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The Inheritance and Estate Tax Act

(Article XXI of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, No. 2, added by Act of Aug. 4, 1991, P.L. 97, No. 22, as amended.)


Section 2126. Deductions Generally.

___The only deductions from the value of the property transferred shall be those set forth in this part. Except as otherwise provided in this article, they shall be deductible regardless of whether or not assets comprising the decedent's taxable estate are employed in the payment or discharge of the deductible items. When a tax is imposed upon a transfer described in subsection (c) of section 2107 and section 2108, the deductions shall be allowed to the transferee only to the extent that the transferee has actually paid the deductible items and either the transferee was legally obligated to pay the deductible items or the estate subject to administration by a personal representative is insufficient to pay the deductible items.

Section 2127. Expenses.

___The following expenses may be deducted from the value of the property transferred:

___(1) Administration expenses. All reasonable expenses of administration of the decedent's estate and of the assets includable in the decedent's taxable estate are deductible.

___(2) Bequest to fiduciary or attorney in lieu of fees. A transfer to an executor, trustee or attorney in lieu of compensation for services is deductible to the extent it does not exceed reasonable compensation for the services to be performed.

___(3) Family exemption. The family exemption is deductible.

___(4) Funeral and burial expenses. Reasonable and customary funeral expenses, including the cost of a family burial lot or other resting place, are deductible.

___(5) Tombstones and gravemarkers. Reasonable and customary expenses for the purchase and erection of a monument, gravestone or marker on decedent's burial lot or final resting place are deductible.

___(6) Burial trusts or contracts. Bequests or devises in trust, or funds placed in trust after decedent's death or funds paid under a contract after decedent's death, in reasonable amounts, to the extent that the funds or income from the funds is to be applied to the care and preservation of the family burial lot or other final resting place in which the decedent is buried or the remains of the decedent repose and the structure on the burial lot or other final resting place, are deductible.

___(7) Bequests for religious services. Bequests in reasonable amounts for the performance or celebration of religious rites, rituals, services or ceremonies, in consequence of the death of the decedent, shall be deductible.

Section 2128. Taxes.

___The following taxes may be deducted from the value of the property transferred:

___(1) Property taxes. Taxes imposed against the decedent or against any property constituting a part of decedent's gross taxable estate and which are owing prior to decedent's death are deductible. However, taxes for which decedent is not personally liable shall not be deductible in an amount exceeding the value of the property against which the taxes are liened.

___(2) State and foreign death taxes. Death taxes other than the Federal estate tax, disregarding interest and penalty, paid to other states and territories of the United States and to taxing jurisdictions outside the United States and its territories on assets, the transfer of which is subject to tax under this article, if the taxes are required to be paid to bring the assets into this Commonwealth, or to transfer them to the new owner, are deductible.

Section 2129. Liabilities.

___(a) Except as set forth in section 2130(5), all liabilities of the decedent shall be deductible subject to the limitations set forth in this section.

___(b) Except as otherwise provided in subsections (h) and (i), the deductions for indebtedness of the decedent, when founded upon a promise or agreement, shall be limited to the extent that it was contracted bona fide and for an adequate and full consideration in money or money's worth.

___(c) Except as provided by subclause (4) of section 2130, indebtedness owing by the decedent upon a secured loan is deductible whether or not the security is a part of the gross taxable estate.

___(d) Except as provided by subclause (4) of section 2130, the decedent's liability (net of all collectible contribution) on a joint obligation is deductible whether or not payment of the obligation is secured by entireties property or property which passes to another under the right of survivorship.

___(e) Indebtedness arising from a contract for the support of the decedent is deductible.

___(f) Decedent's obligation is deductible whether or not discharged by testamentary gift.

___(g) Decedent's debt, which is unenforceable because of any statute of limitations, is deductible if paid by the estate.

___(h) A pledge to a transferee exempt under the provisions of subsection (c) of section 2111 is deductible if paid by the estate, whether or not it is legally enforceable.

___(i) Liabilities arising from the decedent's tort or from decedent's status as an accommodation endorser, guarantor or surety are deductible, except to the extent that it can be reasonably anticipated that decedent's estate will be exonerated or reimbursed by others primarily liable or subject to contribution.

___(j) The fact that a surviving spouse is legally liable and financially able to pay any item which, if the deceased spouse were unmarried, would qualify as a deduction under this part shall not result in the disallowance of such item as a deduction.

___(k) Obligations for decedent's medical expenses are not deductible to the extent decedent's estate will be exonerated or reimbursed for such expenses from other sources.

Section 2130. Deductions Not Allowed.

___The following are not deductible:

___(1) [Repealed.]

___(2) Claims of a former spouse, or others, under an agreement between the former spouse and the decedent, insofar as they arise in consideration of a relinquishment or promised relinquishment of marital or support rights.

___(3) Litigation expenses of beneficiaries.

___(4) Indebtedness secured by real property or tangible personal property, all of which has its situs outside of this Commonwealth, except to the extent the indebtedness exceeds the value of the property.

(5) Expenses, debts, obligations and liabilities incurred in connection with a qualified family-owned business interest exempted from inheritance under section 2lll(t).

[Section 2130 was amended by the Act of June 16, 1994, P.L. 279, No. 48, and reenacted and amended by Section 20 of the Act of June 30, 1995, P.L. 139, No. 21, effective for decedents dying on or after January 1, 1995.]

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