the time pre-
scribedinsection6511(a).
(3)Reimbursements. A deduction is
not allowed to the extent that a claim or
expense described in paragraph (a) of this
section is or could be compensated for
by insurance or otherwise could be reim-
bursed. If the executor is able to establish
that only a partial reimbursement could
be collected, then only that portion of the
potential reimbursement that reasonably
could have been expected to be collected
will reduce the estate’s deductible portion
of the total claim or expense. An execu-
tor may certify that the executor neither
knows nor reasonably should have known
of any available reimbursement for a claim
or expense described in section 2053(a)
or (b) on the estate’sUnited States Estate
(and Generation-Skipping Transfer) Tax
Return(Form 706), in accordance with
the instructions for that form. A potential
reimbursement will not reduce the de-
ductible amount of a claim or expense to
the extent that the executor, on Form 706
and in accordance with the instructions for
that form, provides a reasonable explana-
tion for his or her reasonable determination
that the burden of necessary collection ef-
forts in pursuit of a right of reimbursement
would outweigh the anticipated benefit
from those efforts. Nevertheless, even if a
reasonable explanation is provided, subse-
quent events (including without limitation
an actual reimbursement) occurring within
the period described in §20.2053–1(d)(2)
will be considered in determining the
amount (if any) of a reduction under this
paragraph (d)(3) in the deductible amount
of a claim or expense.
(4)Exception for certain ascertainable
amounts—(i)General rule. A deduction
will be allowed for a claim or expense that
satisfies all applicable requirements even
though it is not yet paid, provided that the
amount to be paid is ascertainable with rea-
November 2, 20095772009–44 I.R.B.

sonable certainty and will be paid. For ex-
ample, executors’ commissions and attor-
neys’ fees that are not yet paid, and that
meet the requirements for deductibility un-
der §20.2053–3(b) and (c), respectively,
are deemed to be ascertainable with rea-
sonable certainty and may be deducted if
such expenses will be paid. However, no
deduction may be taken upon the basis of
a vague or uncertain estimate. To the ex-
tent a claim or expense is contested or con-
tingent, such a claim or expense cannot be
ascertained with reasonable certainty.
(ii)Effect of post-death events.Ade-
duction under this paragraph (d)(4) will be
allowed to the extent the Commissioner is
reasonably satisfied that the amount to be
paid is ascertainable with reasonable cer-
tainty and will be paid. In making this
determination, the Commissioner will take
into account events occurring after the date
of a decedent’s death. To the extent the
amount for which a deduction was claimed
does not satisfy the requirements of this
paragraph (d)(4), and is not otherwise de-
ductible, the deduction will be disallowed
by the Commissioner. If a deduction is
claimed on Form 706 for an amount that
is not yet paid and the deduction is disal-
lowedinwholeorinpart(orifnodeduc-
tion is claimed on Form 706), then if the
claim or expense subsequently satisfies the
requirements of this paragraph (d)(4) or is
paid, relief may be sought by filing a claim
for refund. To preserve the estate’s right to
claim a refund for amounts becoming de-
ductible after the expiration of the period
of limitation for the filing of a claim for re-
fund, a protective claim for refund may be
filed in accordance with paragraph (d)(5)
of this section.
(5)Protective claim for refund—(i)In
general. A protective claim for refund un-
der this section may be filed at any time
before the expiration of the period of lim-
itationprescribedinsection6511(a)for
the filing of a claim for refund to pre-
serve the estate’s right to claim a refund by
reason of claims or expenses that are not
paid or do not otherwise meet the require-
ments of deductibility under section 2053
and these regulations until after the expira-
tion of the period of limitation for filing a
claim for refund. Such a protective claim
shall be made in accordance with guidance
thatmaybeprovidedfromtimetotimeby
publication in the Internal Revenue Bul-
letin (see §601.601(d)(2)(ii)(b)). Although
the protective claim need not state a par-
ticular dollar amount or demand an im-
mediate refund, a protective claim must
identify each outstanding claim or expense
that would have been deductible under sec-
tion 2053(a) or (b) if such item already
had been paid and must describe the rea-
sons and contingencies delaying the ac-
tual payment of the claim or expense. Ac-
tion on protective claims will proceed af-
ter the executor has notified the Commis-
sioner within a reasonable period that the
contingency has been resolved and that the
amount deductible under §20.2053–1 has
been established.
(ii)Effect on marital and charitable de-
duction. To the extent that a protective
claim for refund is filed with respect to
a claim or expense that would have been
deductible under section 2053(a) or (b) if
such item already had been paid and that
is payable out of a share that meets the re-
quirements for a charitable deduction un-
der section 2055 or a marital deduction un-
der section 2056 or section 2056A, or from
a combination thereof, neither the chari-
table deduction nor the marital deduction
shall be reduced by the amount of such
claim or expense until the amount is ac-
tually paid or meets the requirements of
paragraph (d)(4) of this section for deduct-
ing certain ascertainable amounts or the re-
quirements of §20.2053–4(b) or (c) for de-
ducting certain claims against the estate.
(6) [Reserved].
(7)Examples. Assume that the amounts
described in section 2053(a) are payable
out of property subject to claims and are
allowable by the law of the jurisdiction
governing the administration of the es-
tate, whether the applicable jurisdiction
is within or outside of the United States.
Assume that the claims against the estate
are not deductible under §20.2053–4(b) or
(c). Also assume, unless otherwise pro-
vided, that none of the limitations on the
amount of the deduction described in this
section apply to the deduction claimed un-
der section 2053. The following examples
illustrate the application of this paragraph
(d):
Example 1.Amount of expense ascertainable.
Decedent’s (D’s) estate was probated in State. State
law provides that the personal representative shall re-
ceive compensation equal to 2.5 percent of the value
of the probate estate. The executor (E) may claim
a deduction for estimated fees equal to 2.5 percent
of D’s probate estate on the Form 706 filed for D’s
estate under the rule for deducting certain ascertain-
able amounts set forth in paragraph (d)(4) of this sec-
tion, provided that the estimated amount will be paid.
However, the Commissioner will disallow the deduc-
tion upon examination of the estate’s Form 706 to
the extent that the amount for which a deduction was
claimed no longer satisfies the requirements of para-
graph (d)(4) of this section. If this occurs, E may file
a protective claim for refund in accordance with para-
graph (d)(5) of this section in order to preserve the es-
tate’s right to claim a refund for the amount of the fee
that is subsequently paid or that subsequently meets
the requirements of paragraph (d)(4) of this section
for deducting certain ascertainable amounts.
Example 2.Amount of claim not ascertainable.
Prior to death, Decedent (D) is sued by Claimant (C)
for $100x in a tort proceeding and responds assert-
ing affirmative defenses available to D under appli-
cable local law. C and D are unrelated. D subse-
quently dies and D’s Form 706 is due before a final
judgment is entered in the case. The executor of D’s
estate (E) may not claim a deduction with respect to
C’s claim on D’s Form 706 under the special rule con-
tained in paragraph (d)(4) of this section because the
deductible amount cannot be ascertained with reason-
able certainty. However, E may file a timely protec-
tive claim for refund in accordance with paragraph
(d)(5) of this section in order to preserve the estate’s
right to subsequently claim a refund at the time a fi-
nal judgment is entered in the case and the claim is
either paid or meets the requirements of paragraph
(d)(4) of this section for deducting certain ascertain-
able amounts.
Example 3.Amount of claim payable out of prop-
erty qualifying for marital deduction.Thefactsare
thesameasinExample 2except that the applicable
credit amount, under section 2010, against the estate
tax was fully consumed by D’s lifetime gifts, D is sur-
vived by Spouse (S), and D’s estate passes entirely
to S in a bequest that qualifies for the marital deduc-
tion under section 2056. Even though any amount
D’s estate ultimately pays with respect to C’s claim
will be paid from the assets qualifying for the marital
deduction, in filing Form 706, E need not reduce the
amount of the marital deduction claimed on D’s Form
706. Instead, pursuant to the protective claim for re-
fund filed by E, the marital deduction will be reduced
by the claim once a final judgment is entered in the
case. At that time, a deduction will be allowed for the
amount that is either paid or meets the requirements
of paragraph (d)(4) of this section for deducting cer-
tain ascertainable amounts.
*****
(f)Effective/applicability date.This
section applies to the estates of decedents
dying on or after October 20, 2009.
Par. 4. Section 20.2053–3 is amended
by:
1. Revising paragraph (b)(1) and the
second sentence of paragraph (b)(2).
2. Revising paragraph (c)(1) and the
second sentence of paragraph (c)(2).
3. Revising the second sentence of
paragraph (d)(1) and the first sentence of
paragraph (d)(2).
4. Adding paragraphs (d)(3) and (e).
2009–44 I.R.B.578November 2, 2009

The revisions and additions read as fol-
lows:
§20.2053–3 Deductions for expenses of
administering estate.
*****
(b)Executor’s commissions—(1) Ex-
ecutors’ commissions are deductible to the
extent permitted by §20.2053–1 and this
section, but no deduction may be taken if
no commissions are to be paid. In addition,
the amount of the commissions claimed as
a deduction must be in accordance with the
usually accepted standards and practice of
allowing such an amount in estates of sim-
ilar size and characterin the jurisdiction
in which the estate is being administered,
or any deviation from the usually accepted
standards or range of amounts (permissible
under applicable local law) must be jus-
tified to the satisfaction of the Commis-
sioner.
(2)***If,however,thetermsofthe
will set forth the compensation payable to
the executor for services to be rendered
in the administration of the estate, a de-
duction may be taken to the extent that
the amount so fixed does not exceed the
compensation allowable by the local law
or practice and to the extent permitted by
§20.2053–1.
*****
(c)Attorney’s fees—(1) Attorney’s fees
are deductible to the extent permitted by
§20.2053–1 and this section. Further, the
amount of the fees claimed as a deduction
may not exceed a reasonable remuneration
for the services rendered, taking into ac-
count the size and character of the estate,
the law and practice in the jurisdiction in
which the estate is being administered, and
the skill and expertise of the attorneys.
(2)***Adeductionforreasonableat-
torney’s fees actually incurred in contest-
ing an asserted deficiency or in prosecut-
ing a claim for refund will be allowed to
the extent permitted by §20.2053–1 even
though the deduction, as such, was not
claimedontheestatetaxreturnorinthe
claim for refund. * * *
*****
(d) * * *
(1)***Expensesnecessarily incurred
in preserving and distributing the estate,
including the cost ofstoring or maintain-
ing property of the estate if it is impossi-
ble to effect immediate distribution to the
beneficiaries, are deductible to the extent
permitted by §20.2053–1. * * *
(2) Expenses for selling property of the
estate are deductible to the extent permit-
ted by §20.2053–1 if the sale is necessary
in order to pay the decedent’s debts, ex-
penses of administration, or taxes, to pre-
serve the estate, or to effect distribution.
***
(3) Expenses incurred in defending the
estate against claims described in section
2053(a)(3) are deductible to the extent per-
mitted by §20.2053–1 if the expenses are
incurred incident to the assertion of de-
fenses to the claim available under the ap-
plicable law, even if the estate ultimately
does not prevail. For purposes of this
paragraph (d)(3), “expenses incurred in de-
fending the estate against claims” include
costs relating to the arbitration and medi-
ation of contested issues, costs associated
with defending the estate against claims
(whether or not enforceable), and costs as-
sociated with reaching a negotiated settle-
ment of the issues.
(e)Effective/applicability date.This
section applies to the estates of decedents
dying on or after October 20, 2009.
Par. 5. Section 20.2053–4 is revised to
read as follows:
§20.2053–4 Deduction for claims against
the estate.
(a)In general—(1)General rule.For
purposes of this section, liabilities im-
posed by law or arising out of contracts or
torts are deductible if they meet the appli-
cable requirements set forth in §20.2053–1
and this section. To be deductible, a claim
against a decedent’s estate must represent
a personal obligation of the decedent ex-
isting at the time of the decedent’s death.
Except as otherwise provided in para-
graphs (b) and (c) of this section and to
the extent permitted by §20.2053–1, the
amounts that may be deducted as claims
against a decedent’s estate are limited to
the amounts of bona fide claims that are
enforceable against the decedent’s estate
(and are not unenforceable when paid) and
claims that—
(i) Are actually paid by the estate in
satisfaction of the claim; or
(ii) Meet the requirements of
§20.2053–1(d)(4) for deducting certain
ascertainable amounts.
(2)Effect of post-death events.Events
occurring after the date of a decedent’s
death shall be considered in determining
whether and to what extent a deduction
is allowable under section 2053. See
§20.2053–1(d)(2).
(b)Exception for claims and coun-
terclaims in related matter—(1)General
rule. If a decedent’s gross estate includes
one or more claims or causes of action
and there are one or more claims against
the decedent’s estate in the same or a sub-
stantially-related matter, or, if a decedent’s
gross estate includes a particular asset and
there are one or more claims against the
decedent’s estate integrally related to that
particular asset, the executor may deduct
on the estate’sUnited States Estate (and
Generation-Skipping Transfer) Tax Return
(Form 706) the current value of the claim
or claims against the estate, even though
payment has not been made, provided
that—
(i) Each such claim against the estate
otherwise satisfies the applicable require-
ments set forth in §20.2053–1;
(ii) Each such claim against the estate
represents a personal obligation of the
decedent existing at the time of the dece-
dent’s death;
(iii) Each such claim is enforceable
against the decedent’s estate (and is not
unenforceable when paid);
(iv) The value of each such claim
against the estate is determined from
a “qualified appraisal” performed by a
“qualified appraiser” within the meaning
of section 170 of the Internal Revenue
Code and the corresponding regulations;
(v) The value of each such claim against
the estate is subject to adjustment for post-
death events; and
(vi) The aggregate value of the related
claims or assets included in the decedent’s
gross estate exceeds 10 percent of the
decedent’s gross estate.
(2)Limitation on deduction. The de-
duction under this paragraph (b) is limited
to the value of the related claims or par-
ticular assets included in decedent’s gross
estate.
(3)Effect of post-death events.If,
under this paragraph (b), a deduction is
claimed on Form 706 for a claim against
the estate and, during the period de-
scribed in §20.2053–1(d)(2), the claim
is paid or meets the requirements of
§20.2053–1(d)(4) for deducting certain
November 2, 20095792009–44 I.R.B.

