Could a Rhode Island estate claim a credit for estate tax paid by the decedent's mother's estate when the mother died nine months and nine days earlier and the later estate consisted entirely of her transferred assets?

Plain-English summary

Estate of X could not claim a Rhode Island estate-tax credit for tax already paid by Estate of Y when the same assets passed from the mother to her son and then through the son's estate nine months and nine days later. The federal prior-transfer credit did not apply to Rhode Island estate tax, and Rhode Island had no comparable credit of its own.

The mother died intestate, so all of her estate was to pass to her son. Her Rhode Island estate-tax return was filed and the tax due was paid. The son's later estate consisted entirely of proceeds transferred from his mother's estate. Neither estate filed a federal estate-tax return.

Federal law allowed a credit against federal estate tax for federal estate tax paid on property transferred from a person who died within the stated time window. The estate asked Rhode Island to provide similar treatment.

The Division found that R.I. Gen. Laws § 44-22-1.1 provided only one reduction or credit: an adjustment for property that did not have Rhode Island tax situs. The statute did not provide a credit for estate tax paid on a prior transfer. The federal credit therefore could not be imported into the Rhode Island tax.

What this means for you

Estates receiving recently inherited property

Do not assume a federal credit or relief provision automatically applies to Rhode Island estate tax. This ruling required an express state-law credit and found none for prior transfers.

Executors and preparers

Trace the source of estate assets and taxes paid by earlier estates, but verify which relief provisions the Rhode Island statute actually authorizes. Closely timed deaths did not create a state credit here.

Families planning successive transfers

The fact that the later estate consisted entirely of property from the earlier taxed estate did not change the result under the statute applied in this order.

Common questions

Did the mother's estate pay Rhode Island estate tax? Yes. Its Rhode Island return was filed and the tax due was paid.

How soon did the son die after his mother? Nine months and nine days later.

Did federal law provide a prior-transfer credit? Yes, for federal estate tax under the requirements quoted in the ruling, but that federal credit did not apply to Rhode Island estate tax.

Did Rhode Island have its own similar credit? No. The Division found no state credit for tax paid on prior transfers.

What reduction did the Rhode Island statute provide? The ruling said the statute's only reduction or credit involved property without Rhode Island tax situs.

Citations and references

• R.I. Gen. Laws § 44-22-1.1 — Rhode Island estate tax and the reduction identified by the ruling.
• 26 U.S.C. § 2011 — state death-tax credit reference incorporated in the Rhode Island computation described by the ruling.
• 26 U.S.C. § 2013 and Treasury Regulation § 20.2013-1 — federal credit for tax on prior transfers.

Source

• Landing page: Rhode Island Declaratory Rulings
• Declaratory order: Declaratory Order 2009-01

Original ruling text

Ruling Request No. 2009-01

Declaratory Rulings

Ruling Request No. 2009-01

Request for Ruling Regarding Eligibility for a Credit from the Estate Tax for Tax Paid on Prior Transfers

As Administrator of the Estate of X, you request a declaratory ruling relating to Estate of X's eligibility to take a tax credit for estate taxes paid on a prior transfer.

Facts

The facts set forth in your request for ruling dated July 1, 2009, and the documents attached thereto, form the basis for this ruling.

Mr. X died (Estate of X) on xx/xx/xxxx in Providence, Rhode Island. The decedent's mother (Estate of Y) died in Providence, Rhode Island on yy/yy/yyyy (nine months and nine days prior to her son). As she died intestate, all assets in her estate were to be distributed to her son. The Rhode Island Estate Tax Return (RI 100A) was filed in her estate and the amount of estate tax that was due was paid. Mr. X's estate is made up entirely from the proceeds of his mother's estate, as her estate was transferred to him. Neither estate filed a federal estate tax return (Form 706).

Declaratory Ruling Requested

Estate of X is eligible to take a tax credit for the tax already paid in the Estate of Y similar to the credit permitted on Federal Form 706, which is taken on Schedule Q of said form, pursuant to Regulation § 20.2013.1.

Discussion

RIGL §44-22-1.1 provides for a tax upon the transfer of the net estate of every resident or nonresident decedent as a tax upon the right to transfer. The tax is a sum equal to the maximum credit for state death taxes allowed by 26 U.S.C. § 2011 as it was in effect as of January 1, 2001. Any scheduled increase in the unified credit provided in 26 U.S.C. § 2010 in effect on January 1, 2001, or thereafter, shall not apply.

The federal government allows a credit for tax on prior transfers under 26 U.S.C. § 2013 and Regulation § 20.2013-1. Regulation § 20.2013-1 states in part:

> "A credit is allowed under section 2013 against the federal estate tax imposed on the present decedent's estate for Federal estate tax paid on the transfer of property to the present decedent from a transferor who died within ten years before, or within two years after the present decedent's death."

RIGL §44-22-1.1 provides for only one reduction or credit to the estate tax. It involves property not having a tax situs within Rhode Island. The Rhode Island Estate Tax has no credit provision for tax paid on prior transfers.

Ruling

The Estate of X is not eligible to take a credit for tax paid on prior transfers. The federal credit does not apply to the Rhode Island Estate Tax and Rhode Island does not have a similar exemption of its own.

This ruling may be relied upon by the Estate of X and shall be valid until expressly revoked or until the applicable statutory provisions of law are amended in a manner that requires a different result or the underlying facts described herein change.

**DAVID M. SULLIVAN

TAX ADMINISTRATOR

SEPTEMBER 15, 2009**