Introduction
This publication explains and illustrates both the Trial and Substitution method and the Algebraic method that
can be used to compute the Internal Revenue Code (IRC) 2055 charitable deduction or the IRC 2056 marital
deduction when an interrelated computation is necessary for Federal estate tax purposes. The publication also
explains how to compute the Federal gift tax using the Trial and Substitution method and the Algebraic method
when a net gift is involved.
For estate tax purposes, an interrelated computation is required if both (1) a deduction is allowed for property
passing to a qualified charity (a charitable deduction) and/or to the surviving spouse (a marital deduction),
and (2) the property passing to the qualified charity or to the surviving spouse is burdened with payment of
Federal estate tax, Federal generation-skipping transfer tax, penalties, state transfer taxes, or certain allowable
administrative expenses.
For gift tax purposes, an interrelated computation is required if the person receiving the gift agrees to pay the
gift tax on the gifted property. Because the donee pays the gift tax, the amount the donee receives is reduced
by the payment of the gift tax and because the payment of the tax reduces the gift, the tax due on the gift is
also reduced. This is called a “net gift.”
Part I has the tax tables, Part II explains the computation methods, Part III includes examples for computing
the estate tax, and Part IV includes examples for computing the gift tax.