ascertainable amounts, the claimed de-
duction is subject to adjustment to reflect,
and may not exceed, the amount paid on
the claim or the amount meeting the re-
quirements of §20.2053–1(d)(4). If, under
this paragraph (b), a deduction is claimed
on Form 706 for a claim against the es-
tate and, during the period described in
§20.2053–1(d)(2), the claim remains un-
paid (and does not meet the requirements
of §20.2053–1(d)(4) for deducting certain
ascertainable amounts), the claimed de-
duction is subject to adjustment to reflect,
and may not exceed, the current valuation
of the claim. A valuation of the claim will
be considered current if it reflects events
occurring after the decedent’s death. With
regard to any amount in excess of the
amount deductible under this paragraph
(b), an estate may preserve the estate’s
right to claim a refund for claims that
are paid or that meet the requirements of
§20.2053–(1)(d)(4) after the expiration of
the period of limitation for filing a claim
for refund by filing a protective claim
for refund in accordance with the rules in
§20.2053–1(d)(5).
(c)Exception for claims totaling not
more than $500,000—(1)General rule.
An executor may deduct on Form 706 the
current value of one or more claims against
the estate even though payment has not
been made on the claim or claims to the
extent that—
(i) Each such claim against the es-
tate otherwise satisfies the applicable
requirements for deductibility set forth in
§20.2053–1;
(ii) Each such claim against the estate
represents a personal obligation of the
decedent existing at the time of the dece-
dent’s death;
(iii) Each such claim is enforceable
against the decedent’s estate (and is not
unenforceable when paid);
(iv) The value of each such claim
against the estate is determined from
a “qualified appraisal” performed by a
“qualified appraiser” within the meaning
of section 170 of the Internal Revenue
Code and the corresponding regulations;
(v) The total amount deducted by the
estate under this paragraph (c) does not
exceed $500,000;
(vi) The full value of each claim, rather
than just a portion of that amount, must
be deductible under this paragraph (c) and,
for this purpose, the full value of each
such claim is deemed to be the unpaid
amount of that claim that is not deductible
after the application of §§20.2053–1 and
20.2053–4(b); and
(vii) The value of each claim deducted
under this paragraph (c) is subject to ad-
justment for post-death events.
(2)Effect of post-death events. If, under
this paragraph (c), a deduction is claimed
for a claim against the estate and, during
the period described in §20.2053–1(d)(2),
the claim is paid or meets the requirements
of §20.2053–1(d)(4) for deducting certain
ascertainable amounts, the amount of the
allowable deduction for that claim is sub-
ject to adjustment to reflect, and may not
exceed, the amount paid on the claim or
the amount meeting the requirements of
§20.2053–1(d)(4). If, under this paragraph
(c), a deduction is claimed for a claim
against the estate and, during the period
described in §20.2053–1(d)(2), the claim
remains unpaid (and does not meet the
requirements of §20.2053–1(d)(4) for de-
ducting certain ascertainable amounts), the
amount of the allowable deduction for that
claim is subject to adjustment to reflect,
and may not exceed, the current value of
the claim. The value of the claim will
be considered current if it reflects events
occurring after the decedent’s death. To
claim a deduction for amounts in excess
of the amount deductible under this para-
graph (c), the estate may preserve the es-
tate’s right to claim a refund for claims that
are not paid or that do not meet the require-
ments of §20.2053–1(d)(4) until after the
expiration of the period of limitation for
the filing of a claim for refund by filing a
protective claim for refund in accordance
with the rules in §20.2053–1(d)(5).
(3)Examples. The following examples
illustrate the application of this paragraph
(c). Assume that the value of each claim
is determined from a “qualified appraisal”
performed by a “qualified appraiser” and
reflects events occurring after the death of
the decedent (D). Also assume that each
claim represents a personal obligation
of D that existed at D’s death, that each
claim is enforceable against the decedent’s
estate (and is not unenforceable when
paid), and that each claim otherwise satis-
fies the requirements for deductibility of
§20.2053–1.
Example 1. There are three claims against the
estate of the decedent (D) that are not paid and are
not deductible under §20.2053–1(d)(4) or paragraph
(b) of this section: $25,000 of Claimant A, $35,000
of Claimant B, and $1,000,000 of Claimant C. The
executor of D’s estate (E) may not claim a deduction
under this paragraph with respect to any portion of the
claim of Claimant C because the value of that claim
exceeds $500,000. E may claim a deduction under
this paragraph for the total amount of the claims filed
by Claimant A and Claimant B ($60,000) because the
aggregate value of the full amount of those claims
does not exceed $500,000.
Example 2. There are three claims against the
estate of the decedent (D) that are not paid and are
not deductible under §20.2053–1(d)(4) or paragraph
(b) of this section; specifically, a separate $200,000
claim of each of three claimants, A, B and C. The
executor of D’s estate (E) may claim a deduction un-
der this paragraph for any two of these three claims
because the aggregate value of the full amount of
any two of the claims does not exceed $500,000. E
may not deduct any part of the value of the remain-
ing claim under this paragraph because the aggregate
value of the full amount of all three claims would ex-
ceed $500,000.
Example 3. As a result of an automobile acci-
dent involving the decedent (D) and A, D’s gross
estate includes a claim against A that is valued at
$750,000. In the same matter, A files a counterclaim
against D’s estate that is valued at $1,000,000. A’s
claim against D’s estate is not paid and is not de-
ductible under §20.2053–1(d)(4). All other section
2053 claims and expenses of D’s estate have been
paid and are deductible. The executor of D’s estate
(E) deducts $750,000 of A’s claim against the estate
under §20.2053–4(b). E may claim a deduction un-
der this paragraph (c) for the total value of A’s claim
not deducted under §20.2053–4(b), or $250,000. If,
instead, the value of A’s claim against D’s estate is
$1,500,000, so that the amount not deductible un-
der §20.2053–4(b) exceeds $500,000, no deduction
is available under this paragraph (c).
(d)Special rules—(1)Potential and un-
matured claims. Except as provided in
§20.2053–1(d)(4) and in paragraphs (b)
and (c) of this section, no estate tax de-
duction may be taken for a claim against
the decedent’s estate while it remains a po-
tential or unmatured claim. Claims that
later mature may be deducted (to the ex-
tent permitted by §20.2053–1) in connec-
tion with a timely claim for refund. To pre-
serve the estate’s right to claim a refund for
claims that mature and become deductible
after the expiration of the period of limi-
tation for filing a claim for refund, a pro-
tective claim for refund may be filed in
accordance with §20.2053–1(d)(5). See
§20.2053–1(b)(3) for rules relating to the
treatment of court decrees and settlements.
(2)Contested claims. Except as pro-
vided in paragraphs (b) and (c) of this sec-
tion, no estate tax deduction may be taken
for a claim against the decedent’s estate
to the extent the estate is contesting the
decedent’s liability. Contested claims that
2009–44 I.R.B.580November 2, 2009

later mature may be deducted (to the ex-
tent permitted by §20.2053–1) in connec-
tion with a claim for refund filed within the
time prescribed in section 6511(a). To pre-
serve the estate’s right to claim a refund for
claims that mature and become deductible
after the expiration of the period of limi-
tation for the filing a claim for refund, a
protective claim for refund may be filed
in accordance with §20.2053–1(d)(5). See
§20.2053–1(b)(3) for rules relating to the
treatment of court decrees and settlements.
(3)Claims against multiple parties.If
the decedent or the decedent’s estate is
one of two or more parties against whom
the claim is being asserted, the estate may
deduct only the portion of the total claim
due from and paid by the estate, reduced
by the total of any reimbursement received
from another party, insurance, or other-
wise. The estate’s deductible portion also
will be reduced by the contribution or
other amount the estate could have col-
lected from another party or an insurer but
which the estate declines or fails to attempt
to collect. See further §20.2053–1(d)(3).
(4)Unenforceable claims.Claimsthat
are unenforceable prior to or at the dece-
dent’s death are not deductible, even if they
are actually paid. Claims that become un-
enforceable during the administration of
the estate are not deductible to the ex-
tent that they are paid (or will be paid)
after they become unenforceable. How-
ever, see §20.2053–1(b)(3)(iv) regarding a
claim whose enforceability is at issue.
(5)Claims founded upon a promise.
Except with regard to pledges or sub-
scriptions (see §20.2053–5), section
2053(c)(1)(A) provides that the deduction
for a claim founded upon a promise or
agreement is limited to the extent that the
promise or agreement was bona fide and
in exchange for adequate and full consid-
eration in money or money’s worth; that
is, the promise or agreement must have
been bargained for at arm’s length and the
price must have been an adequate and full
equivalent reducible to a money value.
(6)Recurring payments—(i)Non-
contingent obligations. If a decedent is
obligated to make recurring payments on
an enforceable and certain claim that sat-
isfies the requirements for deductibility
under this section and the payments are
not subject to a contingency, the amount
of the claim will be deemed ascertainable
with reasonable certainty for purposes of
the rule for deducting certain ascertainable
amounts set forth in §20.2053–1(d)(4). If
the recurring payments will be paid, a de-
duction will be allowed under the rule for
deducting certain ascertainable amounts
set forth in §20.2053–1(d)(4) (subject to
any applicable limitations in §20.2053–1).
Recurring payments for purposes of this
section exclude those payments made in
connection with a mortgage or indebt-
edness described in and governed by
§20.2053–7. If a decedent’s obligation to
make a recurring payment is contingent
on the death or remarriage of the claimant
and otherwise satisfies the requirements
of this paragraph (d)(6)(i), the amount of
the claim (measured according to actu-
arial principles, using factors set forth in
the transfer tax regulations or otherwise
provided by the IRS) will be deemed as-
certainable with reasonable certainty for
purposes of the rule for deducting cer-
tain ascertainable amounts set forth in
§20.2053–1(d)(4).
(ii)Contingent obligations. If a dece-
dent has a recurring obligation to pay
an enforceable and certain claim but the
decedent’s obligation is subject to a con-
tingency or is not otherwise described
in paragraph (d)(6)(i) of this section, the
amount of the claim is not ascertainable
with reasonable certainty for purposes of
the rule for deducting certain ascertainable
amounts set forth in §20.2053–1(d)(4).
Accordingly, the amount deductible is
limitedtoamountsactuallypaidbythe
estate in satisfaction of the claim in accor-
dance with §20.2053–1(d)(1) (subject to
any applicable limitations in §20.2053–1).
(iii)Purchase of commercial annuity
to satisfy recurring obligation to pay.
If a decedent has a recurring obligation
(whether or not contingent) to pay an en-
forceable and certain claim and the estate
purchases a commercial annuity from an
unrelated dealer in commercial annuities
in an arm’s-length transaction to satisfy
the obligation, the amount deductible by
the estate (subject to any applicable limi-
tations in §20.2053–1) is the sum of—
(A) The amount paid for the commer-
cial annuity, to the extent that the amount
paid is not refunded, or expected to be re-
funded, to the estate;
(B) Any amount actually paid to the
claimant by the estate prior to the purchase
of the commercial annuity; and
(C) Any amount actually paid to the
claimant by the estate in excess of the an-
nuity amount as is necessary to satisfy the
recurring obligation.
(7)Examples. The following examples
illustrate the application of paragraph (d)
of this section. Except as is otherwise pro-
vided in the examples, assume—
(i) A claim satisfies the applicable re-
quirements set forth in §20.2053–1 and
paragraph (a) of this section, is payable
from property subject to claims, and
the amount of the claim is not subject
to any other applicable limitations in
§20.2053–1;
(ii) A claim is not deductible under
paragraphs (b) or (c) of this section as an
exception to the general rule contained in
paragraph (a) of this section; and
(iii) The claimant (C) is not a family
member, related entity or beneficiary of
the estate of decedent (D) and is not the
executor (E).
Example 1.Contested claim, single defendant,
no decision. D is sued by C for $100x in a tort pro-
ceeding and responds asserting affirmative defenses
available to D under applicable local law. D dies
and E is substituted as defendant in the suit. D’s
Form 706 is due before a judgment is reached in
the case. D’s gross estate exceeds $100x. E may
not take a deduction on Form 706 for the claim
against the estate. However, E may claim a deduc-
tion under §20.2053–3(c) or §20.2053–3(d)(3) for
expenses incurred in defending the estate against the
claim if the expenses have been paid in accordance
with §20.2053–1(d)(1) or if the expenses meet the
requirements of §20.2053–1(d)(4) for deducting cer-
tain ascertainable amounts. E may file a protective
claim for refund before the expiration of the period
of limitation prescribed in section 6511(a) in order
to preserve the estate’s right to claim a refund, if the
amount of the claim will not be paid or cannot be as-
certained with reasonable certainty by the expiration
of this limitation period. If payment is subsequently
made pursuant to a court decision or a settlement,
the payment, as well as expenses incurred incident
to the claim and not previously deducted, may be
deducted and relief may be sought in connection with
a timely-filed claim for refund.
Example 2.Contested claim, single defendant, fi-
nal court decree and payment. The facts are the same
as inExample 1except that, before the Form 706 is
timely filed, the court enters a decision in favor of
C, no timely appeal is filed, and payment is made. E
may claim a deduction on Form 706 for the amount
paid in satisfaction of the claim against the estate pur-
suant to the final decisionof the local court, includ-
ing any interest accrued prior to D’s death. In addi-
tion, E may claim a deduction under §20.2053–3(c) or
§20.2053–3(d)(3) for expenses incurred in defending
the estate against the claim and in processing payment
of the claim if the expenses have been paid in accor-
dance with §20.2053–1(d)(1) or if the expenses meet
the requirements of §20.2053–1(d)(4) for deducting
certain ascertainable amounts.
November 2, 20095812009–44 I.R.B.

