N.M. Code R. § 3.8.3.8 - CALCULATION OF CREDIT FOR TAX PAID OTHER STATE; EXAMPLES
A. The following examples illustrate the
application of Section
7-7-3
NMSA 1978. The federal credit in each case is determined by reference to
federal law. All other figures are hypothetical.
B. Example 1: T is a New Mexico decedent. T's
gross estate is $1,750,000; T has $140,000 in deductions. Thus the taxable
estate is $1,610,000. $175,000 of T's estate is real property located in state
X, where it is taxed. State X does not have a reciprocal provision allowing
this amount to be taxed in New Mexico.
(1)
Under Section 7-7-3(B)(1) NMSA 1978 ("method 1"), it is determined that the
amount of estate tax paid to state X on $175,000 is $2,040. This is the amount
of credit for method one. (State X's statute does not tax to the full measure
of its proportional share of the federal credit.)
(2) Under Section 7-7-3(B)(2) NMSA 1978
("method 2"), the calculation is: Total credit for T's taxable estate times the
quotient of the value of the property in state X divided by the value of the
gross estate; that is,
$71,520 x 175,000 = $7,152
1,750,000
(3) The credit allowed in this situation
against New Mexico tax due is equal to the smaller of the above two amounts,
calculated under methods 1 and 2. The credit against the $71,520 owed to New
Mexico would, therefore, be $2,040.
C. Example 2: Same facts as in Example 1,
except $1,400,000 of T's gross estate is real property located in and taxed by
state X. Method 1 results in $61,840 credit. Method 2 results in $57,216 credit
($71,520 x 8/10). The amount credited against New Mexico tax due is $57,216,
because the amount in this case is less using method 2.
Notes
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