Estate Tax Fe

<div class="Section1">If the gross estate includes a reversionary or remainder interest, the executor may elect to postpone payment of the portion of the tax attributable to that interest until six months after termination of the precedent interest in the property. Notice of the election to exercise postponement, together with supporting documents and information, must be filed with the district director before the due date for payment of the tax. The IRS may, for "reasonable cause," extend payment of the tax postponed because of the reversionary or remainder interest for up to an additional three years beyond the postponement period referred to above.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.    IRC § 6163.<br /> <br /> </div>

<div class="Section1">The IRC Section 6166 election terminates and the whole of the unpaid portion of the tax payable in installments becomes due and is payable upon notice and demand from the district director if (1) any portion of the business interest is distributed, sold, exchanged, or otherwise disposed of, or money and other property attributable to such an interest is withdrawn from the business, and (2) the aggregate of such distributions, sales, exchanges, or other dispositions and withdrawals equals or exceeds 50 percent of the value of such interest.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="Section1"><br /> <br /> A sale of business assets by the estate to satisfy unpaid mortgages encumbering the business property is not considered a disposition for purposes of the IRC Section 6166 election; however, to the extent proceeds from such a sale exceed the amount used to satisfy the mortgages, the transaction is considered a disposition.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> Distributions in redemption of stock under IRC Section 303 (distributions in redemption of stock held by a decedent at death in an amount not in excess of death taxes and settlement costs under special income tax rules that treat the redemption as a capital transaction rather than as a dividend) are not counted as withdrawals or as disposals of decedent's interest in the business if an amount equal to any such distribution is paid in estate tax on or before the due date of the first installment of tax due after the distribution, or, if earlier, within one year after the distribution. However, an IRC Section 303 redemption does reduce the value of the business (as of the applicable valuation date) by the amount redeemed, for purposes of determining whether other withdrawals, distributions, sales, exchanges, or disposals meet the applicable 50 percent test.<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.    IRC § 6166(g)(1)(A).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.    Let. Rul. 8441029.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.    IRC § 6166(g)(1)(B).<br /> <br /> </div>

<div class="Section1">The term "interest in a closely held business" means (with regard to a stockholder interest) "stock in a corporation carrying on a trade or business." "Business," for purposes of IRC Section 6166, according to the IRS, refers to a business such as manufacturing, mercantile or service enterprise, as distinguished from management of investment assets.<a href="#_ftn1" name="_ftnref1">¹</a> According to the IRS, the level of activity is the factor that distinguishes an "active business" from mere passive ownership and management of income producing assets. In several rulings since 1961, the Service has tried to make the distinction in various fact situations:</div><br /> <div class="Section1"><br /> <br /> Revenue Ruling 61-55:<a href="#_ftn2" name="_ftnref2">²</a> The ownership, exploration, development, and operation of oil and gas properties is a "trade or business" within the meaning of IRC Section 6166, but the mere ownership of royalty interests in oil properties is not.<br /> <br /> Revenue Ruling 75-366:<a href="#_ftn3" name="_ftnref3">³</a> Farms operated by tenant farmers under agreements that the decedent would pay 40 percent of the expenses and receive 40 percent of the crops, and in which the decedent had actively participated in the important management decisions, constitute an interest in a closely held business for purposes of IRC Section 6166.<br /> <br /> Revenue Ruling 75-367:<a href="#_ftn4" name="_ftnref4">⁴</a> A decedent's ownership of an electing small business corporation engaged in home construction on the decedent's land, a sole proprietorship that developed the land and sold the homes, and a business office and warehouse shared with the corporation, constitute an interest in a closely held business for purposes of IRC Section 6166.<br /> <br /> Letter Ruling 8524037: Commercial rental property as to which the decedent maintained a business office, hired a janitor/maintenance man, plumber, carpenter, electrician, contracted out larger jobs, ordered and supervised work done by employees, qualifies as an interest in a closely held business for purposes of IRC Section 6166.<br /> <br /> Letter Ruling 8529026: Commercial warehouse, as to which the decedent owned the land on which it stood and negotiated leases with the tenants; carried out routine inspections of the property to determine necessary maintenance; carried out all maintenance and repair work; hired others to carry out additional maintenance; dealt with bankruptcy proceedings of two tenants and with subsequent lawsuits over a sublease; negotiated with tenants, attorneys, architects, and contractors with respect to modifications to the warehouse to suit tenants' needs; maintained an office in his home from which he performed all bookkeeping, paid monthly expenses, and maintained all correspondence concerning the warehouse; decedent's sons helped him with all aspects of the warehouse business. Held that the decedent's activity was not sufficient to qualify as an interest in a closely held business for purposes of IRC Section 6166.<br /> <br /> Technical Advice Memorandum (TAM) 8601005: Interest in a general partnership leasing ranchland on a net-lease basis to a limited partnership actively engaged in ranching and in which the decedent was a limited partner. The Service said the land was not held simply as a passive income producing investment, but rather was used as an integral part of the trade or business of ranching. Accordingly, it was held that the decedent's interest in the general partnership was an interest in the business enterprise and not simply a passive investment.<br /> <br /> Revenue Ruling 2006-34<a href="#_ftn5" name="_ftnref5">⁵</a> provides that, for purposes of determining whether a decedent's interest in real estate is an interest in an asset used in an active trade or business, the Service will consider all facts and circumstances, including the activities of agents and employees, the activities of management companies or other third parties, and the decedent's ownership interest in any management company or other third party. The Service will consider the following nonexclusive list of factors (no single factor is dispositive):<br /> <ul><br /> <li>The amount of time the decedent devoted to the trade or business;</li><br /> <li>Whether an office was maintained from which the activities of the decedent were conducted or coordinated, and whether the decedent maintained regular business hours for that purpose;</li><br /> <li>The extent to which the decedent was actively involved in finding new tenants and negotiating and executing leases;</li><br /> <li>The extent to which the decedent provided landscaping, grounds care, or other services beyond the mere furnishing of leased premises;</li><br /> <li>The extent to which the decedent personally made, arranged for, performed, or supervised repairs and maintenance to the property; and</li><br /> <li>The extent to which the decedent handled tenant repair requests and complaints;</li><br /> </ul><br /> For purposes of this list of factors, the term decedent generally includes agents and employees of the decedent, partnership, LLC, or corporation.<br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.    Let. Ruls. 8352086, 8451014, 8524037, 8529026, 8942018, 9621007.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.    1961-1 CB 713.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.    1975-2 CB 472.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.    1975-2 CB 472.<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.    2006-26 IRB 1171, Let. Rul. 200842012.<br /> <br /> </div>

