| Section 6601(j) Example 1 Worksheet - Date of Death May-10-2016 | |||
| 1 | Gross estate | 30,000,000.00 | |
| 2 | Sections 2053 and 2054 deductions | 2,750,000.00 | |
| 3 | Section 2056 or 2056A marital deduction | 0.00 | |
| 4 | Section 2055 charitable deduction | 3,000,000.00 | |
| 5 | Total deductions | 5,750,000.00 | |
| 6 | Tentative taxable estate | 24,250,000.00 | |
| 7 | State death tax deduction | 3,344,000.00 | |
| 8 | Tentative taxable estate less state death tax deduction | 20,906,000.00 | |
| 9 | Adjusted taxable gifts | 0.00 | |
| 10 | Taxable estate | 20,906,000.00 | |
| 11 | Tentative estate tax | 8,308,200.00 | |
| 12 | Gift tax paid or payable | 0.00 | |
| 13 | Gross estate tax | 8,308,200.00 | |
| 14 | Applicable credit amount | 2,125,800.00 | |
| 15 | Net estate tax | 6,182,400.00 | |
| Determining the §6166(a)(2) Ratio | |||
| 16 | Gross estate | 30,000,000.00 | |
| 17 | Sections 2053 and 2054 deductions | 2,750,000.00 | |
| 18 | Section 6166(b)(6) adjusted gross estate | 27,250,000.00 | |
| 19 | Closely held business value | 20,000,000.00 | |
| 20 | Section 6166(a)(2) ratio for the maximum amount of tax which may be paid in installments | 0.733945 | |
| Determining the Maximum Amount of Tax Which May be Paid in Installments | |||
| 21 | Net estate tax | 6,182,400.00 | |
| 22 | Section 6166(a)(2) ratio for the maximum amount of tax which may be paid in installments | 0.733945 | |
| 23 | Maximum amount of tax which may be paid in installments | 4,537,541.57 | |
| 24 | Tax not deferred and payable on the return due date | 1,644,858.43 | |
The line 23 amount is the maximum amount of tax which may be paid in installments. However, we cannot say what the annual installment is until we determine under which specific subsection in the election statement the tax is being deferred - §6166(a), §6166(b)(7), §6166(b)(8)(A), §6166(b)(8)(B)(ii), or §6166(b)(10).
Section 6601(j) Example 1 Determining the §6601(j)(2) 2% and §6601(j)(1)(B) 45% of R% Portions of Deferred Tax | |||||
| §6166(a) | §6166(b)(7) | §6166(b)(8)(A) | §6166(b)(8)(B)(ii) | §6166(b)(10) | |
| §6601(j)(2) 2% portion of deferred tax | 592,000.00 | 0.00 | 0.00 | 0.00 | 592,000.00 |
| §6601(j)(1)(B) 45% of R% portion of deferred tax | 3,945,541.57 | 4,537,541.57 | 4,537,541.57 | 4,537,541.57 | 3,945,541.57 |
| Total deferred tax amount | 4,537,541.57 | 4,537,541.57 | 4,537,541.57 | 4,537,541.57 | 4,537,541.57 |
| Maximum number of annual installments | 10 | 10 | 10 | 5 | 5 |
| Annual installment | 453,754.16 | 453,754.16 | 453,754.16 | 907,508.31 | 907,508.31 |
The interplay among sections 6601(j) and 6166(a), 6166(b)(7), 6166(b)(8)(A), 6166(b)(8)(B)(ii), and 6166(b)(10) results in the table example shown above.
Section 6601(j) Example 1 Determining the §6601(j) Interest Payable on the 1st Anniversary Date of Feb-10-2018 | |||||
| §6166(a) | §6166(b)(7) | §6166(b)(8)(A) | §6166(b)(8)(B)(ii) | §6166(b)(10) | |
| Total deferred tax | 4,537,541.57 | 4,537,541.57 | 4,537,541.57 | 4,537,541.57 | 4,537,541.57 |
| First installment due on the return due date of Feb-10-2017 | 0.00 | 453,754.16 | 453,754.16 | 907,508.31 | 907,508.31 |
| Balance on which §6601(j) interest is computed to the 1st anniversary date of Feb-10-2018 | 4,537,541.57 | 4,083,787.41 | 4,083,787.41 | 3,630,033.26 | 3,630,033.26 |
| §6601(j)(2) portion at 2% rate | 592,000.00 | 0.00 | 0.00 | 0.00 | 473,600.00 |
| §6601(j)(1)(B) portion at 45% of R% rate | 3,945,541.57 | 4,083,787.41 | 4,083,787.41 | 3,630,033.26 | 3,156,433.26 |
| §6601(j)(2) 2% interest due | 11,958.86 | 0.00 | 0.00 | 0.00 | 9,567.09 |
| §6601(j)(1)(B) 45% of R% interest due | 71,660.99 | 74,171.89 | 74,171.89 | 65,930.57 | 57,328.79 |
| Total interest due Feb-10-2018 | 83,619.85 | 74,171.89 | 74,171.89 | 65,930.57 | 66,895.88 |
| 2nd installment due | 0.00 | 453,754.16 | 453,754.16 | 907,508.31 | 907,508.31 |
| Total amount due Feb-10-2018 | 83,619.85 | 527,926.05 | 527,926.05 | 973,438.88 | 974,404.19 |
If the first installment due on the return due date was not paid then but was paid with the return filed on an extended filing due date 6 months later, interest due on that first installment (from the return due date through the payment date 6 months later) would be calculated pursuant to section 6621, not section 6601(j).
See Rev. Rul. 89-32, 1989-1 C.B. 307.