Section 6166(a) Underpayment of Non-Deferred Tax on Form 4768Form 706 Computations on Return As Filed |
DATA AT TIME OF ESTATE TAX RETURN FILING Date of death: February 9, 2018 Return filing due date: November 9, 2018 Tax paid with Form 4768 filing: $2,779,220.25 Return filing extended due date: May 9, 2019 |
SUMMARY COMPUTATION OF ESTATE TAX ON FORM 706 AS FILED ON MAY 9, 2019 | ||
| 1 | 44,000,000 | Gross estate |
| 2 | 3,823,087 | Schedules J, K, and L §2053 and §2054 deductions (including interest - see Comment 1, below) |
| 3 | 1,800,000 | Charitable deduction |
| 4 | 5,623,087 | Total deductions |
| 5 | 38,376,913 | Taxable estate |
| 6 | 5,000,000 | Adjusted taxable gifts |
| 7 | 43,376,913 | Total amount on which tentative tax is computed |
| 8 | 17,296,565 | Tentative tax and gross estate tax |
| 9 | 4,417,800 | Allowable applicable credit amount |
| 10 | 12,878,765 | Net estate tax |
| Section 6166(a) Underpayment of Non-Deferred Tax on Form 4768, Form 706 Computation, Comment 1: |
COMPUTATION OF TAX NOT DEFERRED UNDER THE SECTION 6166 NOTICE OF ELECTION AS FILED WITH FORM 706 | ||
| 11 | 44,000,000 | Gross estate |
| 12 | 3,800,000 | Schedules J, K, and L §2053 and §2054 deductions (before interest) |
| 13 | 23,087.21 | §6621 interest accrued on additional non-deferred tax of $803,549.18, computed from the 706 due date of November 9, 2018 through the 706 filing date of May 9, 2019. The estate reported this amount as $23,087 on Schedule J. (IRS will calculate interest in dollars and cents even though the return reports whole dollar amounts only.) |
| 14 | 40,176,913 | §6166(b)(6) adjusted gross estate |
| 15 | 29,000,000 | §6166 closely held business value |
| 16 | 12,878,765 | Total estate tax, from line 10, above |
| 17 | 0.721808 | §6166(a)(2) ratio for the maximum amount of tax which may be paid in installments (line 14 divided by line 13) - carried to 6 decimal places, rounded |
| 18 | 72.1808% | §6166(a)(2) ratio expressed as a percentage, which exceeds 35 percent of the adjusted gross estate |
| 19 | 9,295,995.69 | Maximum amount of tax which may be paid in installments (line 15 times line 16) NOTE: IRS will calculate the deferred and non-deferred tax amounts (and interest) in dollars and cents even though the return reports whole dollar amounts only |
| 20 | 3,582,769.43 | Tax not deferred under the Section 6166 Notice of Election, due with the filing of Form 4768 on Friday, November 9, 2018 (line 16 less line 19) |
| 21 | 2,779,220.25 | Tax paid with Form 4768 on November 9, 2018 |
| 22 | 803,549.18 | Balance of non-deferred tax payable with the filing of Form 706 on May 9, 2019 (line 20 less line 21). |
| 23 | 23,820.81 | §6621 regular rate interest computed from Nov-09-2018 through May-09-2019 on $803,549.18 also paid with the filing of Form 706 (which has been allowed as a Schedule J deduction when computing the interrelated tax and interest). |
Section 6166(a) Underpayment of Non-Deferred Tax on Form 4768, Form 706 Computation, Comment 2: Most estates will simply pay the balance of non-deferred tax and wait for a bill for the §6621 regular rate interest to come from IRS. Because several weeks will lapse between the filing date and bill payment date, the interest payable will be slightly greater. The more efficient practice would be to calculate the interest due on the return filing date, allow it as a Schedule J deduction when computing the tax and interest (an interrelated computation), and pay the resulting total. A supplemental estate tax return could in theory be filed after payment of the greater, non-interrelated, interest bill to claim it as a Schedule J deduction, but IRS will not recompute the tax until the examination of the return is completed, which could take several years. In the meantime, annual section 6166 interest bills would be calculated on the higher amount of tax that was shown on the return (since a deduction for the interest had not been taken). |