Section 6601(j)

An example for a 2016 date of death showing the §6601(j) interest computations through the first anniversary date calculated on the tax deferred under §6166(a), §6166(b)(7), §6166(b)(8)(A), §6166(b)(8)(B)(ii), and §6166(b)(10). The computations illustrate the application of §6601(j)(1)(B) and §6601(j)(2).

This example takes the §6166(b)(10) deferred tax amount from Example 1 and shows how the bases on which the 2% and 45% of R% interest is calculated are reduced as each installment due date passes, whether or not the installment is actually paid (e.g. when payment of an installment is extended for one year under §6161). Meanwhile, the §6601(j)(4) factors remain constant. This concept also applies when deficiencies are prorated to past-due installment due dates (and increased annual interest that was due on past anniversary due dates).

Illustration of §6601(j)(4) allocations of payments between the 2% and the 45% of R% portions of deferred tax from Example 2 for the §6166(b)(10) annual installment payments of tax and (after the return due date) interest.

This is a regular 14-year §6166(a) election. It illustrates §6601(j)(4) allocations of payments between the 2% and the 45% of R% portions of deferred tax. The return is filed on the extended return due date 6 months after the regular return due date. There is an overpayment of non-deferred tax. An election is made to defer the §6166(a)(2) maximum amount of tax which may be paid in installments. Two voluntary payments are made between anniversary dates, one undesignated and the other designated as a tax payment. The computations are run out through the 6th anniversary date.

Example 4 is modified. An IRS field examination is completed in June 2019 and a deficiency is incorporated into the deferred tax and interest computations from the return due date forward. The corrected post-examination §6601(j)(4) allocations of payments between the 2% and the 45% of R% portions of deferred tax are illustrated. The computations are run out through the 6th anniversary date.