Section 6166(b)(6) provides:
- 6) Adjusted gross estate
- For purposes of this section, the term, "adjusted gross estate" means the value of the gross estate reduced by the sum of the amounts allowable as a deduction under section 2053 or 2054. Such sum shall be determined on the basis of the facts and circumstances in existence on the date (including extensions) for filing the return of tax imposed by section 2001 (or, if earlier, the date on which such return is filed).
For Cincinnati Campus procedures, IRM 4.25.2.1.6.9 provides:
- 9. IRC section 6166(b)(6) provides that the adjusted gross estate is equal to the value of the gross estate less debts allowable. The value of the adjusted gross estate is based on the facts and circumstances in existence on the date for filing return including extensions.
- A. Administrative expenses claimed on Form 1041 can be used to compute debts.
- B. Installment interest deductions not in existence at date of filing are not entered into the computation of adjusted gross estate. Note that for decedents dying after 12–31–1997 no deduction is allowed for interest accruing during the IRC section 6166 extension. Federal and state interest accrued after an estate tax return is filed are not to be considered debts when figuring the adjusted gross estate.
Comments: 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.
The section 2058 state death tax deduction is by definition not included in the §6166(b)(6) adjusted gross estate computation.
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.
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.
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.
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.