The IRS has issued guidance on the procedure for the filing and resolution of a Protective Claim for Refund of estate tax that is based on a deduction for a claim or expense under section 2053 of the Internal Revenue Code (Code). In 2009 the Service advised that the amount deductible under Section 2053 is limited to the amount actually paid in settlement or satisfaction of that claim or expense. Although the Service recognized that the amount to be paid for such claims or expenses may in many cases be unknown at the time the estate tax return is due, the procedure for filing "protective claims" was not clear until now.
The claim must be filed by the later of (a) three years from the date that the return was filed, or (b) two years from the date that the estate tax was paid. For decedents dying before January 1, 2012, the fiduciary must file a Form 843 on behalf of the decedent's estate. For decedents dying after December 31, 2011, the fiduciary may choose to file either the Form 843, or simply attach a new Schedule PC to the decedent's estate tax return for every protective claim. In each case, the notation "Protective Claim for Refund under § 2053" must be entered across the top of the form. The claim itself must be clearly identified, which requires a description of the claimant(s), the subject matter of the claim, extent or amount of the claim, the status of the claim, and the reasons and contingencies delaying the actual payment to be made in satisfaction of the claim or expense; vague or broad language will not be sufficient. An adequately identified claim will automatically include related and ancillary expenses.
Claims that are timely filed but procedurally defective may be cured anytime within the original filing period, or 45 days after the Service provides notice of receipt, provided that the fiduciary ensures that the Service has received the protective claim. If the Service does not send confirmation of the protective claim within 60 days of filing the Form 843, or within 180 days of filing the estate tax return with Form PC attached, the fiduciary must contact the Service at (866) 699-4083 or risks forfeiting the refund; a certified mail receipt or other evidence of delivery of the claim will not be sufficient.
The filing of a protective claim will not affect the normal review of the estate tax return. Once the claim is ripe for consideration by the Service, the fiduciary must again file the Form 843 or a supplemental estate tax return within the later of (a) 90 days after the date the claim or expense is paid, or (b) 90 days after the date on which the amount of the claim or expense becomes certain. The Service will limit its review to the sections actually affected by the claimed deduction. The marital and charitable deductions are not reduced until the claim is actually deducted.