Example 3.Contested claim, single defendant,
settlement and payment. The facts are the same as
inExample 1except that a settlement is reached be-
tween E and C for $80x and payment is made be-
fore Form 706 is timely filed. E may claim a deduc-
tion on Form 706 for the amount paid to C ($80x)
in satisfaction of the claim against the estate. In addi-
tion, E may claim a deduction under §20.2053–3(c) or
§20.2053–3(d)(3) for expenses incurred in defending
the estate, reaching a settlement, and processing pay-
ment of the claim if the expenses have been paid in
accordance with §20.2053–1(d)(1) or if the expenses
meet the requirements of §20.2053–1(d)(4) for de-
ducting certain ascertainable amounts.
Example 4.Contested claim, multiple defendants.
ThefactsarethesameasinExample 1except that
the suit filed by C lists D and an unrelated third-party
(K) as defendants. If the claim against the estate is
not resolved prior to the time the Form 706 is filed, E
may not take a deduction for the claim on Form 706.
If payment is subsequently made of D’s share of the
claim pursuant to a court decision holding D liable for
40 percent of the amount due and K liable for 60 per-
cent of the amount due, then E may claim a deduction
for the amount paid in satisfaction of the claim against
the estate representing D’s share of the liability as as-
signed by the court decree ($40x), plus any interest on
that share accrued prior to D’s death. If the court deci-
sion finds D and K jointly and severally liable for the
entire $100x and D’s estate pays the entire $100x but
could have reasonably collected $50x from K in reim-
bursement, E may claim a deduction of $50x together
with the interest on $50x accrued prior to D’s death.
In both instances, E also may claim a deduction under
§20.2053–3(c) or §20.2053–3(d)(3) for expenses in-
curred and not previously deducted in defending the
estate against the claim and processing payment of
the amount due from D if the expenses have been
paid in accordance with §20.2053–1(d)(1) or if the
expenses meet the requirements of §20.2053–1(d)(4)
for deducting certain ascertainable amounts.
Example 5.Contested claim, multiple defendants,
settlement and payment. The facts are the same as
inExample 1except that the suit filed by C lists D
and an unrelated third-party (K) as defendants. D’s
estate settles with C for $10x and payment is made
before Form 706 is timely filed. E may take a de-
duction on Form 706 for the amount paid to C ($10x)
in satisfaction of the claim against the estate. In addi-
tion, E may claim a deduction under §20.2053–3(c) or
§20.2053–3(d)(3) for expenses incurred in defending
the estate, reaching a settlement, and processing pay-
ment of the claim if the expenses have been paid in
accordance with §20.2053–1(d)(1) or if the expenses
meet the requirements of §20.2053–1(d)(4) for de-
ducting certain ascertainable amounts.
Example 6.Mixed claims. During life, D con-
tracts with C to perform specific work on D’s home
for $75x. Under the contract, additional work must
be approved in advance by D. C performs additional
work and sues D for $100x for work completed in-
cluding the $75x agreed to in the contract. D dies and
D’s Form 706 is due before a judgment is reached in
the case. E accepts liability of $75x but contests li-
ability of $25x. E may take a deduction of $75x on
Form 706 if the amount has been paid or meets the re-
quirements of §20.2053–1(d)(4) for deducting certain
ascertainable amounts. In addition, E may claim a
deduction under §20.2053–3(c) or §20.2053–3(d)(3)
for expenses incurred in defending the estate against
the claim if the expenses have been paid or if the
expenses meet the requirements of §20.2053–1(d)(4)
for deducting certain ascertainable amounts. E may
file a protective claim for refund before the expira-
tion of the period of limitation prescribed in section
6511(a) in order to preserve the estate’s right to claim
a refund for any amount in excess of $75x that is
subsequently paid to resolve the claim against the
estate. To the extent that any unpaid expenses in-
curred in defending the estate against the claim are
not deducted as an ascertainable amount pursuant to
§20.2053–1(d)(4), they may be included in the pro-
tective claim for refund.
Example 7.Claim having issue of enforceabil-
ity. D is sued by C for $100x in a tort proceeding
in which there is an issue as to whether the claim
is barred by the applicable period of limitations.
After D’s death but prior to the decision of the
court, a settlement meeting the requirements of
§20.2053–1(b)(3)(iv) is reached between E and C
in the amount of $50x. E pays C this amount be-
fore the Form 706 is timely filed. E may take a
deduction on Form 706 for the amount paid to C
($50x) in satisfaction of the claim. If, subsequent
to E’s payment to C, facts develop to indicate that
the claim was, in fact, unenforceable, the deduction
will not be denied provided the enforceability of the
claim was at issue in a bona dispute at the time of
the payment. See §20.2053–1(b)(3)(iv). A deduc-
tion may be available under §20.2053–3(d)(3) for
expenses incurred in defending the estate, reaching
a settlement, and processing payment of the claim
if the expenses have been paid in accordance with
§20.2053–1(d)(1) or if the expenses meet the require-
ments of §20.2053–1(d)(4) for deducting certain
ascertainable amounts.
Example 8.Noncontingent and recurring obliga-
tion to pay, binding on estate. D’s property settlement
agreement incident to D’s divorce, signed three years
prior to D’s death, obligates D or D’s estate to pay to
S, D’s former spouse, $20x per year until S’s death or
remarriage. Prior to D’s death, D made payments in
accordance with the agreement and, after D’s death,
E continues to make the payments in accordance
with the agreement. D’s obligation to pay S under
the property settlement agreement is deemed to be a
claim against the estate that is ascertainable with rea-
sonable certainty for purposes of §20.2053–1(d)(4).
To the extent the obligation to make the recurring
payment is a claim that will be paid, E may deduct the
amount of the claim (measured according to actuarial
principles, using factors set forth in the transfer tax
regulations or otherwise provided by the IRS) under
the rule for deducting certain ascertainable amounts
set forth in §20.2053–1(d)(4).
Example 9.Recurring obligation to pay, estate
purchases a commercial annuity in satisfaction.D’s
settlement agreement with T, the claimant in a suit
against D, signed three years prior to D’s death, ob-
ligates D or D’s estate to pay to T $20x per year for
10 years, provided that T does not reveal the details
of the claim or of the settlement during that period.
D dies in Year 1. In Year 2, D’s estate purchases a
commercial annuity from an unrelated issuer of com-
mercial annuities, XYZ, to fund the obligation to T.
E may deduct the entire amount paid to XYZ to ob-
tain the annuity, even though the obligation to T was
contingent.
(e)Interest on claim—(1) Subject to
any applicable limitations in §20.2053–1,
the interest on a deductible claim is it-
self deductible as a claim under section
2053 to the extent of the amount of inter-
est accrued at the decedent’s death (even
if the executor elects the alternate valua-
tion method under section 2032), but only
to the extent of the amount of interest ac-
tually paid or meeting the requirements of
§20.2053–1(d)(4) for deducting certain as-
certainable amounts.
(2) Post-death accrued interest may be
deductible in appropriate circumstances
either as an estate tax administration ex-
pense under section 2053 or as an income
tax deduction.
(f)Effective/applicability date.This
section applies to the estates of decedents
dying on or after October 20, 2009.
Par. 6. Section 20.2053–5 is amended
by:
1. Redesignating paragraphs (a) and (b)
as (a)(1) and (a)(2).
2. Redesignating the introductory text
as paragraph (a).
3. Revising newly redesignated para-
graph (a).
4. Adding a new paragraph (b).
The revision and addition read as fol-
lows:
§20.2035–5 Deductions for charitable,
etc., pledges or subscriptions.
(a) A pledge or a subscription, evi-
denced by a promissory note or otherwise,
even though enforceable against the estate,
is deductible (subject to any applicable
limitations in §20.2053–1) only to the ex-
tent that—
*****
(b)Effective/applicability date.This
section applies to the estates of decedents
dying on or after October 20, 2009.
Par. 7. Section 20.2053–6 is amended
by:
1. Revising paragraphs (a) and (c).
2. Adding paragraphs (g) and (h).
The revisions and additions read as fol-
lows:
§20.2053–6 Deduction for taxes.
(a)In general—(1) Taxes are de-
ductible in computing a decedent’s gross
estate—
2009–44 I.R.B.582November 2, 2009

(i) Only as claims against the estate (ex-
cept to the extent that excise taxes may be
allowable as administration expenses);
(ii) Only to the extent not disallowed by
section 2053(c)(1)(B) and this section; and
(iii) Subject to any applicable limita-
tions in §20.2053–1.
(2) See §§20.2053–9 and 20.2053–10
with respect to the deduction allowed for
certain state and foreign death taxes.
*****
(c)Death taxes—(1) For the estates of
decedents dying on or before December
31, 2004, no estate, succession, legacy or
inheritance tax payable by reason of the
decedent’s death is deductible, except as
provided in §§20.2053–9 and 20.2053–10
with respect to certain state and foreign
death taxes on transfers for charitable,
etc., uses. However, see sections 2011 and
2014 and the corresponding regulations
with respect to credits for death taxes.
(2) For the estates of decedents dying
after December 31, 2004, see section 2058
to determine the deductibility of state
death taxes.
*****
(g)Post-death adjustments of de-
ductible tax liability. Post-death adjust-
ments increasing a tax liability accrued
prior to the decedent’s death, including
increases of taxes deducted under this
section, will increase the amount of the de-
duction available under section 2053(a)(3)
for that tax liability. Similarly, any refund
subsequently determined to be due to and
received by the estate or its successor in
interest with respect to taxes deducted
by the estate under this section reduce
the amount of the deduction taken for
that tax liability under section 2053(a)(3).
Expenses associated with defending the
estate against the increase in tax liabil-
ityorwithobtainingtherefundmaybe
deductible under §20.2053–3(d)(3). A
protective claim for refund of estate taxes
may be filed before the expiration of the
period of limitation for filing a claim for
refund in order to preserve the estate’s
right to claim a refund if the amount of a
deductible tax liability may be affected by
such an adjustment or refund. The appli-
cation of this section may be illustrated by
the following examples:
Example 1.Increase in tax due. After the dece-
dent’s death, the Internal Revenue Service examines
the gift tax return filed by the decedent in the year
before the decedent’s death and asserts a deficiency
of $100x. The estate pays attorney’s fees of $30x
in a non-frivolous defense against the increased defi-
ciency. The final determination of the deficiency, in
the amount of $90x, is paid by the estate prior to the
expiration of the limitation period for filing a claim
for refund. The estate may deduct $90x under sec-
tion 2053(a)(3) and $30x under §20.2053–3(c)(2) or
(d)(3) in connection with a timely claim for refund.
Example 2.Refund of taxes paid. Decedent’s es-
tate timely files D’s individual income tax return for
the year in which the decedent died. The estate timely
pays the entire amount of the tax due, $50x, as shown
on that return. The entire $50x was attributable to
income received prior to the decedent’s death. Dece-
dent’s estate subsequently discovers an error on the
income tax return and timely files a claim for refund
of income tax. Decedent’s estate receives a refund
of $10x. The estate is allowed a deduction of only
$40x under section 2053(a)(3) for the income tax li-
ability accrued prior to the decedent’s death. If D’s
estate had claimed a deduction of $50x on D’sUnited
States Estate (and Generation-Skipping Transfer) Tax
Return(Form 706), the deduction claimed under sec-
tion 2053(a)(3) will be allowed only to the extent of
$40x upon examination by the Commissioner.
(h)Effective/applicability date.This
section applies to the estates of decedents
dying on or after October 20, 2009.
Par. 8. Section 20.2053–9 is amended
by:
1. Adding a sentence at the end of para-
graph (a).
2. Revising the first and last sentences
of paragraph (c).
3. Adding paragraph (f).
The revisions and addition read as fol-
lows:
§20.2053–9 Deduction for certain State
death taxes.
(a)***However,seesection2058to
determine the deductibility of state death
taxes by estates to which section 2058 is
applicable.
*****
(c)***Theelectiontotakeadeduc-
tion for a state death tax imposed upon a
transfer for charitable, etc., uses shall be
exercised by the executor by the filing of a
written notification to that effect with the
Commissioner. * * * The election may be
revoked by the executor by the filing of a
written notification to that effect with the
Commissioner at any time before the expi-
ration of such period.
*****
(f)Effective/applicability date—(1)
The last sentence of paragraph (a) of this
section applies to the estates of decedents
dying on or after October 20, 2009, to
which section 2058 is applicable.
(2) The other provisions of this section
apply to the estates of decedents dying on
or after October 20, 2009, to which section
2058 is not applicable.
Par. 9. Section 20.2053–10 is amended
by removing the language “district direc-
tor” and adding the language “Commis-
sioner” in its place in paragraph (c) and by
adding a new paragraph (e) to read as fol-
lows:
§20.2053–10 Deduction for certain
foreign death taxes.
*****
(e)Effective/applicability date.This
section applies to the estates of decedents
dying on or after October 20, 2009.
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved October 14, 2009.
Michael F. Mundaca,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on October 16,
2009, 11:15 a.m., and published in the issue of the Federal
Register for October 20, 2009, F.R. 53652)
Section 6402.—Authority to
Make Credits or Refunds
26 CFR 301.6402–1: Authority to make credits or
refunds.
This notice provides a limited administrative ex-
ception to the ability of the Internal Revenue Service
to examine a Form 706 (United States Estate (and
Generation-Skipping Transfer) Tax Return) in con-
nection with certain protective claims for refund that
are based on a deduction under section 2053 of the
Internal Revenue Code and are filed within the time
prescribed in section 6511(a) of the Code. See Notice
2009-84, page 592.
Section 6501.—Limitations
on Assessment and
Collection
26 CFR 301.6501(a)–1: Period of limitations upon
assessment and collection.
This notice provides a limited administrative ex-
ception to the ability of the Internal Revenue Service
to examine a Form 706 (United States Estate (and
November 2, 20095832009–44 I.R.B.

