Treasury Regulations · 26 CFR

§ 20.2014-3. “Second limitation”.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 2014

Cite as 26 CFR § 20.2014-3

At a glance

Read from the text and its source citation. Not part of the regulation.

Status: In the current eCFR
Issued: June 24, 1958 by T.D. 6296
Last amended: March 1, 1994 by T.D. 8522
Issued under: 26 U.S.C. § 2014
Length: 1,935 words · about 8 min to read
Cross-references: cites 6 Code sections and 4 regulations; cited by 3

¶(a) The amount of the Federal estate tax attributable to particular property situated in a foreign country, subjected to foreign death tax in that country, and included in the decedent's gross estate for Federal estate tax purposes is the “second limitation.” Thus, the credit is limited to an amount, E, which bears the same ratio to F (the gross Federal estate tax, reduced by any credit for State death taxes under section 2011 and by any credit for gift tax under section 2012) as G (the “adjusted value of the property situated in the foreign country, subjected to foreign death tax, and included in the gross estate”, computed as described in paragraph (b) of this section) bears to H (the value of the entire gross estate, reduced by the total amount of the deductions allowed under sections 2055 (charitable deduction) and 2056 (marital deduction)). Stated algebraically, the “second limitation” (E) equals:

“Adjusted value of the property situated in the foreign country, subjected to foreign death taxes, and included in the gross estate” (G) ÷ Value of entire gross estate, less charitable and marital deductions (H) × Gross Federal estate tax, less credits for State death taxes and gift tax (F)

The values used in this proportion are the values determined for the purpose of the Federal estate tax.

¶(b) Adjustment is required to factor “G” of the ratio stated in paragraph (a) of this section if a deduction for foreign death taxes under section 2053(d), a charitable deduction under section 2055, or a marital deduction under section 2056 is allowed with respect to the foreign property. If a deduction for foreign death taxes is allowed, the value of the property situated in the foreign country, subjected to foreign death tax, and included in the gross estate does not include the value of any property in respect of which the deduction for foreign death taxes is allowed. See § 20.2014-7. If a charitable deduction or a marital deduction is allowed, the value of such foreign property (after exclusion of the value of any property in respect of which the deduction for foreign death taxes is allowed) is reduced as follows:

¶(1) If a charitable deduction or a marital deduction is allowed to a decedent's estate with respect to any part of the foreign property, except foreign property in respect of which a deduction for foreign death taxes is allowed, specifically bequeathed, devised, or otherwise specifically passing to a charitable organization or to the decedent's spouse, the value of the foreign property is reduced by the amount of the charitable deduction or marital deduction allowed with respect to such specific transfer. See example (1) of paragraph (c) of this section.

¶(2) If a charitable deduction or a marital deduction is allowed to a decedent's estate with respect to a bequest, devise or other transfer of an interest in a group of assets including both the foreign property and other property, the value of the foreign property is reduced by an amount, I, which bears the same ratio to J (the amount of the charitable deduction or marital deduction allowed with respect to such transfer of an interest in a group of assets) as K (the value of the foreign property, except foreign property in respect of which a deduction for foreign death taxes is allowed, included in the group of assets) bears to L (the value of the entire group of assets). As used in this subparagraph, the term “group of assets” has reference to those assets which, under applicable law, are chargeable with the charitable or marital transfer. See example (2) of paragraph (c) of this section.

Any reduction described in paragraph (b)(1) or (b)(2) of this section on account of the marital deduction must proportionately take into account, if applicable, the limitation on the aggregate amount of the marital deduction contained in § 20.2056(a)-1(c). See § 20.2014-3(c), Example 3.

¶(c) The application of paragraphs (a) and (b) of this section may be illustrated by the following examples. In each case, the computations relate to the amount of credit under section 2014 without regard to the amount of credit which may be allowable under an applicable death tax convention.

¶Example (1).

(i) Decedent, a citizen and resident of the United States at the time of his death on February 1, 1967, left a gross estate of $1,000,000 which includes the following: shares of stock issued by a domestic corporation, valued at $750,000; bonds issued in 1960 by the United States and physically located in foreign Country X, valued at $50,000; and shares of stock issued by a Country X corporation, valued at $200,000, with respect to which death taxes were paid to Country X. Expenses, indebtedness, etc., amounted to $60,000. Decedent specifically bequeathed $40,000 of the stock issued by the Country X corporation to a U.S. charity and left the residue of his estate, in equal shares, to his son and daughter. The gross Federal estate tax is $266,500, and the credit for State death taxes is $27,600. Under the situs rules referred to in paragraph (a)(3) of § 20.2014-1, the shares of stock issued by the Country X corporation comprise the only property deemed to be situated in Country X. (The bonds also would be deemed to have their situs in Country X if the decedent had died before November 14, 1966.)

(ii) The “second limitation” on the credit for foreign death taxes is:

[($200,000 − $40,000 (factor G of the ratio stated at § 20.2014-3(a); see also § 20.2014-3(b)(1))) ÷ ($1,000,000 − $40,000 (factor H of the ratio stated at § 20.2014-3(a)))] × ($266,500 − $27,600) (factor F of the ratio stated at § 20.2014-3(a)) = $39,816.67.

The lesser of this amount and the amount of the “first limitation” (computed under § 20.2014-2) is the credit for foreign death taxes.

¶Example (2).

