Form 706 (Draft) - United States Estate (And Generation-Skipping Transfer) Tax Return - 2016 Page 16
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55To determine over how many
$592,000 or
The interest paid on installment
installments the estate tax may be paid,
payments is not deductible as
The amount of the estate tax that is
!
please refer to sections 6166(a), (b)(7),
an administrative expense of
attributable to the closely-held business
CAUTION
(b)(8), and (b)(10).
the estate.
and that is payable in installments.
Time for payment. Under the
2% portion. The 2% portion is an
Making the election. If you check this
installment method, the executor may
amount equal to the amount of the
line to make a final election, you must
elect to defer payment of the qualified
tentative estate tax (on $1,000,000 plus
attach the notice of election described in
estate tax, but not interest, for up to 5
the applicable exclusion amount in
Regulations section 20.6166-1(b). If you
DRAFT AS OF
years from the original payment due
effect) minus the applicable credit
check this line to make a protective
date. After the first installment of tax is
amount in effect. However, if the
election, you must attach a notice of
paid, you must pay the remaining
amount of estate tax extended under
protective election as described in
installments annually by the date 1 year
section 6166 is less than the amount
Regulations section 20.6166-1(d).
after the due date of the preceding
figured above, the 2% portion is the
Regulations section 20.6166-1(b)
installment. There can be no more than
lesser amount.
requires that the notice of election is
June 16, 2016
10 installment payments.
made by attaching to a timely filed
Inflation adjustment. The
Interest on the unpaid portion of the
estate tax return the following
$1,000,000 amount used to calculate
tax is not deferred and must be paid
information:
the 2% portion is indexed for inflation for
annually. Interest must be paid at the
The decedent's name and taxpayer
the estates of decedents who died in a
same time as and as a part of each
identification number as they appear on
calendar year after 1998. For an estate
installment payment of the tax.
the estate tax return;
of a decedent who died in 2016, the
The amount of tax that is to be paid in
Acceleration of payments. If the
dollar amount used to determine the
installments;
estate fails to make payments of tax or
“2% portion” of the estate tax payable in
The date selected for payment of the
interest within 6 months of the due date,
installments under section 6166 is
first installment;
the IRS may terminate the right to make
$1,480,000.
The number of annual installments,
installment payments and force an
Computation. Interest on the
including first installment, in which the
acceleration of payment of the tax upon
portion of the tax in excess of the 2%
tax is to be paid;
notice and demand.
portion is figured at 45% of the annual
The properties shown on the estate
Generally, if any portion of the
rate of interest on underpayments. This
tax return that are the closely-held
interest in the closely-held business
rate is based on the federal short-term
business interest (identified by schedule
which qualifies for installment payments
rate and is announced quarterly by the
and item number); and
is distributed, sold, exchanged, or
IRS in the Internal Revenue Bulletin.
The facts that formed the basis for the
otherwise disposed of, or money and
If you elect installment payments and
executor's conclusion that the estate
other property attributable to such an
the estate tax due is more than the
qualifies for payment of the estate tax in
interest is withdrawn, and the aggregate
maximum amount to which the 2%
installments.
of those events equals or exceeds 50%
interest rate applies, each installment
You may also elect to pay certain
of the value of the interest, then the right
payment is deemed to comprise both
GST taxes in installments. See section
to make installment payments will be
tax subject to the 2% interest rate and
6166(i).
terminated, and the unpaid portion of
tax subject to 45% of the regular
the tax will be due upon notice and
Line 4. Reversionary or
underpayment rate. The amount of each
demand. See section 6166(g)(1)(A).
installment that is subject to the 2% rate
Remainder Interests
Interest computation. A special
is the same as the percentage of total
For details of this election, see section
interest rate applies to installment
tax payable in installments that is
6163 and the related regulations.
payments. For decedents dying in 2016,
subject to the 2% rate.
the interest rate is 2% on the lesser of:
Part 4—General
Information
Line 3 Worksheet—Adjusted Gross Estate
Authorization
1
What is the value of the decedent's interest in closely-held business(es)
included in the gross estate (less value of passive assets, as mentioned
Completing the authorization will
in section 6166(b)(9))?
authorize one attorney, accountant, or
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
What is the value of the gross estate (Form 706, page 3, Part 5,
enrolled agent to represent the estate
line 13)?
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
and receive confidential tax information,
3
Add lines 18, 19, and 20 from Form 706, page 3, Part 5.
. . . . . . . .
but will not authorize the representative
4
Subtract line 3 from line 2 to calculate the adjusted gross estate.
. . .
to enter into closing agreements for the
5
Divide line 1 by line 4 to calculate the value the business interest bears
estate. If you would like to authorize
to the value of the adjusted gross estate. For purposes of this
your representative to enter into
calculation, carry the decimal to the sixth place; the IRS will make this
agreements or perform other
adjustment for purposes of determining the correct amount. If this
designated acts on behalf of the estate,
amount is less than 0.350000, the estate does not qualify to make the
you must file Form 2848 with Form 706.
election under section 6166.
. . . . . . . . . . . . . . . . . . . . . . . . .
6
Multiply line 5 by the amount on line 16 of Form 706, page 1, Part 2. This
Note. If you intend for the
is the maximum amount of estate tax that may be paid in installments
representative to represent the estate
under section 6166. (Certain GST taxes may be deferred as well; see
section 6166(i) for more information.)
before the IRS, he or she must complete
. . . . . . . . . . . . . . . . . . .
and sign this authorization.
Part Instructions
-15-
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