S6166_Paragraph
(k4) - Section 6166(k)(4) - Interest - Section 6601(j)
Section 6601(j) Example 4 - Date of Death May-10-2016 2013 Federal Form 706, Page 1 | |||||
| 1 | Total gross estate less exclusion | 1 | 30,000,000.00 | ||
| 2 | Tentative total allowable deductions | 2 | 5,750,000.00 | ||
| 3a | Tentative taxable estate (before state death tax deduction) (subtract line 2 from line 1) | 3a | 24,250,000.00 | ||
| b | State death tax deduction | b | 3,344,000.00 | ||
| c | Taxable estate (subtract line 3b from line 3a) | c | 20,906,000.00 | ||
| 4 | Adjusted taxable gifts | 4 | 0.00 | ||
| 5 | Add lines 3c and 4 | 5 | 20,906,000.00 | ||
| 6 | Tentative tax on the amount on line 5 | 6 | 8,308,200.00 | ||
| 7 | Total gift tax paid or payable | 7 | 0.00 | ||
| 8 | Gross estate tax (subtract line 7 from line 6) | 8 | 8,308,200.00 | ||
| 9a | Basic exclusion amount | 9a | 5,450,000.00 | ||
| 9b | DSUE amount from predeceased spouse | 9b | 0.00 | ||
| 9c | Applicable exclusion amount (add lines 9a and 9b) | 9c | 5,450,000.00 | ||
| 9d | Applicable credit amount (tentative tax on amount in 9c) | 9d | 2,125,800.00 | ||
| 10 | Adjustment to unified credit (applicable credit amount) | 10 | 0.00 | ||
| 11 | Allowable applicable credit amount (subtract line 10 from line 9) | 11 | 2,125,800.00 | ||
| 12 | Subtract line 11 from line 8 (but do not enter less than zero) | 12 | 6,182,400.00 | ||
| 13 | Credit for foreign death taxes (from Schedule P) | 13 | 0.00 | ||
| 14 | Credit for tax on prior transfers (from Schedule Q) | 14 | 0.00 | ||
| 15 | Total credits (add lines 13 and 14) | 15 | 0.00 | ||
| 16 | Net estate tax (subtract line 15 from line 12) | 16 | 6,182,400.00 | ||
| 17 | Generation-skipping transfer (GST) taxes payable (from Schedule R, Part 2, line 10) | 17 | 0.00 | ||
| 18 | Total transfer taxes (add lines 16 and 17) | 18 | 6,182,400.00 | ||
| 19 | Prior payments. Explain in an attached schedule. | 19 | 1,750,000.00 | ||
| 20 | Balance due (or overpayment) | 20 | 4,432,400.00 | ||
Section 6601(j) Example 4 - Date of Death May-10-2016 2013 Federal Form 706, Page 3 - Recapitulation | |||||
| Item No. | Gross estate | Alternate value | Value at date of death | ||
| 1 | Schedule A - Real Estate | 1 | 1,250,000.00 | ||
| 2 | Schedule B - Stocks and Bonds | 2 | 2,700,000.00 | ||
| 3 | Schedule C - Mortgages, Notes, and Cash | 3 | 1,000,000.00 | ||
| 4 | Schedule D - Insurance on the Decedent's Life | 4 | 2,500,000.00 | ||
| 5 | Schedule E - Jointly Owned Property | 5 | 750,000.00 | ||
| 6 | Schedule F - Other Miscellaneous Property | 6 | 21,800,000.00 | ||
| 7 | Schedule G - Transfers During Decedent's Life | 7 | 0.00 | ||
| 8 | Schedule H - Powers of Appointment | 8 | 0.00 | ||
| 9 | Schedule I - Annuities | 9 | 0.00 | ||
| 10 | Total gross estate (add items 1 through 9) | 10 | 30,000,000.00 | ||
| 11 | Schedule U - Qualified Conservation Easement Exclusion | 11 | 0.00 | ||
| 12 | Total gross estate less exclusion (subtract line 11 from line 10). | 12 | 30,000,000.00 | ||
| Item No. | Deductions | Amount | |||
