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Interest expense. Interest expenses incurred after the decedent's death are generally allowed as a deduction if they are reasonable, necessary to the administration of the estate, and allowable under local law. Interest incurred as the result of a federal estate tax deficiency is a deductible administrative expense. Penalties on estate tax deficiencies are not deductible even if they are allowable under local law. Note. If you elect to pay the tax in installments under section 6166, you may not deduct the interest payable on the installments. Miscellaneous expenses. Miscellaneous administration expenses necessarily incurred in preserving and distributing the estate are deductible. These expenses include appraiser's and accountant's fees, certain court costs, and costs of storing or maintaining assets of the estate. The expenses of selling assets are deductible only if the sale is necessary to pay the decedent's debts, the expenses of administration, or taxes, or to preserve the estate or carry out distribution. Schedule K—Debts of the Decedent, and Mortgages and Liens Use Schedule PC to make a protective claim for refund for expenses which are not currently deductible under section 2053. For such a claim, report the expense on Schedule K but without a value in the last column. You must complete and attach Schedule K if you claimed deductions on either item 15 or item 16 of Part 5—Recapitulation. Income vs. estate tax deduction. Taxes, interest, and business expenses accrued at the date of the decedent's death are deductible both on Schedule K and as deductions in respect of the decedent on the income tax return of the estate. If you choose to deduct medical expenses of the decedent only on the estate tax return, they are fully deductible as claims against the estate. If, however, they are claimed on the decedent's final income tax return under section 213(c), they may also not be claimed on the estate tax return. In this case, you may also not deduct on the estate tax return any amounts that were not deductible on the income tax return because of the percentage limitations. Debts of the Decedent List under Debts of the Decedent only valid debts the decedent owed at the time of death. List any indebtedness secured by a mortgage or other lien on property of the gross estate under Mortgages and Liens. If the amount of the debt is disputed or the subject of litigation, deduct only the amount the estate concedes to be a valid claim. Generally, if the claim against the estate is based on a promise or agreement, the deduction is limited to the extent that the liability was contracted bona fide and for an adequate and full consideration in money or money's worth. However, any enforceable claim based on a promise or agreement of the decedent to make a contribution or gift (such as a pledge or a subscription) to or for the use of a charitable, public, religious, etc., organization is deductible to CAUTION ! the extent that the deduction would be allowed as a bequest under the statute that applies. Certain claims of a former spouse against the estate based on the relinquishment of marital rights are deductible on Schedule K. For these claims to be deductible, all of the following conditions must be met. • The decedent and the decedent's spouse must have entered into a written agreement relative to their marital and property rights. • The decedent and the spouse must have been divorced before the decedent's death and the divorce must have occurred within the 3-year period beginning on the date 1 year before the agreement was entered into. It is not required that the agreement be approved by the divorce decree. • The property or interest transferred under the agreement must be transferred to the decedent's spouse in settlement of the spouse's marital rights. You may not deduct a claim made against the estate by a remainderman relating to section 2044 property. Section 2044 property is described in the instructions for Part 4—General Information, line 7. Include in this schedule notes unsecured by mortgage or other lien and give full details, including: • Name of payee, • Face and unpaid balance, • Date and term of note, • Interest rate, and • Date to which interest was paid before death. Include the exact nature of the claim as well as the name of the creditor. If the claim is for services performed over a period of time, state the period covered by the claim. Example. Electric Illuminating Co., for electric service during December 2021, $150. If the amount of the claim is the unpaid balance due on a contract for the purchase of any property included in the gross estate, indicate the schedule and item number where you reported the property. If the claim represents a joint and separate liability, give full facts and explain the financial responsibility of the co-obligor. Property and income taxes. The deduction for property taxes is limited to the taxes accrued before the date of the decedent's death. Federal taxes on income received during the decedent's lifetime are deductible, but taxes on income received after death are not deductible. Keep all vouchers or original records for inspection by the IRS. Allowable death taxes. If you elect to take a deduction for foreign death taxes under section 2053(d) rather than a credit under section 2014, the deduction is subject to the limitations described in section 2053(d) and its regulations. Mortgages and Liens Under Mortgages and Liens, list only obligations secured by mortgages or other liens on property included in the gross estate at its full value or at a value that was undiminished by the amount of the mortgage or lien. If the debt is enforceable against other property of the estate not subject to the mortgage or lien, or if the decedent was personally liable for the debt, include the full value of the property subject to the mortgage or lien in the gross estate under the appropriate schedule and deduct the mortgage or lien on the property on this schedule. -36- Instructions for Form 706 (Rev. 09-2022)