Generation-Skipping Transfer) Tax Return) in con-
nection with certain protective claims for refund that
are based on a deduction under section 2053 of the
Internal Revenue Code and are filed within the time
prescribed in section 6511(a) of the Code. See Notice
2009-84, page 592.
Section 6511.—Limitations
on Credit or Refund
26 CFR 301.6511(a)–1: Period of limitation on filing
claim.
This notice provides a limited administrative ex-
ception to the ability of the Internal Revenue Service
to examine a Form 706 (United States Estate (and
Generation-Skipping Transfer) Tax Return) in con-
nection with certain protective claims for refund that
are based on a deduction under section 2053 of the
Internal Revenue Code and are filed within the time
prescribed in section 6511(a) of the Code. See Notice
2009-84, page 592.
Section 6514.—Credits
or Refunds after Period
of Limitation
26 CFR 301.6514(a)–1: Credits or refunds after pe-
riod of limitation.
This notice provides a limited administrative ex-
ception to the ability of the Internal Revenue Service
to examine a Form 706 (United States Estate (and
Generation-Skipping Transfer) Tax Return) in con-
nection with certain protective claims for refund that
are based on a deduction under section 2053 of the
Internal Revenue Code and are filed within the time
prescribed in section 6511(a) of the Code. See Notice
2009-84, page 592.
Section 7477.—Declaratory
Judgments Relating to
Value of Certain Gifts
26 CFR 301.7477–1: Declaratory judgments relating
to the value of certain gifts for gift tax purposes.
T.D. 9460
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 301
Declaratory Judgments — Gift
Tax Determinations
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations under section 7477 of the
Internal Revenue Code (Code) regarding
petitions filed with the United States Tax
Court for declaratory judgments with re-
spect to the valuation of gifts. Changes
to the applicable law were made by sec-
tion 506(c)(1) of the Taxpayer Relief Act
of 1997. These final regulations primarily
affect individuals who are donors of gifts.
The final regulations provide rules for de-
termining whether a donor may petition
the Tax Court for a determination regard-
ing the value of a gift, including guidance
regarding the definition of “exhaustion of
administrative remedies.”
DATES:Effective date:These regulations
are effective September 9, 2009.
Applicability date:For the date of ap-
plicability, see §301.7477–1(f).
FOR FURTHER INFORMATION
CONTACT: Juli Ro Kim or
George Masnik (202) 622–3090 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 7477, enacted in conjunction
with other provisions as part of the Tax-
payer Relief Act of 1997 (TRA) (Public
Law 105–34, 111 Stat. 855), provides a
declaratory judgmentprocedure pursuant
to which taxpayers may contest in the
United States Tax Court an IRS determina-
tion regarding the value of a gift. Prior law
did not provide a judicial remedy in situa-
tions where the proposed IRS adjustment
would not result in a gift tax deficiency
or a tax overpayment. The new procedure
applies, for example, where an increase in
gift tax determined under section 2502 is
offset by the taxpayer’s applicable credit
amount under section 2505(a), so that no
additional tax is assessed as a result of a
valuation increase. Because there is no tax
deficiency, in the absence of section 7477,
the taxpayer would be unable to challenge
the IRS determination, even though, upon
the expiration of the statute of limitations,
that determination would become binding
for purposes of calculating the cumulative
gift tax on all future gifts of that taxpayer,
as well as the taxpayer’s estate tax liabil-
ity. See H. R. CONF. REP. NO. 105–220,
at 407–408 (1997).
On June 9, 2008, proposed regulations
under section 7477 were published in
theFederal Register(REG–143716–04,
2008–1 C.B. 1170 [73 FR 32503]). The
IRS received no written or oral comments
responding to the notice of proposed rule-
making. No public hearing was requested
or held.
The final regulations include a few
clarifications. In particular, under sec-
tion 7477, in order to be eligible for the
declaratory judgment procedure, the Tax
Court must determine that the donor ex-
hausted all administrative remedies. In
general, the proposed regulations provide
that the IRS will consider a donor to have
exhausted all administrative remedies if
an Appeals conference is requested timely
and the donor (or an authorized represen-
tative) “participates fully” in the Appeals
process. The final regulations contain a
separate subsection specifying that full
participation requires timely submission
of requested information and disclosure
of all relevant information regarding the
controversy. In addition, a provision has
been added specifying that, if Appeals
does not grant the donor’s request for a
conference, the donor will be treated as
having exhausted all administrative reme-
dies if, after filing a Tax Court petition for
a declaratory judgment, the donor (or au-
thorized representative) participates fully
in the Appeals office consideration when
offeredbytheIRSwhilethecaseisin
docketed status.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations and,
because these regulations do not impose
on small entities a collection of informa-
tion requirement, the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ingthisregulationwassubmittedtothe
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
2009–44 I.R.B.584November 2, 2009

Drafting Information
The principal authors of these fi-
nal regulations are George Masnik and
Juli Ro Kim, Office of the Associate
Chief Counsel (Passthroughs and Special
Industries), IRS. Other personnel from
the IRS and the Treasury Department
participated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.7477–1 is revised
to read as follows:
§301.7477–1 Declaratory judgments
relating to the value of certain gifts for
gift tax purposes.
(a)In general.Iftheadjustment(s)
proposed by the Internal Revenue Service
(IRS) will not result in any deficiency in or
refund of the donor’s gift tax liability for
the calendar year, and if the requirements
contained in paragraph (d) of this section
are satisfied, then the declaratory judgment
procedure under section 7477 is available
to the donor for determining the amount of
one or more of the donor’s gifts during that
calendar year for Federal gift tax purposes.
(b)Declaratory judgment proce-
dure—(1)In general. If a donor does not
resolve a dispute with the IRS concerning
the value of a transfer for gift tax purposes
at the Examination level, the donor will be
sent a notice of preliminary determination
of value (Letter 950-G or such other docu-
ment as may be utilized by the IRS for this
purpose from time to time, but referred to
in this section as Letter 950-G), inviting
thedonortofileaformalprotestandto
request consideration by the appropriate
IRS Appeals office. See §§601.105 and
601.106 of this chapter. Subsequently, the
donor will be sent a notice of determina-
tion of value (Letter 3569, or such other
document as may be utilized from time to
time by the IRS for this purpose in cases
where no deficiency or refund would re-
sult, but referred to in this section as Letter
3569) if—
(i) The donor requests Appeals consid-
eration in writing within 30 calendar days
after the mailing date of the Letter 950-G,
or by such later date as determined pur-
suant to IRS procedures, and the matter is
not resolved by Appeals;
(ii) The donor does not request Appeals
consideration within the time provided in
paragraph (b)(1)(i) of this section; or
(iii) The IRS does not issue a Letter
950-G in circumstances described in para-
graph (d)(4)(iv) of this section.
(2)Notice of determination of value.
The Letter 3569 will notify the donor of
the adjustment(s) proposed by the IRS, and
will advise the donor that the donor may
contest the determination made by the IRS
by filing a petition with the Tax Court be-
fore the 91st day after the date on which the
Letter 3569 was mailed to the donor by the
IRS.
(3)Tax Court petition. If the donor
does not file a timely petition with the Tax
Court, the IRS determination as set forth
in the Letter 3569 will be considered the
final determination of value, as defined in
sections 2504(c) and 2001(f). If the donor
files a timely petition with the Tax Court,
the Tax Court will determine whether the
donor has exhausted available administra-
tive remedies. Under section 7477, the Tax
Court is not authorized to issue a declara-
tory judgment unless the Tax Court finds
that the donor has exhausted all adminis-
trative remedies within the IRS. See para-
graph (d)(4) of this section regarding the
exhaustion of administrative remedies.
(c)Adjustments subject to declara-
tory judgment procedure. The declaratory
judgment procedures set forth in this sec-
tion apply to adjustments involving all
issues relating to the transfer, including
without limitation valuation issues and
legal issues involving the interpretation
and application of the gift tax law.
(d)Requirements for declaratory judg-
ment procedure—(1)In general.The
declaratory judgment procedure provided
in this section is available to a donor with
respect to a transfer only if all the require-
ments of paragraphs (d)(2) through (5) of
this section with regard to that transfer are
satisfied.
(2)Reporting. The transfer is shown
or disclosed on the return of tax imposed
by chapter 12 for the calendar year dur-
ing which the transfer was made or on
a statement attached to such return. For
purposes of this paragraph (d)(2), the
termreturn of tax imposed by chapter 12
means the last gift tax return (Form 709,
“United States Gift (and Generation-Skip-
ping Transfer) Tax Return”orsuchother
form as may be utilized for this purpose
from time to time by the IRS) for the cal-
endar year filed on or before the due date
of the return, including extensions granted
if any, or, if a timely return is not filed,
the first gift tax return for that calendar
year filed after the due date. For purposes
of satisfying this requirement, the trans-
fer need not be reported in a manner that
constitutes adequate disclosure within the
meaning of §301.6501(c)–1(e) or (f) (and
thus for which, under §§20.2001–1(b) and
25.2504–2(b) of this chapter, the period
during which the IRS may adjust the value
of the gift will not expire). The issuance
of a Letter 3569 with regard to a transfer
disclosed on a return does not constitute a
determination by the IRS that the transfer
was adequately disclosed, or otherwise
cause the period of limitations on assess-
ment to commence to run with respect to
that transfer. In addition, in the case of a
transfer that is shown on the return, the
IRS may in its discretion defer until a later
time making a determination with regard
to such transfer. If the IRS exercises its
discretion to defer such determination in
that case, the transfer will not be addressed
in the Letter 3569 (if any) sent to the donor
currently, and the donor is not yet eligible
for a declaratory judgment with regard to
that transfer under section 7477.
(3)IRS determination and actual con-
troversy. The IRS makes a determina-
tion regarding the gift tax treatment of the
transfer that results in an actual contro-
versy. The IRS makes a determination
that results in an actual controversy with
respect to a transfer by mailing a Letter
3569 to the donor, thereby notifying the
donor of the adjustment(s) proposed by the
IRS with regard to that transfer and of the
donor’s rights under section 7477.
(4)Exhaustion of administrative reme-
dies—(i)In general. The Tax Court deter-
mines whether the donor has exhausted all
administrative remedies available within
the IRS for resolving the controversy.
November 2, 20095852009–44 I.R.B.