| 13 | Schedule J - Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims | 13 | 2,489,750.00 | ||
| 14 | Schedule K - Debts of the Decedent | 14 | 260,250.00 | ||
| 15 | Schedule K - Mortgages and Liens | 15 | 0.00 | ||
| 16 | Total of items 13 through 15 | 16 | 2,750,000.00 | ||
| 17 | Allowable amount of deductions from item 16 | 17 | 2,750,000.00 | ||
| 18 | Schedule L - Net Losses During Administration | 18 | 0.00 | ||
| 19 | Schedule L - Expenses Incurred in Administering Property Not Subject to Claims | 19 | 0.00 | ||
| 20 | Schedule M - Bequests, etc., to Surviving Spouse | 20 | 0.00 | ||
| 21 | Schedule O - Charitable, Public, and Similar Gifts and Bequests | 21 | 3,000.000.00 | ||
| 22 | Tentative total allowable deductions (add lines 17 through 21) | 22 | 5,750,000.00 | ||
Section 6601(j) Example 4 Worksheet - Date of Death May-10-2016 §6166(a) Regular 14-Year Election Voluntary Interim Payments Between Anniversary Dates | |||
| In this example the return was filed on the extended return due date 6 months after the statutory return due date. The following facts exist. | |||
| |||
| 1 | Gross estate | 30,000,000.00 | |
| 2 | Schedules J, K, and L deductions (§2053 and §2054) | 2,750,000.00 | |
| 2a | Expenses included in line 2 amount but which are not includible in the §6166(b)(6) adjusted gross estate computation | 0.00 | |
| 2b | Expenses not included in line 2 amount but which are includible in the §6166(b)(6) adjusted gross estate computation | 0.00 | |
| 2c | Deductible Federal interest accrued on return filing date | 0.00 | |
| 2d | Deductible state interest accrued on return filing date | 0.00 | |
| 2e | Total adjustments to line 2 (sum of lines 2b, 2c, and 2d less line 2a) | 0.00 | |
| 3 | Adjusted Schedules J, K, and L §2053 and §2054 deductions (line 2 plus line 2e) | 2,750,000.00 | |
| 4 | §6166(b)(6) adjusted gross estate (line 1 less line 3) | 27,250,000.00 | |
| 5 | Closely held business value | 20,000,000.00 | |
| 6 | §6166(a)(2) ratio for the maximum amount of tax which may be paid in installments | 0.733945 | |
| 7 | Net estate tax | 6,182,400.00 | |
| 8a | Maximum amount of tax payayble in installments (line 6 times line 7) | 4,537,541.57 | |
| 8b | Unpaid balance of tax | 4,432,400.00 | |
| 8c | Unpaid balance of tax payable in installments on return filing date (not greater than line 8a) | 4,432,400.00 | |
| 8d | Tax payable in installments - maximum deferral election | 4,537,541.57 | |
| 9 | 2% portion of tax payayble in installments (lesser of $592,000 or line 8d) | 592,000.00 | |
| 10 | 45% of R% portion of tax payable in installments (line 8d less line 9) | 3,945,541.57 | |
| 11 | Tax not payable in installments and due on return due date (line 7 less line 8d) | 1,644,858.43 | |
| 12 | Payment on return due date | 1,750,000.00 | |
| 13 | Underpayment or (Overpayment) of tax payable in installments (line 11 less line 12) | (105,141.57) | |
| 14 | Prepayment of the tax payable in installments | 105,141.57 | |
| Section 6601(j) Example 4 - 2% and 45% Portions of Deferred Tax | |
