# PLR 8846001 Computation Illustration 1 - Interest is not interrelated with the estate tax

 PLR 8846001 - §6166(h) Computation Illustration 1 §6166(h) - Calculation Of The Amount Of A Deficiency Payable In Installments Interest Is Not Interrelated With The Tax May-17-1980 Date of death Feb-17-1981 Estate tax return due date and the return filing date. The tax shown due of \$115,287.42 is paid in full. (The figure given on the first page of PLR 8846001 contains a typo, reporting this figure as \$115,787.42.) A closely held business is included in the gross estate, but neither a §6166 election nor a protective §6166 election is filed with the return. (In 1980 a closely held business value had to exceed 65% of the adjusted gross estate in order to qualify for a §6166 election.) An IRS field examination is completed . The estate agrees to a deficiency of \$67,449.18, for total estate tax of \$182,736.60. The closely held business represents 74.18347% of the adjusted gross estate. The maximum amount of tax that could have been paid in installments had a §6166 election been filed with the return was \$135,560.36. NOTE: The computations shown below are hypothetical - the only figures given in the PLR are those cited above, from which we derived a set of hypothetical figures to flesh out the computations. Also, these sample computations use analogues of current IRS Estate Tax Examination report forms which are generated by the IRS Notebook application used by IRS Estate Tax Attorneys in their examinations of estate tax returns, Forms 706. The IRS Notebook application can run computations for dates of death from 1977 through 2016.

 PLR 8846001 - §6166(h) Computation Illustration 1 Hypothetical Report of Estate Tax Examination Changes Interest Is Not Interrelated With The Tax Form 1273 Estate of:    Decedent                                        SSN: 999-99-9999V                                D/D: May-17-1980 1 Tentative Taxable Estate Shown on Return or Previously Adjusted 536,325.50 2 Increase/Decrease in Tentative Taxable Estate 205,403.06 3a Tentative Taxable Estate as Corrected (Line 1 plus/minus Line 2) 741,728.56 NOTE: The only figures given in PLR 8846001 are those shown on Lines 23 through 29, below, the maximum amount that could have been paid in installments (\$135,560.36), and the §6166(a)(2) ratio. Shown on Return/ As Previously Assessed As Corrected 3b State Death Tax Deduction 0.00 0.00 3c Taxable Estate as Corrected (Line 3a - Line 3b) 536,325.50 741,728.56 4 Adjusted taxable gifts 0.00 0.00 5 Total 536,325.50 741,728.56 6 Tentative Tax 169,240.44 245,239.57 7 Aggregate Gift Tax Payable (After Dec. 31, 1976) 0.00 0.00 8 Tax Before Unified Credit (Line 6 - Line 7) 169,240.44 245,239.57 9a Basic Exclusion Amount 161,562.50 161,562.50 9b Deceased Spousal Unused Exclision (DSUE) 0.00 0.00 9c Applicable Exclusion Amount (Line 9a + Line 9b) 161,562.50 161,562.50 9d Applicable Credit Amount (From Table A, using Line 9c) 42,500.00 42,500.00 10 Adjustment to Unified Credit 0.00 0.00 11 Allowable Applicable Credit Amount 42,500.00 42,500.00 12 Tax Before SDTC (Line 8 - Line 11)*Cannot be < 0 126,740.44 202,739.57 13 State Death Tax Credit 11,453.02 20,002.97 Tentatively Allowed Submit Evidence by 14 Net Tax Post State Death Tax Credit (Line 12 - Line 13) 115,287.42 182,736.60 15 Gift Tax Credit (Pre-1977 Gifts) 0.00 0.00 16 Foreign Death Tax Credit (Statutory) 0.00 0.00 17 Prior Transfer Credit 0.00 0.00 18 Foreign Death Tax Credit (Treaty)/Canadian Marital Credit 0.00 0.00 19 Total Credits (Sum of Lines 15 through 18) 0.00 0.00 20 Net Estate Tax Payable 115,287.42 182,736.60 21 Generation-Skipping Transfer Taxes (Schedule R, Part 2, Line 12) 0.00 0.00 22 Increased Estate Tax (Section 4980A, Schedule S) 0.00 0.00 23 Total Federal Estate Tax (Sum of Lines 20 through 22) 115,287.42 182,736.60 24 Total Transfer Tax Previously Assessed 115,287.42 25 Total Transfer Tax Increase/Decrease (Line 23 - Line 24) 67,449.18 26 Penalties Previously Assessed - Code(s) 0.00 27 Penalties as Corrected - Code(s) 0.00 28 Net Penalties Increase/Decrease (Line 27 - Line 28) 0.00 29 Net Tax and Penalties Payable Increase/Decrease (Line 25 + Line 28) 67,449.18