(ii)Appeals office consideration.For
purposes of this section, the IRS will
consider a donor to have exhausted all
administrative remedies if, prior to filing
a petition in Tax Court (except as pro-
vided in paragraphs (d)(4)(iii) and (iv)
of this section), the donor, or a qualified
representative of the donor described in
§601.502 of this chapter, timely requests
consideration by Appeals and participates
fully (within the meaning of paragraph
(d)(4)(vi) of this section) in the Appeals
consideration process. A timely request
for consideration by Appeals is a written
request from the donor for Appeals con-
sideration made within 30 days after the
mailing date of the Letter 950-G, or by
such later date for responding to the Letter
950-G as is agreed to between the donor
and the IRS.
(iii)Request for Appeals office consid-
eration not granted. If the donor, or a
qualified representative of the donor de-
scribed in §601.502 of this chapter, timely
requests consideration by Appeals and
Appeals does not grant that request, the
IRS nevertheless will consider the donor
to have exhausted all administrative reme-
dies within the IRS for purposes of section
7477 upon the issuance of the Letter 3569,
provided that the donor, or a qualified
representative of the donor described in
§601.502 of this chapter, after the filing
of a petition in Tax Court for a declara-
tory judgment pursuant to section 7477,
participates fully (within the meaning of
paragraph (d)(4)(vi) of this section) in the
Appeals office consideration if offered
by the IRS while the case is in docketed
status.
(iv)No Letter 950-G issued.IftheIRS
does not issue a Letter 950-G to the donor
prior to the issuance of Letter 3569, the
IRS nevertheless will consider the donor
to have exhausted all administrative reme-
dies within the IRS for purposes of section
7477 upon the issuance of the Letter 3569,
provided that—
(A) The IRS decision not to issue the
Letter 950-G was not due to actions or in-
actions of the donor (such as a failure to
supply requested information or a current
mailing address to the Area Director hav-
ing jurisdiction over the tax matter); and
(B) The donor, or a qualified represen-
tative of the donor described in §601.502
of this chapter, after the filing of a petition
in Tax Court for a declaratory judgment
pursuant to section 7477, participates
fully (within the meaning of paragraph
(d)(4)(vi) of this section) in the Appeals
office consideration if offered by the IRS
whilethecaseisindocketedstatus.
(v)Failure to agree to extension of time
for assessment. For purposes of section
7477, the donor’s refusal to agree to an
extension of the time under section 6501
within which gift tax with respect to the
transfer at issue (if any) may be assessed
will not be considered by the IRS to con-
stitute a failure by the donor to exhaust
all administrative remedies available to the
donor within the IRS.
(vi)Participation in Appeals consider-
ation process. For purposes of this sec-
tion, the donor or a qualified representa-
tive of the donor described in §601.502 of
this chapter participates fully in the Ap-
peals consideration process if the donor or
the qualified representative timely submits
all information related to the transfer that
isrequestedbytheIRSinconnectionwith
the Appeals consideration and discloses to
the Appeals office all relevant informa-
tion regarding the controversy to the ex-
tent such information and its relevance is
known or should be known by the donor
or the qualified representative during the
time the issue is under consideration by
Appeals.
(5)Timely petition in Tax Court.The
donor files a pleading with the Tax Court
requesting a declaratory judgment under
section 7477. This pleading must be filed
with the Tax Court before the 91st day after
the date of mailing of the Letter 3569 by
the IRS to the donor. The pleading must
be in the form of a petition subject to Tax
Court Rule 211(d).
(e)Examples. The following examples
illustrate the provisions of this section, and
assume that in each case the Tax Court
petition is filed on or after September 9,
2009.
These examples, however, do not ad-
dress any other situations that might af-
fect the Tax Court’s jurisdiction over
the proceeding:
Example 1.Exhaustion of administrative reme-
dies. The donor (D) timely files a Form 709, “United
States Gift (and Generation-Skipping Transfer) Tax
Return,” on which D reports D’s completed gift of
closely held stock. After conducting an examination,
the IRS concludes that the value of the stock on the
date of the gift is greater than the value reported on the
return. Because the amount of D’s available applica-
ble credit amount under section 2505 is sufficient to
cover any resulting tax liability, no gift tax deficiency
will result from the adjustment. D is unable to resolve
the matter with the IRS examiner. The IRS sends a
Letter 950-G to D informing D of the proposed ad-
justment. D, within 30 calendar days after the mail-
ing date of the letter, submits a written request for Ap-
peals consideration. During the Appeals process, D
provides to the Appeals office all additional informa-
tion (if any) requested by Appeals relevant to the de-
termination of the value of the stock in a timely fash-
ion. The Appeals office and D are unable to reach an
agreement regarding the value of the stock as of the
date of the gift. The Appeals office sends D a notice
of determination of value (Letter 3569). For purposes
of section 7477, the IRS will consider D to have ex-
hausted all available administrative remedies within
the IRS, and thus will not contest the allegation in D’s
petition that D has exhausted all such administrative
remedies.
Example 2.Exhaustion of administrative reme-
dies. Assume the same facts as inExample 1, except
that D does not timely request consideration by Ap-
peals after receiving the Letter 950-G. A Letter 3569
is mailed to D more than 30 days after the mailing
of the Letter 950-G and prior to the expiration of the
period of limitations for assessment of gift tax. D
timely files a petition in Tax Court pursuant to sec-
tion 7477. After the case is docketed, D requests Ap-
peals consideration. In this situation, because D did
not respond timely to the Letter 950-G with a written
request for Appeals consideration, the IRS will not
consider D to have exhausted all administrative reme-
dies available within the IRS for purposes of section
7477 prior to filing the petition in Tax Court, and thus
may contest any allegation in D’s petition that D has
exhausted all such administrative remedies.
Example 3.Exhaustion of administrative reme-
dies. D timely files a Form 709 on which D reports
D’s completed gifts of interests in a family limited
partnership. After conducting an examination, the
IRS proposes to adjust the value of the gifts as re-
ported on the return. No gift tax deficiency will result
from the adjustments, however, because D has a suf-
ficient amount of available applicable credit amount
under section 2505. D declines to consent to extend
the time for the assessment of gift tax with respect
to the gifts at issue. Because of the pending expira-
tion of the period of limitation on assessment within
which a gift tax, if any, could be assessed, the IRS de-
termines that there is notadequate time for Appeals
consideration. Accordingly, the IRS mails to D a Let-
ter 3569, even though a Letter 950-G had not first
been issued to D. D timely files a petition in Tax Court
pursuant to section 7477. After the case is docketed
in Tax Court, D is offered the opportunity for Ap-
peals to consider any dispute regarding the determi-
nation and participates fully in the Appeals consider-
ation process. However, the Appeals office and D are
unable to resolve the issue. The IRS will consider D
to have exhausted all administrative remedies avail-
able within the IRS, and thus will not assert that D
has not exhausted all such administrative remedies.
Example 4.Legal issue. D transfers nonvested
stock options to a trust for the benefit of D’s child.
D timely files a Form 709 reporting the transfer as
a completed gift for Federal gift tax purposes and
complies with the adequate disclosure requirements
for purposes of triggering the commencement of
the applicable statute of limitations. Pursuant to
2009–44 I.R.B.586November 2, 2009

§301.6501(c)–1(f)(5), adequate disclosure of a trans-
fer that is reported as a completed gift on the Form
709 will commence the running of the period of
limitations for assessment of gift tax on D, even if the
transfer is ultimately determined to be an incomplete
gift for purposes of §25.2511–2 of this chapter. After
conducting an examination, the IRS concurs with the
reported valuation of the stock options, but concludes
that the reported transfer is not a completed gift for
Federal gift tax purposes. D is unable to resolve the
matter with the IRS examiner. The IRS sends a Letter
950-G to D, who timely mails a written request for
Appeals consideration. Assuming that the IRS mails
to D a Letter 3569 with regard to this transfer, and
that D complies with the administrative procedures
set forth in this section, including the exhaustion of
all administrative remedies available within the IRS,
then D may file a petition for declaratory judgment
with the Tax Court pursuant to section 7477.
Example 5.Transfers in controversy.OnApril
16, 2007, D timely files a Form 709 on which D re-
ports gifts made in 2006 of fractional interests in cer-
tain real property and of interests in a family limited
partnership (FLP). However, although the gifts are
disclosed on the return, the return does not contain
information sufficient to constitute adequate disclo-
sure under §301.6501(c)–1(e) or (f) for purposes of
the application of the statute of limitations on assess-
ment of gift tax with respect to the reported gifts. The
IRS conducts an examination and concludes that the
value of both the interests in the real property and the
FLP interests on the date(s) of the transfers are greater
than the values reported on the return. No gift tax de-
ficiency will result from the adjustments because D
has a sufficient amount of remaining applicable credit
amount under section 2505. However, D does not
agreewiththeadjustments. TheIRSsendsaLetter
950-G to D informing D of the proposed adjustments
in the value of the reported gifts. D, within 30 calen-
dar days after the mailing date of the letter, submits
a written request for Appeals consideration. The Ap-
peals office and D are unable to reach an agreement
regarding the value of any of the gifts. In the exercise
of its discretion, the IRS decides to resolve currently
only the value of the real property interests, and to
defer the resolution of the value of the FLP interests.
On May 28, 2009, the Appeals office sends D a Letter
3569 addressing only the value of the gifts of inter-
ests in the real property. Because none of the gifts re-
ported on the return filed on April 16, 2007, were ad-
equately disclosed for purposes of §301.6501(c)–1(e)
or (f), the period of limitations during which the IRS
may adjust the value of those gifts has not begun to
run. Accordingly, the Letter 3569 is timely mailed.
If D timely files a petition in Tax Court pursuant to
section 7477 with regard to the value of the inter-
ests in the real property, then, assuming the other re-
quirements of section 7477 are satisfied with regard
to those interests, the Tax Court’s declaratory judg-
ment, once it becomes final, will determine the value
of the gifts of the interests in the real property. Be-
cause the IRS has not yet put the gift tax value of the
interests in the FLP into controversy, the procedure
under section 7477 is not yet available with regard to
those gifts.
(f)Effective/applicability date.This
section applies to civil proceedings de-
scribed in section 7477 filed in the United
States Tax Court on or after September 9,
2009.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved August 26, 2009.
Michael Mundaca,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on September
8, 2009, 8:45 a.m., and published in the issue of the Federal
Register for September 9, 2009, F.R. 46347)
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2009. See Rev. Rul. 2009-35, page
568.
Section 7872.—Treatment
of Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2009. See Rev. Rul. 2009-35, page
568.
November 2, 20095872009–44 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Credit for Carbon Dioxide
Sequestration Under Section
45Q
Notice 2009–83
SECTION 1. PURPOSE
This notice sets forth interim guidance,
pending the issuance of regulations, relat-
ing to the credit for carbon dioxide (CO
2
)
sequestration under section 45Q of the
Internal Revenue Code. Specifically, this
notice provides guidance on determining
eligibility for the credit and the amount
of the credit, as well as rules regarding
adequate security measures for secure ge-
ological storage of CO
2
. This notice also
sets forth a separate reporting requirement.
The Internal Revenue Service (Service)
and Treasury Department (Treasury) ex-
pect that the regulations will incorporate
the rules set forth in this notice.
SECTION 2. BACKGROUND
.01 Section 45Q was enacted by § 115
of the Energy Improvement and Extension
Act of 2008, Pub. L. No. 110–343, 122
Stat. 3829 (October 3, 2008), as amended
by § 1131 of the American Recovery and
Reinvestment Tax Act of 2009, Division
B of Pub. L. 111–5, 123 Stat 115 (Feb.
17, 2009). Section 45Q(a) provides that a
credit for CO
2
sequestration (§ 45Q credit)
is generally available to a taxpayer that
captures qualified CO
2
at a qualified facil-
ity and disposes of the CO
2
in secure ge-
ological storage within the United States,
effective for CO
2
captured after October 3,
2008. As originally enacted, § 45Q(a)(1)
provides for a credit of $20 per metric ton
of qualified CO
2
that is captured and dis-
posed of in secure geological storage, and
§ 45Q(a)(2) provides for a credit of $10 per
metric ton of qualified CO
2
that is captured
and used as a tertiary injectant in a quali-
fied enhanced oil or natural gas recovery
project (EOR project). Section 45Q(a),
as amended, provides additional require-
ments effective after February 17, 2009,
that, for purposes of the $20 per metric
ton credit under § 45Q(a)(1), the qualified
CO
2
must not be used as a tertiary injec-
tant; and, for purposes of the $10 per met-
ric ton credit under § 45Q(a)(2), the qual-
ified CO
2
used as a tertiary injectant must
be disposed of in secure geological stor-
age.
.02 Section 45Q(d)(2) as amended pro-
vides that the Secretary of Treasury or his
or her delegate (the Secretary), in consulta-
tion with the Administrator of the Environ-
mental Protection Agency (EPA), the Sec-
retary of Energy (DOE), and the Secretary
of the Interior (DOI), shall establish reg-
ulations for determining adequate security
measures for the geological storage of CO
2
such that the CO
2
does not escape into the
atmosphere.
.03 Section 45Q(d)(5) provides that the
§ 45Q credit is attributable to the person
that captures and physically or contractu-
ally ensures the disposal of or the use as a
tertiary injectant of the qualified CO
2,
ex-
cept to the extent provided in regulations
prescribed by the Secretary.
.04 Section 45Q(d)(6) provides for a re-
capture of the benefit of any credit allow-
able under § 45Q(a) with respect to any
qualified CO
2
that ceases to be captured,
disposed of, or used as a tertiary injectant
in a manner consistent with the require-
ments of § 45Q.
.05 Section 45Q(d)(7) provides that, for
taxable years beginning in a calendar year
after 2009, the dollar amount contained in
§ 45Q(a) will be substituted for an amount
equal to the product of such dollar amount
multiplied by the inflation adjustment fac-
tor for such calendar year determined un-
der § 43(b)(3)(B), determined by substitut-
ing “2008” for “1990.”
.06 Section 45Q(e) as amended pro-
vides that the § 45Q credit will apply with
respect to qualified CO
2
before the end
of the calendar year in which the Secre-
tary, in consultation with EPA, certifies
that 75,000,000 metric tons of qualified
CO
2
have been taken into account in ac-
cordance with § 45Q(a).
SECTION 3. TERMS AND
DEFINITIONS
.01Terms. For purposes of this notice,
(a) The terms disposal, storage, and se-
questration are used interchangeably,
(b) The term credit refers to a tax credit
and shall not be interpreted or construed as
aCO
2
allowance, permit, or any other CO
2
emissions property right, and
(c) The term leakage refers to CO
2
that
ceases to be sequestered via escape or re-
lease from the subsurface to the atmos-
phere or ocean.
.02Industrial Facility.
(a) Industrial facility refers to a facil-
ity that produces a CO
2
stream from a
fuel combustion source, a manufacturing
process, or a fugitive CO
2
emission source
that, absent captureand disposal, would
otherwise be released into the atmosphere
as industrial emission of greenhouse gas.
(b) An industrial facility does not in-
clude a facility that produces CO
2
from
CO
2
production wells at natural CO
2
-bear-
ing formations.
.03Qualified Carbon Dioxide. Quali-
fied carbon dioxide means CO
2
that is:
(a) Captured from an industrial source
that would otherwise be released into
the atmosphere as industrial emission of
greenhouse gas (GHG),
(b) Measured at the source of capture,
and
(c) Verified at the point of disposal or
injection.
Qualified CO
2
includes the initial de-
posit of captured CO
2
used as a tertiary
injectant but does not include CO
2
that is
re-captured, recycled, or otherwise re-in-
jected as part of the enhanced oil and nat-
ural gas recovery process.
.04Qualified Enhanced Oil or Nat-
ural Gas Recovery Project.Qualified
enhanced oil or natural gas recovery
project has the same meaning given the
term “qualified enhanced oil recovery
project” under § 43(c)(2) by substituting
“crude oil or natural gas” for “crude oil”
in § 43(c)(2)(A)(i).
.05Qualified Facility. Qualified fa-
cility means an industrial facility that is
owned by the taxpayer where carbon cap-
ture equipment is placed in service and
where at least 500,000 metric tons of qual-
ified CO
2
is captured during the taxable
year.
SECTION 4. APPLICATION OF
SECTION 45Q CREDIT
.01In General. Taxpayers who capture
qualified CO
2
from a qualified facility in
2009–44 I.R.B.588November 2, 2009