| Tax payable in installments - maximum deferral election | 4,537,541.57 |
| Portion drawing interest at 2% rate | 592,000.00 |
| 2% portion of annual installment | 59,200.00 |
| Portion drawing interest at 45% of R% rates | 3,945,541.57 |
| 45% of R% portion of annual installment | 394,554.16 |
| Section 6601(j) Example 4 - Payment History Through the 6th Anniversary Date | |||||||
| Date | Payment | Undesignated Payment | Payment Designated As Tax | Payment Designated As Interest | Payment Designated As Penalty | Miscellaneous | |
| Due | Feb-10-2017 | 1,750,000.00 | 0.00 | 1,750,000.00 | 0.00 | 0.00 | 0.00 |
| 1 | Aug-10-2017 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 2 | Feb-10-2018 | 81,682.26 | 0.00 | 0.00 | 81,682.26 | 0.00 | 0.00 |
| 3 | May-25-2018 | 100,000.00 | 100,000.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 4 | Feb-10-2019 | 57,245.63 | 0.00 | 0.00 | 57,245.63 | 0.00 | 0.00 |
| 6 | Sep-06-2019 | 150,000.00 | 0.00 | 150,000.00 | 0.00 | 0.00 | 0.00 |
| 7 | Feb-10-2020 | 79,058.68 | 0.00 | 0.00 | 79,058.68 | 0.00 | 0.00 |
| 8 | Feb-10-2021 | 77,525.26 | 0.00 | 0.00 | 77,525.26 | 0.00 | 0.00 |
| 9 | Feb-10-2022 | 199,235.72 | 0.00 | 121,734.47 | 77,501.25 | 0.00 | 0.00 |
| 10 | Feb-10-2023 | 529,012.03 | 0.00 | 453,754.16 | 75,257.87 | 0.00 | 0.00 |
| Totals | 3,023,759.58 | 100,000.00 | 2,475,488.63 | 448,270.95 | 0.00 | 0.00 | |
The anniversary date payments were paid in response to billing notices from Cincinnati Campus. The voluntary payments were made at the estate's discretion.
| Section 6601(j) Example 4 - Application of Payments Through the 6th Anniversary Date | ||||||
| Period | Date | Tax Balance Due | Payment | Interest Accrued | Interest Paid | Tax Paid |
| Due Date | Feb-10-2017 | 6,182,400.00 | 1,750,000.00 | 0.00 | 0.00 | 1,750,000.00 |
| 1 | Aug-10-2017 | 4,432,400.00 | 0.00 | 40,318.77 | 0.00 | 0.00 |
| 2 | Feb-10-2018 | 4,432,400.00 | 81,682.26 | 81,682.26 | 81,682.26 | 0.00 |
| 3 | May-25-2018 | 4,432,400.00 | 100,000.00 | 23,121.89 | 23,121.89 | 76,878.11 |
| 4 | Feb-10-2019 | 4,355,521.89 | 57,245.63 | 57,245.63 | 57,245.63 | 0.00 |
| 5 | Sep-06-2019 | 4,355,521.89 | 150,000.00 | 45,560.39 | 0.00 | 150,000.00 |
| 6 | Feb-10-2020 | 4,205,521.89 | 79,058.68 | 79,058.68 | 79,058.68 | 0.00 |
| 7 | Feb-10-2021 | 4,205,521.89 | 77,525.26 | 77,525.26 | 77,525.26 | 0.00 |
| 8 | Feb-10-2022 | 4,205,521.89 | 199,235.72 | 77,501.25 | 77,501.25 | 121,734.47 |
| 9 | Feb-10-2023 | 4,083,787.42 | 529,012.03 | 75,257.87 | 75,257.87 | 453,754.16 |
| Determining the Amount of the First Installment That is Actually Payable | |
| Tax payable in 10 installments under the §6166(a) election | 4,537,541.57 |
| Annual installment | 453,754.16 |
| Overpayment of non-deferred tax on the return due date | (105,141.57) |
| Portion of the undesignated May-25-2018 voluntary payment allocated to tax | (76,878.10) |
| Designated voluntary tax payment Sep-06-2019 | (150,000.00) |
| Balance of the first installment that is actually payable | 121,734.49 |
