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PLR 8846001 - §6166(h) Computation Illustration 2 §6166(h) - Calculation Of The Amount Of A Deficiency Payable In Installments
Interest Is Interrelated With The Tax
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| 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. In this Illustration the Federal estate tax is interrelated with the tax (for dates of death in 1980, 100% of the interest accrued on tax deferred under §6166 was deductible on Schedule J as an administration expense). | |
| 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. | |
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PLR 8846001 - §6166(h) Computation Illustration 2 Hypothetical Report of Estate Tax Examination Changes
Interest Is Interrelated With The Tax
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| 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 | 205,403.08 | ||||
| 3a | Tentative Taxable Estate as Corrected (Line 1 plus/minus Line 2) | 741,728.58 | ||||
| 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 | 741,728.58 | |||
| 4 | Adjusted taxable gifts | 0.00 | 0.00 | |||
| 5 | Total | 536,325.50 | 741,728.58 | |||
| 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 | ||||
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PLR 8846001 - §6166(h) Computation Illustration 2 Hypothetical Line Adjustment - Estate Tax
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| 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 | 258,292.00 | 558,292.00 |
| 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 | (12,934.50) | 41,891.00 |
| 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 | 245,357.50 | 898,683.00 |
| 11 | Schedule U - Qualified Conservation Easement Exclusion | 0.00 | 0.00 | 0.00 |
| 12 | Gross Estate less exclusion | 653,325.50 | 245,357.50 | 898,683.00 |
| 13 | Schedule J - Funeral and Administration Expenses | 75,000.00 | 39,954.42 | 114,954.42 |
| 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 | 39,954.42 | 156,954.42 |
| 17 | Allowable deductions from Schedules J and K | 117,000.00 | 39,954.42 | 156,954.42 |
| 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 | 39,954.42 | 156,954.42 |
| 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 | 39,954.42 | 156,954.42 |
| 26 | Tentative taxable estate | 536,325.50 | 205,403.08 | 741,728.58 |
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PLR 8846001 - §6166(h) Computation Illustration 2 Form 886-A - HYPOTHETICAL EXPLANATION OF ITEMS
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| Schedule B - Stocks and Bonds | |||
| Shown on Return/ As Previously Assessed | As Corrected | ||
| 1 | Value of closely held business interest | 300,000.00 | 558,292.00 |
| Total of these Items | 300,000.00 | 558,292.00 | |
| Shown on Return | 300,000.00 | ||
| Change to Schedule | 258,292.00 | ||
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PLR 8846001 - §6166(h) Computation Illustration 2 Form 886-A - HYPOTHETICAL EXPLANATION OF ITEMS
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| Schedule F - Other Miscellaneous Property | |||
| Shown on Return/ As Previously Assessed | As Corrected | ||
| 1 | Total of miscellaneous assets | 54,825.50 | 41,891.00 |
| Total of these Items | 54,825.50 | 41,891.00 | |
| Shown on Return | 54,825.50 | ||
| Change to Schedule | (12,934.50) | ||
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PLR 8846001 - §6166(h) Computation Illustration 2 Form 886-A - HYPOTHETICAL EXPLANATION OF ITEMS
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| Schedule J - Funeral and Admistrative Expenses | |||
| Shown on Return/ As Previously Assessed | As Corrected | ||
| B-2 Attorney fees | 50,000.00 | 75,000.00 | |
| B-4(d) Additional administration expenses | 0.00 | 4,100.46 | |
| B-4(e) Interest on Federal estate tax | 0.00 | 10,853.96 | |
| Total of these Items | 50,000.00 | 89,954.42 | |
| Shown on Return | 50,000.00 | ||
| Change to Schedule | 39,954.42 | ||
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PLR 8846001 - §6166(h) Computation Illustration 2 §6166(b)(6) Adjusted Gross Estate Computation
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| Gross estate | 898,683.00 | |||||
| Schedule J - Funeral and Administrative Expenses | ||||||
| A. | Funeral expenses | 15,000.00 | ||||
| B. | Administration expenses | 99,954.42 | ||||
| Total Schedule J | 114,954.42 | |||||
| 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 | 156,954.42 | |||||
| Allowable amount of deductions | 156,954.42 | |||||
| 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 | 156,954.42 | |||||
| Adjustment for expenses incurred after the return was filed | (10,853.96) | |||||
| Adjusted Schedules J, K, and L debts and expenses | 146,100.46 | 146,100.46 | ||||
| Section 6166(b)(6) adjusted gross estate | 752,582.54 | |||||
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PLR 8846001 - §6166(h) Computation Illustration 2 §6166(a)(2) Ratio Computation
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| Section 6166 business value, divided by | 558,292.00 | |||
| Section 6166(b)(6) adjusted gross estate, yields | 752,582.54 | |||
| 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%. | ||||
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PLR 8846001 - §6166(h) Computation Illustration 2 §6166(a) Annual Installment
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| 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 |
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PLR 8846001 - §6166(h) Computation Illustration 2 Maximum Amount of Tax That Could Have Been Paid in Installments
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| 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 for 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. | |