a taxable year beginning after October 3,
2008, and meet all of the other require-
ments of § 45Q are eligible to claim the
credit.
.02Section 45Q Credit Amount.(a)The
amount of the § 45Q credit is equal to the
sum of:
(i) $20 per metric ton of qualified CO
2
if the qualified CO
2
is not used as a tertiary
injectant in an EOR project; and
(ii) $10 per metric ton of qualified CO
2
if the qualified CO
2
is used as a tertiary
injectant in an EOR project.
Pursuant to § 45Q(d)(5), a taxpayer that
captures and physicallyor contractually
ensures the disposal of or the use as a ter-
tiary injectant of qualified CO
2
is eligible
to claim the § 45Q credit.
(b)Inflation Adjustment. The § 45Q
credit amount will be adjusted for inflation
for any taxable year beginning in a calen-
dar year after 2009. The Service will an-
nounce in later guidance the applicable in-
flation adjustment for the amount of § 45Q
credit for a given taxable year.
.03Carbon Dioxide Measured by
Weight. (a) In order to claim a § 45Q
credit, the amount of CO
2
must be mea-
sured at the source of capture and verified
either at the point of disposal in secure ge-
ological storage or at the point of injection
as a tertiary injectant in an EOR project.
The amount of qualified CO
2
for purposes
of the § 45Q credit is presumed to be the
lesser of the amount measured at capture
and the amount verified at disposal or in-
jection, unless the taxpayer can establish
to the satisfaction of the Secretary that the
greater amount is the correct amount.
(b) For the purpose of calculating the
§ 45Q credit, a metric ton of CO
2
includes
only the contained weight of the CO
2
.The
weight of any other substances, such as
water or impurities, is not included in the
calculation. For example, if a metric ton
of a substance that is bought and sold as
“CO
2
” is 95 percent pure CO
2
by weight,
for purposes of the § 45Q credit, 1.0526
tons (equivalent to 1 divided by 0.95) of
the 95 percent pure substance is considered
tobeonemetrictonofCO
2
.
.04Captured and Disposed of or Used
within the United States. Section 45Q
credit applies only to qualified CO
2
that is
captured and disposed of or used as a ter-
tiary injectant within the United States (as
defined in § 638(1)) or a possession of the
United States (as defined in § 638(2)).
.05Taxpayers Eligible to Claim the
§45QCredit. (a) To be eligible to claim
the § 45Q credit, a person must (i) own an
industrial facility at which carbon capture
equipment is placed in service, (ii) capture
not less than 500,000 metric tons of qual-
ified CO
2
during the taxable year at such
industrial facility, and (iii) physically or
contractually ensure that the qualified CO
2
is securely stored in a geologic formation,
including where such CO
2
is captured and
transported for use in an EOR project. In
the case of qualified CO
2
that is used as
a tertiary injectant in an EOR project, re-
quirement (iii) above applies only to CO
2
captured after February 17, 2009.
Each industrial facility for which the
§ 45Q credit is claimed must be equipped
with carbon capture equipment and must
capture not less than 500,000 metric tons
of qualified CO
2
during the taxable year.
Additionally, a person that buys the cap-
tured CO
2
at the point of transit or dis-
posal but does not own the industrial fa-
cility at which the CO
2
is captured does
not meet the qualified facility requirement
of § 45Q(c) and is therefore ineligible to
claim the § 45Q credit.
(b)Example. (i) X, a calendar year tax-
payer, owns a manufacturing facility in the
United States and releases CO
2
into the
atmosphere as a by-product of the facil-
ity’s operations. On November 1, 2009,
X leases carbon capture equipment and
places it in service at the manufacturing fa-
cility. On February 1, 2010, Y, an oil com-
pany, enters into a contract with X to pur-
chase the CO
2
for use as a tertiary injectant
in an EOR project. Pursuant to the terms of
the contract, X captures the CO
2
and de-
livers it to Y at the manufacturing facil-
ity. Y transports the CO
2
in a pipeline to
Y’s oil fields located in the United States.
Pursuant to its contract with X, Y uses
the CO
2
as a tertiary injectant in an EOR
project and thereafter disposes of the CO
2
in secure geological storage in the United
States in 2010 and later years. During the
taxable year beginning on January 1, 2010,
700,000 metric tons of CO
2
is captured at
X’s facility and injected as a tertiary injec-
tant under the terms of the agreement. X
measures the amount of CO
2
at the source
of capture and Y verifies the amount of
CO
2
at the point of injection during taxable
year 2010.
(ii) CO
2
captured from X’s facility is
qualified CO
2
under § 45Q(b) because
the CO
2
was captured from an industrial
source from which it would otherwise
have been released into the atmosphere
and is measured at the source of capture
and verified at the point of injection in the
United States. The CO
2
was captured at
a qualified facility within the meaning of
section 3.05 of this notice because it is an
industrial facility, within the meaning of
section 3.02 of this notice, that is owned
by X, at which carbon capture equipment
is placed in service, and the facility cap-
tures not less than 500,000 metric tons of
CO
2
during the taxable year. Therefore,
X is eligible to claim the § 45Q credit
in 2010 for the qualified CO
2
captured
andusedasatertiaryinjectantinanEOR
project in 2010. The amount of qualified
CO
2
for purposes of the § 45Q credit is
presumed to be the lesser of the amount
measured at capture and the amount ver-
ified at injection, unless X can establish
to the satisfaction of the Secretary that the
greater amount is the correct amount.
.06Allocation of § 45Q Credit Among
Qualified Facility Owners. Eligibility
for the § 45Q credit is based on the total
amount of CO
2
captured and disposed of
in secure geological storage during a tax-
able year subject to the following:
(a) If the qualified facility is owned by a
partnership that has not made a valid elec-
tion under § 761(a), the partnership will
be considered the taxpayer for purposes
of this notice. In such cases, the § 45Q
credit must be allocated in accordance with
§ 1.704–1(b)(4)(ii).
(b) If the qualified facility is owned by a
partnership that has made a valid § 761(a)
election, then each partner in the partner-
ship will be considered the taxpayer for
purposes of this notice. In such case, the
taxpayer may claim the § 45Q credit in
accordance with its portion of the total
amount of qualified CO
2
that is commen-
surate with its undivided ownership of the
qualified facility.
.07Applicability of Credit for Projects
under §§ 48A and 48B of the Code.Qual-
ified CO
2
for purposes of the § 45Q credit
does not include CO
2
that is captured and
sequestered in a project to the extent re-
quired under an agreement executed with
the Service under the qualifying advanced
coal project program of § 48A or the
qualifying gasification project program of
§48B.
November 2, 20095892009–44 I.R.B.

.08Credit Recapture. Taxpayers must
physically or contractually ensure that all
qualified CO
2
disposed of in secure geo-
logical storage remains stored and is not
released into the atmosphere. Taxpayers
must recapture the benefit of any credit
allowable under § 45Q(a) with respect to
any qualified CO
2
that ceases to be cap-
tured, disposed of, or used as a tertiary in-
jectant in a manner consistent with the re-
quirements of § 45Q. Procedures regarding
§ 45Q credit recapture will be provided in
future guidance.
.09Credit Termination.Pursuantto
§ 45Q(e), at such time as the Service cer-
tifies,inconsultationwiththeEPA,that
75,000,000 metric tons of qualified CO
2
have been taken into account for purposes
of § 45Q credit, the Service will publicly
announce that the § 45Q credit will cease
to be available for the calendar year fol-
lowing such announcement.
SECTION 5. SECURE GEOLOGICAL
STORAGE
.01In General. In order to qualify
for the § 45Q credit, a taxpayer must ei-
ther physically or contractually dispose of
captured CO
2
in secure geological storage
using adequate security measures as pro-
vided by the Secretary in regulations. The
term “secure geological storage” includes
storage at deep saline formations, oil and
gas reservoirs, and unminable coal seams
under such conditions as the Secretary may
determine under regulations. There are not
yet regulations setting forth the require-
ments for secure geological storage. This
section of the notice provides interim pro-
cedures for a taxpayer to determine ade-
quate security measures for the secure ge-
ological storage of CO
2
until such reg-
ulations are promulgated. In the event
that a taxpayer disposes of the qualified
CO
2
contractually, the taxpayer must en-
sure that the contracting party complies
with the requirements of this section of the
notice at all times, and the taxpayer must
be able to provide documentation of such
compliance as required under section 7 of
this notice. In order to demonstrate se-
cure geological storage for purposes of the
§ 45Q credit, a taxpayer must meet the re-
quirements of section 5.02 of this notice.
.02Requirements of Secure Geological
Storage.
(a)Measurement of CO
2
at the Source
of Capture: Final Mandatory GHG Re-
porting Rule. On September 22, 2009,
EPA issued the Final Mandatory GHG Re-
porting Rule (Reporting Rule) (to be cod-
ified at 40 C.F.R pt. 98), to require re-
porting of greenhouse gas emissions from
all sectors of the economy. The Report-
ing Rule applies to fossil fuel suppliers
and industrial gas suppliers, including CO
2
suppliers, as well as to direct greenhouse
gas emitters. The Reporting Rule does
not require control of greenhouse gases:
rather, it requires only that certain sources
monitor and report emissions. A taxpayer
claiming the § 45Q credit must use the
methodology, inputs, and equations in the
Reporting Rule (or any successor rule) to
calculate the amount of CO
2
measured at
the source of capture. The amount re-
ported under the Reporting Rule (or any
successor rule) must be consistent with the
amount of qualified CO
2
takenintoac-
count for purposes of the § 45Q credit.
(b)Sequestration Site Rules.
(i)IPCC Guidelines. In order for geo-
logical storage to be considered adequately
secure for purposes of the § 45Q credit
such that the injected CO
2
does not es-
cape into the atmosphere, a taxpayer must
conduct at the frequency appropriate for
the site conditions, except as otherwise
provided under paragraph (c), the follow-
ing procedures outlined in the 2006 In-
tergovernmental Panel on Climate Change
Guidelines for National Greenhouse Gas
Inventories (IPCC Guidelines):
(A) Conduct a site characterization by
evaluating the geology of the storage site
and surrounding strata and identifying the
local and regional hydrogeology and leak-
age pathways such as deep wells, faults,
and fractures.
(B) Conduct an assessment of the risks
of CO
2
leakage, or escape of CO
2
from
the subsurface to the atmosphere, by eval-
uating the potential for leakage through a
combination of site characterization and
realistic models that predict movement of
CO
2
over time and locations where emis-
sions might occur. A range of modeling
tools is available, including reservoir sim-
ulators that are widely used in the oil and
gas industry and have proved effective in
predicting movement of gases and liquids,
including CO
2
, through geological forma-
tions. Reservoir simulation can be used
to predict the likely location, timing, and
flux of emissions. Additional numerical
modeling techniques may need to be used
to analyze aspects of the geology, such as
multi-phase reaction transport models and
geomechanical models.
(C) Monitor potential leakage path-
ways, measure leakage at those pathways
as necessary, monitor the current and fu-
ture behavior of the CO
2
and of the storage
system, and use the results of the monitor-
ingplantovalidateand/or update models
as appropriate. Monitoring should be con-
ducted according to a suitable plan. This
should take into account the expectations
from the modeling on where leakage might
occur, as well as measurements made over
theentirezoneinwhichCO
2
is likely to
be present.
(ii)UIC Program: Proposed Rules for
Geologic Storage. The Underground In-
jection Control (UIC) program was estab-
lished under the authority of Part C of the
Safe Drinking Water Act (42 U.S.C. 300h
et seq.) (SDWA), which regulates under-
ground injection wells. The SDWA is de-
signed to protect the quality of drinking
water sources in the United States. The
SDWA gives the EPA authority to issue
regulations for state programs that con-
tain “minimum requirements for effective
programs to prevent underground injection
which endangers drinking water sources.”
Under the UIC program, the EPA promul-
gated a series of regulations (40 C.F.R.
parts 144 through 148) to employ a multi-
ple barrier approach that includes require-
ments for the proper geologic siting, con-
struction, operation, testing, and closure
of injection wells to ensure that injected
fluids remain isolated from underground
sources of drinking water (USDWs) and
the environment.
On July 25, 2008, the EPA proposed
rules relating to federal requirements un-
der the UIC Program for CO
2
Geologic Se-
questration Wells (73 Fed. Register No.
144, 40 C.F.R. parts 144–146). The EPA
proposes to create a new category of in-
jection well (Class VI) under its existing
UIC Program with new federal require-
ments to permit the injection of CO
2
for the
purpose of geologic sequestration (i.e.,the
long-term containment of a gaseous, liq-
uid, or supercritical CO
2
stream in subsur-
face geologic formations). The EPA pro-
poses to tailor existing UIC program com-
ponents to create standards appropriate for
injecting large amounts of CO
2
into a va-
2009–44 I.R.B.590November 2, 2009