| Determine the §6601(j)(4) 2% and 45% of R% Factors | ||||
| 2% portion of deferred tax | 592,000.00 | = | 0.130467124 | The 2% portion of any tax payment |
| Total amount of deferred tax | 4,537,541.57 | |||
| 45% of R% portion of deferred tax | 3,945,541.57 | = | 0.869532876 | The 45% of R% portion of any tax payment (or, 1 - 0.130467124 = 0.869532876) |
| Section 6601(j) Example 4 - Application of the §6601(j)(4) Factors to the §6166 Tax Payments Received | ||||||
| Period | Date | Tax Payment | Tax Not Deferred Under §6166 | Payment of Tax Deferred Under §6166 | 2% portion of payment | 45% of R% portion of payment |
| Due Date | Feb-10-2017 | 1,750,000.00 | 1,644,858.43 | 105,141.57 | 13,717.52 | 91,424.05 |
| 1 | Aug-10-2017 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 2 | Feb-10-2018 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 3 | May-25-2018 | 76,878.11 | 0.00 | 76,878.11 | 10,030.07 | 66,848.04 |
| 4 | Feb-10-2019 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 6 | Sep-06-2019 | 150,000.00 | 0.00 | 150,000.00 | 19,570.07 | 130,429.93 |
| 7 | Feb-10-2020 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 8 | Feb-10-2021 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 9 | Feb-10-2022 | 121,734.47 | 0.00 | 121,734.47 | 15,882.35 | 105,852.12 |
| 10 | Feb-10-2023 | 453,754.16 | 0.00 | 453,754.16 | 59,200.00 | 394,554.16 |
Section 6601(j) applies only to payments of tax deferred under §6166. It has no bearing on payments of non-deferred tax.
Section 6601(j) - Example 4 Determination of the Annual Installment Interest Computation Base After Applying §6601(j)(4) | |||||||
| Date | Beginning 2% deferred tax base | Allocated payment per §6601(j)(4) | 2% tax base forward for computing interest | Beginning 45% of R% deferred tax base | Allocated payment per §6601(j)(4) | 45% of R% tax base forward for computing interest | |
| Due | Feb-10-2017 | 592,000.00 | 13,717.52 | 578,282.48 | 3,945,541.57 | 91,424.05 | 3,854,117.52 |
| 1 | Aug-10-2017 | 578,282.48 | 0.00 | 578,282.48 | 3,854,117.52 | 0.00 | 3,854,117.52 |
| 2 | Feb-10-2018 | 578,282.48 | 0.00 | 578,282.48 | 3,854,117.52 | 0.00 | 3,854,117.52 |
| 3 | May-25-2018 | 578,282.48 | 10,030.07 | 568,252.42 | 3,854,117.52 | 66,848.04 | 3,787,269.47 |
| 4 | Feb-10-2019 | 568,252.42 | 0.00 | 568,252.42 | 3,787,269.47 | 0.00 | 3,787,269.47 |
| 6 | Sep-06-2019 | 568,252.42 | 19,570.07 | 548,682.35 | 3,787,269.47 | 130,429.93 | 3,656,839.54 |
| 7 | Feb-10-2020 | 548,682.35 | 0.00 | 548,682.35 | 3,656,839.54 | 0.00 | 3,656,839.54 |
| 8 | Feb-10-2021 | 548,682.35 | 0.00 | 548,682.35 | 3,656,839.54 | 0.00 | 3,656,839.54 |
| 9 | Feb-10-2022 | 548,682.35 | 15,882.35 | 532,800.00 | 3,656,839.54 | 105,852.12 | 3,550,987.42 |
| 10 | Feb-10-2023 | 532,800.00 | 59,200.00 | 473,600.00 | 3,550,987.42 | 394,554.16 | 3,156,433.26 |
Interest overpayments are allocated to tax in the same manner as the undesignated payment on May-25-2018 in this example was applied to tax.
See the Period 3 allocations above. Occasional one-cent discrepancies are due to rounding.