(i) Decedent, a citizen and resident of the United States at the time of his death, left a gross estate of $1,000,000 which includes: shares of stock issued by a United States corporation, valued at $650,000; shares of stock issued by a Country X corporation, valued at $200,000; and life insurance, in the amount of $150,000, payable to a son. Expenses, indebtedness, etc., amounted to $40,000. The decedent made a specific bequest of $25,000 of the Country X corporation stock to Charity A and a general bequest of $100,000 to Charity B. The residue of his estate was left to his daughter. The gross Federal estate tax is $242,450 and the credit for State death taxes is $24,480. Under these facts and applicable law, neither the stock of the Country X corporation specifically bequeathed to Charity A nor the insurance payable to the son could be charged with satisfying the bequest to Charity B. Therefore, the “group of assets” which could be so charged is limited to stock of the Country X corporation valued at $175,000 and stock of the United States corporation valued at $650,000.

(ii) Factor “G” of the ratio which is used in determining the “second limitation” is computed as follows:

Value of property situated in Country X		$200,000.00
Less:
Reduction described in § 20.2014-3(b)(1)	$25,000.00
Reduction described in § 20.2014-3(b)(2) = [$175,000 (factor K of the ratio stated at § 20.2014-3 (b)(2)) ÷ ($175,000 + $650,000 (factor L of the ratio stated at § 20.2014-3 (b)(2)))] × $100,000 (factor J of the ratio stated at § 20.2014-3(b)(2)) =	21,212.12
		46,212.12
Factor “G” of the ratio		153,787.88

(iii) In this case, the “second limitation” on the credit for foreign death taxes is:

[$153,787.88 (factor G of the ratio stated at § 20.2014-3(a); see also subdivision (ii) above) ÷ ($1,000,000 − $125,000 (factor H of the ratio stated at § 20.2014-3(a)))] × ($242,450 − $24,480) (factor F of the ratio stated at § 20.2014-3(a)) = $38,309.88.

¶Example (3).

(i) Decedent, a citizen and resident of the United States at the time of his death, left a gross estate of $850,000 which includes: shares of stock issued by United States corporations, valued at $440,000; real estate located in the United States, valued at $110,000; and shares of stock issued by Country X corporations, valued at $300,000. Expenses, indebtedness, etc., amounted to $50,000. Decedent devised $40,000 in real estate to a United States charity. In addition, he bequeathed to his wife $200,000 in United States stocks and $300,000 in Country X stocks. The residue of his estate passed to his children. The gross Federal estate tax is $81,700 and the credit for State death taxes is $5,520.

(ii) Decedent's adjusted gross estate is $800,000 (i.e., the $850,000, gross estate less $50,000, expenses, indebtedness, etc.). Assume that the limitation imposed by section 2056(c), as in effect before 1982, is applicable so that the aggregate allowable marital deduction is limited to one-half the adjusted gross estate, or $400,000 (which is 50 percent of $800,000). Factor “G” of the ratio which is used in determining the “second limitation” is computed as follows:

Value of property situated in Country X.		$300,000
Less: Reduction described in § 20.2014-3 (b)(1) determined as follows (see also end of § 20.2014-3(b))—
Total amount of bequests which qualify for the marital deduction:
Specific bequest of Country X stock	$300,000
Specific bequest of United States stock	200,000
	500,000
Limitation on aggregate marital deduction under section 2056(c)	400,000
Part of specific bequest of Country X stock with respect to which the marital deduction is allowed—($400,000 ÷ $500,000 × $300,000)		240,000
Factor “G” of the ratio		60,000

(iii) Thus, the “second limitation” on the credit for foreign death taxes is:

[$60,000 (factor G of the ratio stated at § 20.2014-3(a); see also subdivision (ii) above) ÷ ($850,000 − $40,000 − $400,000 (factor H of the ratio stated at § 20.2014-3(a)))] × ($81,700 − $5,520) (factor F of the ratio stated at § 20.2014-3(a)) = $11,148.29.

¶(d) If the foreign country imposes more than one kind of death tax or imposes taxes at different rates upon the several shares of an estate, or if the foreign country and a political subdivision or possession thereof each imposes a death tax, the “second limitation” is still computed by applying the ratio set forth in paragraph (a) of this section. Factor “G” of the ratio is determined by taking into consideration the combined value of the foreign property which is subjected to each different tax or different rate. The combined value, however, cannot exceed the value at which such property was included in the gross estate for Federal estate tax purposes. Thus, if Country X imposes a tax on the inheritance of a surviving spouse at a 10-percent rate and on the inheritance of a son at a 20-percent rate, the combined value of their inheritances is taken into consideration in determining factor “G” of the ratio, which is then used in computing the “second limitation.” However, the “first limitation” is computed as provided in paragraph (b) of § 20.2014-2. The lesser of the “first limitation” and the “second limitation” is the credit for foreign death taxes.

[T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6600, 27 FR 4984, May 29, 1962; T.D. 7296, 38 FR 34193, Dec. 12, 1973; T.D. 8522, 59 FR 9646, Mar. 1, 1994]

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Cited by 3 other regulations

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

March 1, 1994Amended by T.D. 8522 (59 FR 9646)
December 12, 1973Amended by T.D. 7296 (38 FR 34193)
May 29, 1962Amended by T.D. 6600 (27 FR 4984)
June 24, 1958Issued by T.D. 6296 (23 FR 4529)

Where it sits in 26 CFR

Subchapter B Estate and gift taxes
Part 20 Estate tax; estates of decedents dying after august 16, 1954
Credits Against Tax