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Section 6166(b)(6) Adjusted Gross Estate Computation - Example 3 |
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| The estate tax return is filed on the 6-month extended due date with the catch-up payment of the balance of non-deferred tax plus interest accrued thereon; the accrued interest is includible in the §6166(b)(6) adjusted gross estate computation. A Supplemental estate tax return is filed over one year later to report a new Schedule J deduction for an additional interest expense that is not eligible for inclusion in the §6166(b)(6) adjusted gross estate computation. | |
| Feb-17-2016 | Date of death |
| Nov-17-2016 | Estate tax return due date. Form 4768 is filed to request an automatic 6-month extension of time to file. Estimated tax not eligible for deferral under section 6166 - $2,500,000 - is paid with the Form 4768. |
| May-17-2017 | Estate tax return filing date. The section 6166 election statement shows the amount of tax not eligible for deferral is $2,803,802.19. A catch-up payment of $303,802.19 tax and $4,550.13 interest thereon is paid with the return. |
| Dec-31-2017 | The estate obtained a loan from a third party on Aug-30-2017. Accrued interest of $52,000 was paid on Dec-31-2017. A supplemental estate tax return is filed in 2018 to claim the interest payment as a new administration expense deduction, but it is not included in the 6166(b)(6) adjusted gross estate computation. This recomputation causes the interest accrued on the unpaid balance of non-deferred tax on the return filing date to decrease, which modifies the 6166(b)(6) adjusted gross estate computation. |
| The non-deferred tax underpayment on May-17-2017 is recalculated to have been $300,026.70, and interest thereon is now $4,993.58. The overpayments are now allocated pro-rata to the 2% and 45% of 3% portions of deferred tax pursuant to §6601(j)(4). | |
| Section 6166(b)(6) Adjusted Gross Estate Computation - Example 3 | ||||||
| Gross estate | 50,000,000.00 | |||||
| Schedule J - | ||||||
| A. | Funeral expenses | 25,000.00 | ||||
| B. | 1. | Executors' commissions | 1,000,000.00 | |||
| 2. | Attorney fees | 1,400,000.00 | ||||
| 3. | Accountant fees | 415,000.00 | ||||
| 4. | Miscellaneous | |||||
| a. | Appraisals | 250,000.00 | ||||
| b. | Utilities | 14,375.00 | ||||
| c. | Other | 1,215.00 | ||||
| d. | Interest on balance of non-deferred tax on May-17-2017 recalculated to reflect the new deduction for loan interest (the original figure was $4,550.13) | 4,493.58 | ||||
| e. | Interest on loan through Dec-31-2017 | 52,000.00 | ||||
| Total Schedule J | 3,162,083.58 | |||||
| Schedule K - Debts | ||||||
| Debts of decedent | 144,535.00 | |||||
| Schedule K - Mortgages and Liens | ||||||
| Mortgages | 876,550.00 | |||||
| Total Schedule K | 1,021,085.00 | |||||
| Total Schedules J and K debts and expenses | 4,183,168.58 | |||||
| Allowable amount of deductions | 4,183,168.58 | |||||
| Schedule L - Net Losses | 0 | |||||
| Schedule L - Expenses on property not subject to claims | 0 | |||||
| Total Schedules J, K, and L debts and expenses | 4,183,168.58 | |||||
| Adjustment for interest accrued after the date the return was filed | (52,000.00) | |||||
| Total Schedules J, K, and L debts and expenses for §6166(b)(6) adjusted gross estate computation | 4,131,168.58 | 4,131,168.58 | ||||
| Section 6166(b)(6) adjusted gross estate | 45,868,831.42 | |||||
| The $4,493.58 of interest accrued on the unpaid non-deferred tax is includible in the §6166(b)(6) adjusted gross estate computation because it is the amount that was accrued on the date the return was filed. This figure changes in response to a deficiency assessment or a change in the §6166(a)(2) ratio - it moves in tandem with whatever amount of unpaid non-deferred tax is finally determined to have been outstanding on the date the return was filed. Although the $52,000 interest accrued and paid on the loan is not includible in the §6166(b)(6) computation because it relates to events occurring after the return was filed, it is allowable as a deduction on Schedule J in this example and reduces the net estate tax accordingly. | ||||||
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Section 6166(b)(6) Adjusted Gross Estate Computation - Example 3
§6166(a)(2) Ratio Computation
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| Section 6166 business value, divided by | 37,500,000.00 | |||
| Section 6166(b)(6) adjusted gross estate, yields | 45,868,831.42 | |||
| Section 6166(a)(2) ratio for the maximum amount of tax which may be paid in installments | 0.817549 | |||
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Section 6166(b)(6) Adjusted Gross Estate Computation - Example 3
Estate Tax Computation
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| 1 | Gross estate | 50,000,000.00 | ||||
| Schedules J, K, and L deductions | 4,183,168.58 | |||||
| Marital deduction | 0.00 | |||||
| Charitable deduction | 2,000,000.00 | |||||
| 2 | Total allowable deductions | 6,183,168.58 | ||||
| 3a | Tentative taxable estate | 43,816,831.42 | ||||
| 3b | State death tax deduction | 0.00 | ||||
| 3c | Taxable estate | 43,816,831.42 | ||||
| 4 | Adjusted taxable gifts | 0.00 | ||||
| 5 | Add lines 3c and 4 | 43,816,831.42 | ||||
| 6 | Tentative tax on the line 5 amount | 17,472,532.57 | ||||
| 7 | Total gift tax paid or payable | 0.00 | ||||
| 8 | Gross estate tax | 17,472,532.57 | ||||
| 9a | Basic exclusion amount | 5,450,000.00 | ||||
| 9b | DSUE amount | 0.00 | ||||
| 9c | Applicable exclusion amount | 5,450,000.00 | ||||
| 9d | Applicable credit amount | 2,125,800.00 | ||||
| 10 | Adjustment to applicable credit amount | 0.00 | ||||
| 11 | Allowable applicable credit amount | 2,125,800.00 | ||||
| 12 | Subtract line 11 from line 8 | 15,346,732.57 | ||||
| 13 | Credit for foreign death taxes | 0.00 | ||||
| 14 | Credit for tax on prior transfers | 0.00 | ||||
| 15 | Total credits | 0.00 | ||||
| 16 | Net estate tax | 15,346,732.57 | ||||
| 17 | Generation-Skipping taxes payable | 0.00 | ||||
| 18 | Total transfer taxes | 15,346,732.57 | ||||