Instructions For Form Rev-1500 - Pennsylvania Inheritance Tax Return Resident Decedent Page 20
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27will be consumed for the benefit of the surviving spouse and
The request for a probability factor must identify the estate, date
issue, thereby affecting the amount available for distribution to
of death, bureau file number, and must be accompanied by a
the decedent’s issue at the death of the spouse. (For dates of
copy of any relevant instrument.
death before July 1, 1994, TRUST B is not subject to a future
The facts described in Example 2 require subjective analysis
interest compromise tax determination since all potential benefi-
before a compromise can be reached. Since the trustee has the
ciaries are of the same class and tax rate). For dates of death
power to invade principal for the benefit of the life tenant, a rea-
between July 1, 1994 and December 31, 1994, a future interest
sonable determination must be made to estimate the probable
compromise would be required because the spousal tax rate
need for use of principal. In reviewing the facts of this estate, the
was 3% and the other potential beneficiaries would be subject to
Department would consider the health of the life tenant, her
tax at 6%.
average expenses, any expected extraordinary expenses, and all
To request a compromise determination, the person responsible
future income, including the income from the decedent’s trust.
for filing the return must check block 4 “Limited Estate” and
By balancing expenses against income, a compromise could be
check block 4a “Future Interest Compromise” of the REV-1500
cover sheet.
effected on the probability that principal would be consumed.
If a contingency makes it impossible on the date of death to
Similarly, in Example 3, the trustee must also consider the
determine the rate of tax which will apply when a future interest
potential distributions made for the benefit of the decedent’s
vests in possession and enjoyment and a compromise determina-
issue as well as the spouse (life tenant). In this example, addi-
tion is not requested by the taxpayer, the Department will assess
tional information concerning the number of issue, their ages,
tax at the highest rates which would apply at all points of uncer-
respective financial situations, and related data which would
tainty in the chain of distribution.
have an effect on the probability of principal distribution to the
issue. Such distributions would affect the calculation of both the
Schedule M must accompany the return if a compromise deter-
life estate and remainder interests.
mination is requested. All information having a direct or indirect
effect on the compromise portion of the estate should be present-
When the “Notice of Inheritance Tax Appraisement, Allowance
ed with the return. Required data would include the name, rela-
or Disallowance of Deductions and Assessment of Tax” is
tionship, date of birth, age and sex of each beneficiary involved
received, the taxpayer may, within 60 days of the date the assess-
in the future interest compromise. The estate is encouraged to
ment is received, exercise the statutory right of appeal provided
provide any information that is deemed to have an impact on the
in 72 P.S. § 9186(b). Any liability not paid in full or under appeal
possible future benefit to the respective beneficiaries so that the
will be referred for collection at the expiration of the appeal peri-
Department may make informed judgments. This may include,
od or nine months after the date of death, whichever is later.
but would not be limited to: the health and lifestyle of the
respective beneficiaries, individual wealth of the beneficiary,
The taxpayer is cautioned that in the case of decedents dying on
average expenses, expected income, etc. The estate’s compro-
or after December 13, 1982, all Inheritance Tax, including the
mise offer should be supported by as much factual data and
compromise tax component, is due at death and becomes delin-
explanatory information as possible.
quent nine months following death (72 P.S. § 9142). The taxpay-
er may, therefore, wish to consider making a payment on
The Department of Revenue will review the information pre-
account of the amount of tax which will result from the compro-
sented to determine if a compromise determination is appropri-
mise determination to obtain the benefit of the discount for pay-
ate and to evaluate the suggested compromise tax amount sub-
ment within three months after the date of death, or to avoid
mitted by the taxpayer. The Department’s review may be based
imposition of interest. For dates of death between December 31,
on actuarial computation, subjective analysis, or a combination
1991 and December 31, 1994, the availability of the Spousal
of both. If the facts presented on Schedule M do not reveal any
Poverty Credit does not affect the future interest compromise
extraordinary circumstances, the determination of the
calculation.
Department will be made by an actuarial formula without any
SCHEDULE N
subjective review. For instance, if, in Example 1 no exceptional
SPOUSAL PROVERTY CREDIT
circumstances are identified, the Department’s analysis and
compromise offer would be based strictly on an actuarial formu-
la. The formula developed for use in compromise situations
involves an actuarially derived probability factor which is
applied to determine the present value of the probability that the
secondary beneficiary will survive the life tenant (in this exam-
ple, the 38 year old son would survive the 65 year old wife). The
amount of the principal of the trust is multiplied by the probabil-
ity factor to determine the amount taxable at each of the applica-
ble tax rates.
The Chief of the Inheritance Tax Division, upon written request,
will provide the probability factor in the case of an actual dece-
dent prior to the filing of the tax return. Inquiries should be
addressed to:
PA DEPARTMENT OF REVENUE
BUREAU OF INDIVIDUAL TAXES
INHERITANCE TAX DIVISION
SPOUSAL POVERTY CREDIT
PO BOX 280601
This schedule is appropriate only for estates of decedents dying
HARRISBURG, PA 17128-0601
17
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