riety of geologic formations to ensure that
USDWs are not endangered.
The proposed UIC program rules have
not been finalized as of the date of this no-
tice. Once the UIC program rules are fi-
nalized, any taxpayer claiming the § 45Q
credit who is covered by the new program
rules must follow the modeling, monitor-
ing, well construction, and other require-
ments of the relevant permit as required
under the rules. The requirements in the
final UIC program rules (or any successor
rules) will apply in lieu of the requirements
of the IPCC Guidelines under paragraph
(i). However, any taxpayer that is not cov-
ered by the final UIC program rules must
continue to follow the procedures outlined
in the IPCC Guidelines pursuant to para-
graph (i).
(iii)Proposed Geologic Sequestration
Rules. Subpart PP of the Final Mandatory
GHG Reporting Rule announces EPA’s
plans to propose new rules to require
reporting of the amount of CO
2
that is
geologically sequestered. EPA will seek
comments on monitoring, reporting, and
verification methodologies that can be
used to determine the amount of CO
2
emit-
ted and geologically sequestered at active
EOR facilities and geologic sequestration
sites where CO
2
is injected (for long-term
storage) into saline aquifers, oil and gas
reservoirs, or other geologic formations.
When the proposed geologic sequestra-
tion rules are finalized, such rules (or any
successor rules) will apply in addition to
the final UIC program rules (to the extent
applicable), and the requirements of the
IPCC Guidelines under paragraph (i) will
no longer apply.
(c)Compliance with Additional Reg-
ulatory Requirements. EPA may impose
additional or different requirements for
secure geological storage, including addi-
tional methodology, inputs, and equations
to calculate the amount of CO
2
measured
and verified at the source of injection
and/or the amount of CO
2
emitted from
secure geological storage. Furthermore,
various aspects of geologic sequestration,
including well construction, operation,
well plugging, and post-injection site
closure may be subject to other existing
or future requirements from government
bodies, including EPA’s regional or state
UIC programs. Any taxpayer claiming the
§ 45Q credit must follow such additional
requirements together with the Reporting
Rule and the IPCC Guidelines (or, in lieu
of the IPCC guidelines, the UIC program
rule as applicable and the geologic se-
questration rule, once they are finalized)
in order to demonstrate secure geological
storage for purposes of the § 45Q credit.
SECTION 6. REPORTING
REQUIREMENTS
.01Annual Reports. A taxpayer that has
claimed the § 45Q credit on a tax return
must submit an annual report to the Service
containing the following information:
(a) The name, address, and taxpayer
identification number of the reporting tax-
payer, and all parties with which the tax-
payer contractually ensures the secure ge-
ological storage of the CO
2
;
(b) The name and location of the qual-
ified facilities at which the CO
2
was cap-
tured;
(c) The amounts (in metric tons) of
qualified CO
2
for the taxable year that has
been taken into account for purposes of
claiming the § 45Q credit;
(d) Any changes in the information in-
cluded in prior annual reports submitted
under section 6.01 of this notice, includ-
ing adjustments to the amount (in metric
tons) of qualified CO
2
taken into account
for purposes of the § 45Q credit in prior
taxable years; and
(e) A declaration, applicable to the re-
port and any accompanying documents,
signed by a person currently authorized to
bind the taxpayer in these matters, in the
following form:
“Under penalties of perjury, I declare
that I have examined this report, includ-
ing accompanying documents, and to the
best of my knowledge and belief, the facts
presented in support of this report are true,
correct, and complete.”
.02Time for Filing Reports. The annual
report described in section 6.01 of this no-
tice must be filed with the Service at the
following address not later than the last
day of the second calendar month follow-
ing the month during which the tax return
on which the § 45Q credit is claimed was
due (including extensions):
Internal Revenue Service
Attn: CC:PSI:6, Room 5116
P.O. Box 14095
Benjamin Franklin Station
Washington, D.C. 20044
SECTION 7. RECORDKEEPING
REQUIREMENT
.01In General. A taxpayer is not
required to attach documentation to the
return on which the credit is claimed.
However, § 6001 of the Code provides
that every person liable for any tax im-
posed by the Code, or for the collection
thereof, must keep such records, render
such statements, make such returns, and
comply with such rules and regulations
as the Secretary may from time to time
prescribe. See Treas. Reg. § 1.6001–1(e).
.02Information Must Be Available for
Inspection. The taxpayer must retain in
its records documentation establishing
that the taxpayer qualifies for the § 45Q
credit. The taxpayer must, upon request,
make such documentation available for
inspection by the Service regardless of
whether the taxpayer physically or con-
tractually ensures injection or disposal in
secure geological storage. Such necessary
documentation includes, but is not limited
to, the following:
(a) Methodology, inputs, and equations
used to measure the amount of CO
2
at the
source of capture and verify the amount at
the point of disposal or injection. Quali-
fied CO
2
for purposes of the § 45Q credit
does not include the amount of CO
2
recy-
cled or re-injected as part of EOR opera-
tions.
(b) Evidence of disposal of captured
CO
2
in secure geological storage, as spec-
ified in section 5 of this notice. As future
Federal and state regulations are promul-
gated, such evidence may also include any
certificates issued or determinations made
by a Federal or state government that the
geological storage meets the necessary re-
quirements to ensure secure storage.
(c) Methodology, inputs, and equations
used to calculate the amount of CO
2
emit-
ted from secure geological storage.
(d) All contracts entered into by the tax-
payer and any contracting party that en-
sures the use of the CO
2
as a tertiary in-
jectant or the disposal of the CO
2
in secure
geological storage.
SECTION 8. PAPERWORK
REDUCTION ACT
The collection of information contained
in this notice has been reviewed and ap-
proved by the Office of Management and
November 2, 20095912009–44 I.R.B.

Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. § 3507) under
control number 1545–2153.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collection of information is in sec-
tion 6 of this notice. This information is re-
quired to allow the Secretary to determine
when 75,000,000 metric tons of qualified
CO
2
have been taken into account for pur-
poses of the § 45Q credit. The § 45Q credit
will cease to be available after the end of
the calendar year in which the Secretary,
in consultation with the EPA, certifies that
75,000,000 metric tons of qualified CO
2
have been taken into account. This collec-
tionofinformationisrequiredtoobtaina
benefit. The likely respondents are busi-
nesses or other for-profit institutions.
The estimated total annual reporting
burden is 180 hours.
The estimated annual burden per re-
spondent varies from 2 to 10 hours, de-
pending on individual circumstances, with
an estimated average of 6 hours. The esti-
mated number of respondents is 30.
The estimated annual frequency of re-
sponses is annually.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. § 6103.
SECTION 9. DRAFTING
INFORMATION
The principal author of this notice is
Jennifer C. Bernardini of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries). For further in-
formation regarding this notice, contact
Jennifer C. Bernardini at (202) 622–3110
(not a toll-free call).
Limited Reexamination of
Estate Tax Return Applicable
to Certain Section 2053
Claims for Refund
Notice 2009–84
PURPOSE
This notice provides a limited admin-
istrative exception to the ability of the
Internal Revenue Service (Service) to ex-
amine a Form 706 (United States Estate
(and Generation-Skipping Transfer) Tax
Return) in connection with certain protec-
tive claims for refund filed within the time
prescribed in section 6511(a) of the Inter-
nal Revenue Code (Code). Specifically, in
processing a timely-filed protective claim
for refund of tax based on a deduction
under section 2053 of the Code, if the
claim for refund ripens and becomes ready
for consideration after the expiration of
the period of limitations on assessment
prescribed in section 6501, the Service
will limit its review of the Form 706 to the
evidence relating to the deduction under
section 2053 that was the subject of the
protective claim.
BACKGROUND
Concurrently with the issuance of this
notice, the Treasury Department and the
Service are issuing final regulations under
section 2053 of the Code (T.D. 9468) to
provide guidance in determining the de-
ductible amount of a claim against a dece-
dent’s estate under section 2053. Sec-
tion 20.2053–1(d)(1) of the final regula-
tions provides the general rule that a de-
duction for any claim or expense described
in section 2053 and the final regulations
is limited, with several exceptions, to the
amount actually paid in settlement or sat-
isfaction of the claim or expense.
Under the final regulations, if a claim or
expense that would have been deductible
under section 2053 had it already been paid
is not fully deductible within the period
of limitation prescribed in section 6511(a),
theestatemayfileaprotectiveclaimforre-
fund to preserve the estate’s right to claim
a refund of tax attributable to the deduction
of such claim or expense in the event that
it becomes deductible in whole or in part
after the expiration of the period of limi-
tation prescribed in section 6511(a). Sec-
tion 20.2053–1(d)(5). A protective claim
for refund may be filed at any time before
the expiration of the period of limitation
prescribed in section 6511(a) for the filing
of a claim for credit or refund. See section
6514. Once the claim or expense has been
paid or otherwise has become deductible
under section 2053, the executor may no-
tify the Service that the decedent’s estate is
ready to pursue the claim for refund.
In considering a claim for refund, the
Service must determine if there is an over-
payment of tax for purposes of section
6402. An overpayment exists to the ex-
tent the amount of tax paid exceeds the cor-
rect tax liability. To determine the correct
tax liability, the Service has the authority
to examine each item on the return regard-
less of whether the period of limitations
on assessment has expired. SeeLewis v.
Reynolds, 284 U.S. 281, 283 (1932).Even
if the Service is barred from assessing any
additional amount of tax by reason of the
expiration of the period of limitations on
assessment under section 6501, the Ser-
vice may reject the claim for refund to the
extent the Service determines there is no
overpayment of tax.
DISCUSSION
Commentators responding to the
proposed regulations (published in the
Federal Register on April 23, 2007
(REG–143316–03, 2007–1 C.B. 1292 [72
FR 20080])) expressed concerns that the
protective claim procedures effectively
would keep the period of limitations on as-
sessment open to the extent of the amount
of the claim for refund and, therefore,
would impede the goal of achieving final-
ity in the administration of a decedent’s
estate. In cases in which the Service ac-
cepts the Form 706 as filed or in which
any disputes between the estate and the
Service are resolved without a judicial de-
termination, the executor generally relies
on the estate tax closing letter (Letter 627)
that is issued by the Service to advise the
estate that the Form 706 has been accepted,
either as filed or after an adjustment to
which the estate has agreed. Practitioners
are concerned that, if an estate must file
a protective claim for refund in order to
claim a deduction for a claim or expense
under section 2053 of the Code, executors
will be unable to rely on the estate tax
closing letter because the Service has the
2009–44 I.R.B.592November 2, 2009

