6166(b)(6) Comment 1:  Administration expenses that are allowable as deductions on Form 706 but which are claimed on the estate 1041 must be included in the §6166(b)(6) adjusted gross estate computation.

6166(b)(6) Comment 2:  The section 2058 state death tax deduction is by definition not included in the §6166(b)(6) adjusted gross estate computation.

6166(b)(6) Comment 3:  Many estates with §6166 elections file their returns on the extended due date 15 months after date of death pursuant to section 6081. If an IRS examination increases the amount of tax not deferred under section 6166, there will be a deduction for interest accrued on Federal estate tax as of the filing date in the 6166(b)(6) adjusted gross estate computation. Interest accrued on any unpaid state death tax on the filing date is also includible in the computation.

6166(b)(6) Comment 4:  Cincinnati Campus will often include the full amount of Schedules J, K, and L deductions in their §6166(b)(6) adjusted gross estate computation notwithstanding any contrary adjustments that an estate might have made in its computation in its notice of election.

6166(b)(6) Comment 5:  The return filing date is a bright-line test for determining which interest expenses are includible in the §6166(b)(6) adjusted gross estate computation, but this is not true for attorney fees, executors' commissions, or accountant fees which are determined and paid after the return has been filed. These fees and commissions are estimates when the return is prepared and filed. They are adjusted to the finally determined amounts at the end of the IRS field examination and are allowable as deductions when calculating the §6166(b)(6) adjusted gross estate on the "relation back" principle.

6166(b)(6) Comment 6:  However, this is not true when preparing supplemental returns. Fees and commissions directly related to preparation of the supplemental return are allowable as deductions on Schedule J, but are not includible in the §6166(b)(6) adjusted gross estate computation because they relate to periods occurring after the original return was filed. If a supplemental return is filed while the original return examination is still open, Cincinnati will take no action (unless there is a tax increase shown on the supplemental return) and will transfer the supplemental return to the Estate Tax Attorney who is conducting the examination for consideration as part of the examination. In that event, the fees and commissions relating to the supplemental return would most likely be wrapped in with the original return adjustments to be included in the §6166(b)(6) adjusted gross estate computation.

A regular §6166(b)(6) adjusted gross estate computation without any complications. The return is filed on the return due date. The §6166 Notice of Election elects to defer the maximum amount of tax eligible for deferral under §6166(a)(2).

The regular §6166(b)(6) adjusted gross estate computation from Example 1 is brought forward and modified. Form 4768 is filed on the return due date of Nov-17-2016 to request an automatic 6-month extension of time to file. Estimated non-deferred tax of $2,500,000 is paid with Form 4768. A protective section 6161 extension of time to pay is also made. The return is filed on the 6-month extended due date of May-17-2017. The §6166 Notice of Election shows that the correct non-deferred tax is $2,803,802.19. The balance of non-deferred tax of $303,802.19 plus interest of $4,550.13 accrued thereon is paid with the return. The interest of $4,550.13 is interrelated with the Federal estate tax and is allowed as a deduction on Schedule J, and is included in the §6166(b)(6) adjusted gross estate computation because it was accrued on the date the return was filed.

The interest of $4,550.13 is calculated at regular underpayment interest rates of R% on the unpaid non-deferred tax and is immediately due and payable. Interest is also accrued on the tax deferred under section 6166 (2% on the first $592,000 of deferred tax and 45% of R% on the balance of deferred tax), but that interest is not payable (plus additional interest) until the 1st anniversary date of Nov-17-2017.

The facts from Example 2 are brought forward. In August 2017 the estate secures a loan from a third party for estate purposes. Accrued interest of $52,000 is paid on Dec-31-2017. A supplemental estate tax return is filed in 2018 to claim the $52,000 interest payment as a new deduction on Schedule J. The recalcuated non-deferred tax is less than the amount shown due when the return was filed. The excess payment of non-deferred tax is now allocated pro-rata to the 2% and 45% of R% portions of deferred tax pursuant to §6601(j)(4). The interest due on May-17-2017 is less than in Example 2.

The interest accrued on this additional payment through May-17-2017 is allowable as a deduction on Schedule J and is included the §6166(b)(6) adjusted gross estate computation.