 PLR 8846001 - §6166(h) Computation Illustration 1 Hypothetical Line Adjustment - Estate Tax Form 6180 Estate of:    Decedent                                        SSN: 999-99-9999V                                   D/D: May-17-1980 Shown on Return/ As Previously Assessed Change As Corrected 1 Schedule A - Real Estate 100,000.00 0.00 100,000.00 2 Schedule B - Stocks and Bonds 300,000.00 250,240.00 550,240.00 3 Schedule C - Mortgages, Notes, and Cash 148,500.00 0.00 148,500.00 4 Schedule D - Life Insurance 50,000.00 0.00 50,000.00 5 Schedule E - Jointly Owned Property 0.00 0.00 0.00 6 Schedule F - Other Miscellaneous Property 54,825.50 0.00 54,825.50 7 Schedule G - Transfers During Decedent's Life 0.00 0.00 0.00 8 Schedule H - Powers of Appointment 0.00 0.00 0.00 9 Schedule I - Annuities 0.00 0.00 0.00 10 Gross estate 653,325.50 250,240.00 903,565.50 11 Schedule U - Qualified Conservation Easement Exclusion 0.00 0.00 0.00 12 Gross Estate less exclusion 653,325.50 250,240.00 903,565.50 13 Schedule J - Funeral and Administration Expenses 75,000.00 44,836.94 119,836.94 14 Schedule K - Debts of Decedent 42,000.00 0.00 42,000.00 15 Schedule K - Mortgages 0.00 0.00 0.00 16 Total of Schedules J and K 117,000.00 44,836.94 161,836.94 17 Allowable deductions from Schedules J and K 117,000.00 44,836.94 161,836.94 18 Schedule L - Net Losses During Administration 0.00 0.00 0.00 19 Schedule L - Expenses on Property Not Subject to Claims 0.00 0.00 0.00 20 Total - Lines 17, 18, and 19 117,000.00 44,836.94 161,836.94 21 Schedule M - Marital Deduction 0.00 0.00 0.00 22 Schedule O - Charitable Deduction 0.00 0.00 0.00 23 ESOP Deduction 0.00 0.00 0.00 24 Schedule T - QFOBI Deduction 0.00 0.00 0.00 25 Total allowable deductions 117,000.00 44,836.94 161,836.94 26 Tentative taxable estate 536,325.50 205,403.06 741,728.56

 PLR 8846001 - §6166(h) Computation Illustration 1 Form 886-A  -   HYPOTHETICAL EXPLANATION OF ITEMS Schedule B - Stocks and Bonds Shown on Return/ As Previously Assessed As Corrected 1 Value of closely held business interest 300,000.00 550,240.00 Total of these Items 300,000.00 550,240.00 Shown on Return 300,000.00 Change to Schedule 250,240.00

 PLR 8846001 - §6166(h) Computation Illustration 1 Form 886-A  -   HYPOTHETICAL EXPLANATION OF ITEMS Schedule J - Funeral and Admistrative Expenses Shown on Return/ As Previously Assessed As Corrected B-4(d)  Additional administration expenses 0.00 44,836.94 Total of these Items 0.00 44,836.94 Shown on Return 0.00 Change to Schedule 44,836.94

 PLR 8846001 - §6166(h) Computation Illustration 1 §6166(b)(6) Adjusted Gross Estate Computation Gross estate 903,656.50 Schedule J - Funeral and Administrative Expenses A. Funeral expenses 25,000.00 B. Administration expenses 94,836.94 Total Schedule J 119,836.94 Schedule K - Debts of Decedent 42,000.00 Schedule K - Mortgages and Liens 0.00 Total Schedule K 42,000.00 Total Schedules J and K debts and expenses 161,836.94 Allowable amount of deductions 161,836.94 Schedule L - Net Losses 0.00 Schedule L - Expenses on property not subject to claims 0.00 Total Schedules J, K, and L debts and expenses 161,836.94 Adjustment for expenses incurred after the return was filed 0 Adjusted Schedules J, K, and L debts and expenses 161,836.94 161,836.94 Section 6166(b)(6) adjusted gross estate 741,728.56

 PLR 8846001 - §6166(h) Computation Illustration 1 §6166(a)(2) Ratio Computation Section 6166 business value, divided by 550,240.00 Section 6166(b)(6) adjusted gross estate, yields 741,728.56 Section 6166(a)(2) ratio for the maximum amount of tax payable in installments 0.741835 NOTE: The 6166(a)(2) percentage given in the PLR is 74.18347%, which is a decimal carried out to 7 places. Our example carries the ratio out to 6 decimal places instead of 7, which is consistent with page 15 of the current Form 706 Instructions, and is shown here as 74.1835%.

 PLR 8846001 - §6166(h) Computation Illustration 1 §6166(a) Annual Installment Total deficiency 67,449.18 Section 6166(a)(2) ratio expressed as a percentage 74.1835% Maximum amount of tax eligible for payment in installments 50,036.16 Number of installments selected 10 The annual installment, the first of which is due Feb-17-1986 5,003.62

 PLR 8846001 - §6166(h) Computation Illustration 1 Maximum Amount of Tax That Could Have Been Paid in Installments Had An Election Or A Protective Election Been Filed With The Return Corrected total estate tax 182,736.60 Section 6166(a)(2) ratio expressed as a percentage 74.1835% Maximum amount of tax that could have been paid in installments 135,560.41 Number of installments selected 10 The annual installment, the first of which is due Feb-17-1986 13,556.04 Tax not deferred under section 6166 and due on the return due date 47,176.19 NOTE: The PLR reports the maximum amount of tax that could have been paid in installments as \$135,560.36. The difference here is attributable to reducing the number of decimal places in the §6166(a)(2) ratio from 7 in the PLR to 6 pursuant to the Instructions fo Form 706. The PLR also states that the §6166(a)(2) ratio was "rounded to 74 percent" of the adjusted gross estate, but this is not borne out by the mathematics (74.0000% of \$182,736.60 = \$135,225.09). The "rounding" was only for discussion purposes.