ability to examine the entire Form 706
when a timely-filed claim for refund is
ready for consideration by the Service.
The final regulations under section
2053, issued concurrently with this notice,
provide several exceptions to the general
rule that a deduction for a claim or expense
is limited to the amount paid in settlement
or satisfaction of that claim or expense. As
a result of these exceptions, the Treasury
Department and the Service anticipate that
the number of protective refund claims
filed to preserve a deduction under section
2053 will be significantly smaller than
was anticipated by commentators to the
proposed regulations. The Treasury De-
partment and the Service, nevertheless,
acknowledge the value in achieving final-
ity in the administration of estates and in
making the regulations under section 2053
more administrable.
Accordingly, if the period of limitations
on assessment has expired and the Service
is notified that a timely-filed protective
claim for refund of tax based on a deduc-
tion under section 2053 has ripened and is
ready for consideration, the Service gener-
ally will refrain from exercising its author-
ity to examine each item on the Form 706
to determine if there is an overpayment of
tax for purposes of section 6402. Instead,
when such a timely-filed claim for refund
ripens after the expiration of the period of
limitations on assessment, the Service will
limit its examination of the Form 706 to
the evidence relating to the deduction un-
der section 2053 that was the subject of the
protective claim.
To the extent that the Service deter-
mines the deduction under section 2053 is
allowable, the Service will recompute the
estate tax liability of the estate (and the
marital and charitable deductions, and all
other amounts determined as part of that
process) by allowing that deduction.
SCOPE
The Service’s decision to limit its ex-
amination of the Form 706 to the evidence
relating to the deduction under section
2053 of the Code applies only to estates
in which a timely protective refund claim
was filed to preserve an estate’s ability to
claim a deduction under section 2053 for
a claim or expense that subsequently is
paid or otherwise meets the requirements
for deductibility under the final regula-
tions. This administrative exception does
not apply, however, when the Service is
considering a protective claim for refund
based on a deduction under section 2053
and, in the same estate, is considering a
claim for refund not based on a protective
claim regarding a deduction under section
2053. In addition, the Service’s decision
to limit its examination of the Form 706
applies only if the protective claim for
refund ripens after the expiration of the
period of limitations on assessment and
does not apply if there is evidence of fraud,
malfeasance, collusion, concealment, or
misrepresentation of a material fact.
EFFECTIVE DATE
This notice is applicable with respect to
protective claims for refund filed on behalf
of estates of decedents dying on or after
October 20, 2009.
DRAFTING INFORMATION
The principal author of this notice is
Karlene Lesho of the Office of Associate
Chief Counsel (Passthroughs and Special
Industries). For further information re-
garding this notice, contact Karlene Lesho
at (202) 622–3090 (not a toll-free call).
November 2, 20095932009–44 I.R.B.

Part IV. Items o
fGeneralInterest
Deletions Fro
m Cumulative
List of Organi
zations
Contribution
stoWhich
are Deductib
le Under Section
170 of the Cod
e
Announcemen
t 2009–78
The Internal
Revenue Service has re-
voked its det
ermination that the organi-
zations list
ed below qualify as organiza-
tions describ
ed in sections 501(c)(3) and
170(c)(2)oft
he Internal Revenue Code of
1986 effectiv
e January 1, 2006.
Generally, th
e Service will not disallow
deductions fo
r contributions made to a
listed organi
zation on or before the date
of announceme
nt in the Internal Revenue
Bulletin tha
t an organization no longer
qualifies. H
owever, the Service is not
precluded fr
om disallowing a deduction
for any contr
ibutions made after an or-
ganization
ceases to qualify under section
170(c)(2) if t
he organization has not timely
filed a suit fo
r declaratory judgment under
section7428a
nd if the contributor (1) had
knowledge of t
he revocation of the ruling
or determinat
ion letter, (2) was aware that
such revocat
ion was imminent, or (3) was
in part respo
nsible for or was aware of the
activities o
r omissions of the organization
that brought
about this revocation.
Concerned Re
sidents of Southeast, Inc.
Brewster, N
Y
2009–44 I.R.B.594November 2, 2009

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
November 2, 2009i2009–44 I.R.B.

Numerical Finding List
1
Bulletins 2009–27 through 2009–44
Announcements:
2009-56, 2009-28 I.R.B.145
2009-57, 2009-29 I.R.B.158
2009-58, 2009-29 I.R.B.158
2009-59, 2009-29 I.R.B.158
2009-60, 2009-30 I.R.B.166
2009-61, 2009-33 I.R.B.246
2009-62, 2009-33 I.R.B.247
2009-63, 2009-33 I.R.B.248
2009-64, 2009-36 I.R.B.319
2009-65, 2009-36 I.R.B.319
2009-66, 2009-37 I.R.B.364
2009-67, 2009-38 I.R.B.388
2009-68, 2009-38 I.R.B.388
2009-69, 2009-40 I.R.B.475
2009-70, 2009-41 I.R.B.499
2009-71, 2009-40 I.R.B.475
2009-72, 2009-41 I.R.B.500
2009-73, 2009-41 I.R.B.500
2009-74, 2009-42 I.R.B.537
2009-75, 2009-42 I.R.B.537
2009-77, 2009-43 I.R.B.567
2009-78, 2009-44 I.R.B.594
Notices:
2009-51, 2009-28 I.R.B.128
2009-55, 2009-31 I.R.B.170
2009-57, 2009-29 I.R.B.147
2009-58, 2009-30 I.R.B.163
2009-59, 2009-31 I.R.B.170
2009-60, 2009-32 I.R.B.181
2009-61, 2009-32 I.R.B.181
2009-62, 2009-35 I.R.B.260
2009-63, 2009-34 I.R.B.252
2009-64, 2009-36 I.R.B.307
2009-65, 2009-39 I.R.B.413
2009-66, 2009-39 I.R.B.418
2009-67, 2009-39 I.R.B.420
2009-68, 2009-39 I.R.B.423
2009-69, 2009-35 I.R.B.261
2009-70, 2009-34 I.R.B.255
2009-71, 2009-35 I.R.B.262
2009-72, 2009-37 I.R.B.325
2009-73, 2009-38 I.R.B.369
2009-74, 2009-38 I.R.B.370
2009-75, 2009-39 I.R.B.436
2009-76, 2009-43 I.R.B.554
2009-77, 2009-40 I.R.B.449
2009-78, 2009-40 I.R.B.452
2009-79, 2009-40 I.R.B.454
2009-81, 2009-40 I.R.B.455
2009-82, 2009-41 I.R.B.491
Notices— Continued:
2009-83, 2009-44 I.R.B.588
2009-84, 2009-44 I.R.B.592
Proposed Regulations:
REG-140492-02, 2009-43 I.R.B.559
REG-152166-05, 2009-32 I.R.B.183
REG-112994-06, 2009-28 I.R.B.144
REG-127270-06, 2009-42 I.R.B.534
REG-136563-07, 2009-41 I.R.B.497
REG-108045-08, 2009-43 I.R.B.557
REG-113289-08, 2009-33 I.R.B.244
REG-116614-08, 2009-42 I.R.B.536
REG-130200-08, 2009-31 I.R.B.174
REG-139068-08, 2009-43 I.R.B.558
Revenue Procedures:
2009-30, 2009-27 I.R.B.27
2009-31, 2009-27 I.R.B.107
2009-32, 2009-28 I.R.B.142
2009-33, 2009-29 I.R.B.150
2009-34, 2009-34 I.R.B.258
2009-35, 2009-35 I.R.B.265
2009-36, 2009-35 I.R.B.304
2009-37, 2009-36 I.R.B.309
2009-38, 2009-37 I.R.B.362
2009-39, 2009-38 I.R.B.371
2009-40, 2009-39 I.R.B.438
2009-41, 2009-39 I.R.B.439
2009-42, 2009-40 I.R.B.459
2009-43, 2009-40 I.R.B.460
2009-44, 2009-40 I.R.B.462
2009-45, 2009-40 I.R.B.471
2009-46, 2009-42 I.R.B.507
2009-47, 2009-42 I.R.B.524
Revenue Rulings:
2009-18, 2009-27 I.R.B.1
2009-19, 2009-28 I.R.B.111
2009-20, 2009-28 I.R.B.112
2009-21, 2009-30 I.R.B.162
2009-22, 2009-31 I.R.B.167
2009-23, 2009-32 I.R.B.177
2009-24, 2009-36 I.R.B.306
2009-25, 2009-38 I.R.B.365
2009-26, 2009-38 I.R.B.366
2009-27, 2009-39 I.R.B.404
2009-28, 2009-39 I.R.B.391
2009-29, 2009-37 I.R.B.322
2009-30, 2009-39 I.R.B.391
2009-31, 2009-39 I.R.B.395
2009-32, 2009-39 I.R.B.399
2009-33, 2009-40 I.R.B.447
2009-34, 2009-42 I.R.B.502
2009-35, 2009-44 I.R.B.568
Treasury Decisions:
9452, 2009-27 I.R.B.1
9453, 2009-28 I.R.B.114
9454, 2009-32 I.R.B.178
9455, 2009-33 I.R.B.239
9456, 2009-33 I.R.B.188
9457, 2009-41 I.R.B.482
9458, 2009-43 I.R.B.547
9459, 2009-41 I.R.B.480
9460, 2009-44 I.R.B.584
9461, 2009-41 I.R.B.488
9462, 2009-42 I.R.B.504
9463, 2009-40 I.R.B.442
9465, 2009-43 I.R.B.542
9466, 2009-43 I.R.B.551
9468, 2009-44 I.R.B.570
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2009–1 through 2009–26 is in Internal Revenue Bulletin
2009–26, dated June 29, 2009.
2009–44 I.R.B.iiNovember 2, 2009

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–27 through 2009–44
Announcements:
2006-93
Superseded by
Ann. 2009-62, 2009-33 I.R.B.247
Notices:
2002-3
Modified and superseded by
Notice 2009-68, 2009-39 I.R.B.423
2004-67
Supplemented and superseded by
Notice 2009-59, 2009-31 I.R.B.170
2006-70
Obsoleted by
T.D. 9453, 2009-28 I.R.B.114
2006-109
Superseded in part by
Rev. Proc. 2009-32, 2009-28 I.R.B.142
2007-7
Modified by
Notice 2009-82, 2009-41 I.R.B.491
2008-30
Amplified and clarified by
Notice 2009-75, 2009-39 I.R.B.436
2008-43
Obsoleted by
REG-113289-08, 2009-33 I.R.B.244
2009-28
Clarified by
Notice 2009-69, 2009-35 I.R.B.261
2009-31
Amplified by
Rev. Proc. 2009-43, 2009-40 I.R.B.460
2009-42
Amplified by
Rev. Proc. 2009-43, 2009-40 I.R.B.460
Revenue Procedures:
97-27
Clarified and modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
97-49
Modified and superseded by
Rev. Proc. 2009-31, 2009-27 I.R.B.107
2002-44
Superseded by
Rev. Proc. 2009-44, 2009-40 I.R.B.462
Revenue Procedures— Continued:
2002-59
Superseded by
Rev. Proc. 2009-41, 2009-39 I.R.B.439
2005-63
Modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
2007-44
Modified by
Rev. Proc. 2009-36, 2009-35 I.R.B.304
2007-65
Modified by
Ann. 2009-69, 2009-40 I.R.B.475
2008-34
Superseded by
Rev. Proc. 2009-46, 2009-42 I.R.B.507
2008-38
Superseded by
Rev. Proc. 2009-30, 2009-27 I.R.B.27
2008-44
Superseded by
Rev. Proc. 2009-35, 2009-35 I.R.B.265
2008-52
Amplified, clarified, and modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
2008-59
Superseded by
Rev. Proc. 2009-47, 2009-42 I.R.B.524
2008-65
Modified by
Rev. Proc. 2009-33, 2009-29 I.R.B.150
2009-16
Modified by
Rev. Proc. 2009-33, 2009-29 I.R.B.150
2009-39
Modified by
Ann. 2009-67, 2009-38 I.R.B.388
Revenue Rulings:
74-346
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
75-190
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
75-398
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
75-526
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
Revenue Rulings— Continued:
2009-22
Corrected by
Ann. 2009-74, 2009-42 I.R.B.537
2009-29
Corrected by
Ann. 2009-74, 2009-42 I.R.B.537
Treasury Decisions:
9456
Corrected by
Ann. 2009-73, 2009-41 I.R.B.500
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–1 through 2009–26 is in Internal Revenue Bulletin 2009–26, dated June 29, 2009.
November 2, 2009iii2009–44 I.R.B.

INTERNAL REVENUE BULLETIN
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