2010 Pennsylvania Code
Title 20 - DECEDENTS, ESTATES AND FIDUCIARIES
Chapter 37 - Apportionment of Death Taxes
3702 - Equitable apportionment of Federal estate tax.

     § 3702.  Equitable apportionment of Federal estate tax.
        (a)  General rule.--Subject to the provisions of section 3701
     (relating to power of decedent), the Federal estate tax shall be
     apportioned equitably among all parties interested in property
     includible in the gross estate for Federal estate tax purposes
     in proportion to the value of the interest of each party,
     subject to the rules stated in this section.
        (b)  Pre-residuary.--
            (1)  No Federal estate tax shall be apportioned against a
        beneficiary of any pre-residuary gift made by will. Any
        Federal estate tax attributable thereto shall be paid
        entirely from the residue of the estate and charged in the
        same manner as a general administration expense of the
        estate, except that when a portion of the residue of the
        estate is allowable as a deduction for Federal estate tax
        purposes the tax shall be paid to the extent possible from
        the portion of the residue which is not so allowable.
            (2)  No Federal estate tax shall be apportioned against a
        beneficiary of any pre-residuary gift made by inter vivos
        trust. Any Federal estate tax attributable thereto shall be
        paid entirely from the residue of the trust and charged in
        the same manner as a general administration expense of the
        trust, except that when a portion of the residue of the trust
        is allowable as a deduction for Federal estate tax purposes
        the tax shall be paid to the extent possible from the portion
        of the residue which is not so allowable.
        (c)  Deductions.--No Federal estate tax shall be apportioned
     against an interest allowable as a Federal estate tax marital or
     charitable deduction (determined and valued without regard to
     any Pennsylvania inheritance tax or other state or foreign death
     taxes apportioned against such interest) except as otherwise
     provided in subsections (b) and (g).
        (d)  Credits.--Any Federal estate tax credit for state or
     foreign death taxes on property includable in the gross estate
     for Federal estate tax purposes shall inure to the benefit of
     the parties chargeable with the payment of the state or foreign
     death taxes in proportion to the amount of the taxes paid by
     each party, but any credit inuring to the benefit of a party
     shall not exceed the Federal estate tax apportionable to that
     party. Any unified credit against Federal estate tax, credit for
     tax on prior transfers (sometimes called the credit for property
     previously taxed) or credit for gift taxes paid by the decedent
     or his estate with respect to gifts made by the decedent before
     January 1, 1977, shall inure to the benefit of all parties
     liable to apportionment in proportion to the amount of Federal
     estate tax apportioned against each party under the other
     provisions of this chapter. Any Federal estate tax credit for
     gift taxes paid by the donee of a gift made before January 1,
     1977, shall inure to the benefit of the donee.
        (e)  Election by spouse.--Property passing to a spouse who
     elects to take an elective share under Chapter 22 (relating to
     elective share of surviving spouse) shall be exempt from
     apportionment of Federal estate tax only to the extent provided
     in subsection (c).
        (f)  Additional Federal estate tax.--
            (1)  Any increase in Federal estate tax caused by the
        inclusion under section 2044 of the Internal Revenue Code of
        1986 (Public Law 99-514, 26 U.S.C. § 2044) of a qualified
        terminable interest trust in the estate of a decedent shall
        be apportioned against that trust.
            (2)  Any increase in Federal estate tax caused by a
        taxable event occurring in a qualified domestic trust under
        section 2056A of the Internal Revenue Code of 1986 (Public
        Law 99-514, 26 U.S.C. § 2056A) shall be apportioned against
        that trust notwithstanding the provisions of subsection (b)
        or (c).
            (3)  Any additional Federal estate tax due because a
        qualified heir disposes of qualified real property or ceases
        to use it for the qualified use shall be apportioned against
        the qualified heir notwithstanding the provisions of
        subsection (b).
        (g)  Present and future interests.--When both a present and a
     future interest are involved, the Federal estate tax
     apportioned, including interest and penalties, shall be paid
     entirely from principal, except as otherwise provided in
     subsection (h), even if the future interest qualifies for a
     Federal estate tax charitable deduction or the holder of the
     present interest also has rights in the principal or the
     principal is otherwise exempt from apportionment.
        (h)  Interest and penalties.--Interest and penalties shall be
     apportioned in the same manner as the principal amount of the
     Federal estate tax unless the court finds it inequitable to do
     so by reason of special circumstances, in which case the court
     may direct a different apportionment of interest and penalties.
     To the extent the interest or penalties are apportioned to or
     are payable out of a residuary estate or a trust, they shall be
     paid from income or principal in the same manner as the Federal
     estate tax, subject to a fiduciary's power to adjust under
     Chapter 81 (relating to principal and income).
        (i)  Values.--The values used in determining the amount of
     Federal estate tax liability shall be used for Federal estate
     tax apportionment purposes.
        (j)  Gift tax.--Gift tax paid by the decedent and imposed on
     a gift by the decedent or his spouse within three years of the
     date of his death and included in his gross estate shall be
     treated in the same manner as though the amount of such gift tax
     had been a preresiduary testamentary gift by the decedent to the
     donee of the gift.
     (Dec. 16, 1992, P.L.1163, No.152, eff. imd.; May 16, 2002,
     P.L.330, No.50, eff. 60 days; July 7, 2006, P.L.625, No.98, eff.
     imd.)

        2006 Amendment.  Act 98 amended subsec. (h). Section 16(2) of
     Act 98 provided that the amendment of subsec. (h) shall apply to
     the estates of decedents who die on or after the effective date
     of par. (2).
        2002 Amendment.  Act 50 amended subsecs. (f) and (h) and
     added subsec. (j). See section 14(a) of Act 50 in the appendix
     to this title for special provisions relating to applicability.
        1992 Amendment.  Act 152 amended subsecs. (a), (b), (c) and
     (d).
        Cross References.  Section 3702 is referred to in section
     3705 of this title.