<p>Under IRC Section 6166, if the decedent's interest in a closely held business exceeds 35 percent of the <em>adjusted gross estate</em>, the portion of the federal estate tax (including the generation-skipping transfer tax if it is imposed on a direct skip transfer occurring as a result of decedent's death) attributable to that interest may be paid in annual installments (maximum of 10), and the executor may elect to delay the beginning of the installment payments up to five years.<a href="#_ftn1">¹</a> The <em>adjusted gross estate</em> is the gross estate less deductions allowable under IRC Section 2053 and IRC Section 2054 (see Q <a href="javascript:void(0)">847</a>).<a href="#_ftn2">²</a> In the case of a gift within three years of death (see Q <a href="javascript:void(0)">824</a>), the requirement that the value of the business interest exceed 35 percent of the gross estate is met by the estate only if the estate meets the requirement both with and without the application of the bringback rule.<a href="#_ftn3">³</a><br/> </p><p><hr></hr><strong>Planning Point:</strong> Section 6166 is one of the only estate tax deferral options for estates. Depending on the circumstances, an estate may elect to borrow funds to pay the entire estate tax liability rather than take advantage of Section 6166 as the interest payments should be deductible for estate tax purposes.<br/> </p><p><hr></hr><br/> <br/> For decedents dying prior to 1998, a special 4 percent interest rate applies to the portion of tax on which payment is deferred under IRC Section 6166. However, if such portion exceeds $345,800, reduced by the amount of unified credit allowable against the tax, the excess amount will bear interest at the regular underpayment rate (see Q <a href="javascript:void(0)">869</a>).<a href="#_ftn4">⁴</a> In 1997, the maximum amount of deferred tax eligible for the 4 percent interest rate was $153,000.<br/> <br/> For decedents dying after 1997, a special 2 percent interest rate applies to the portion of tax on which payment is deferred under IRC Section 6166. However, if such portion exceeds the amount of tax which would be calculated on the sum of $1,000,000 as indexed ($1,940,000 in 2026, $1,900,000 in 2025, $1,850,000 in 2024 and $1,750,000 in 2023)<a href="#_ftn5">⁵</a> plus the unified credit equivalent, reduced by the amount of the unified credit (see "IRC Section 2010, Unified Credit," in Q <a href="javascript:void(0)">861</a>) allowable against the tax, the excess amount will bear interest at 55 percent of the regular underpayment rate (see above). The $1,000,000 amount is adjusted for inflation, rounded down to the next lowest multiple of $10,000, after 1998.<a href="#_ftn6">⁶</a> No deduction is permitted for estate or income tax purposes for the interest payable on such deferred tax.<a href="#_ftn7">⁷</a> In 2026, the maximum amount of deferred tax eligible for the 2 percent interest rate is $776,000 ($760,000 in 2025, $700,000 in 2023 and $740,000 in 2024).<a href="#_ftn8">⁸</a><br/> <br/> If an election to defer taxes was made for a decedent dying before 1998, an irrevocable election could be made before 1999 to apply the lower interest rates (and the corresponding interest deduction disallowance) to payments due after the election was made (however, the 2 percent portion is equal to the amount which would be the 4 percent portion were it not for this election).<a href="#_ftn9">⁹</a><br/> <br/> For purposes of determining whether an estate qualifies for an IRC Section 6166 extension, the term "interest in a closely held business" means–</p><p>(A) an interest as a proprietor in a trade or business carried on as a proprietorship;</p><p>(B) an interest as a partner in a partnership carrying on a trade or business, if –</p><p>(i) 20 percent or more of the total capital interest in such partnership is included in determining the gross estate of the decedent, or</p><p>(ii) such partnership had 45 (15 for decedents dying before 2002) or fewer partners; or</p><p>(C) stock in a corporation carrying on a trade or business if–</p><p>(i) 20 percent or more in value of the voting stock of such corporation is included in determining the gross estate of the decedent, or</p><p>(ii) such corporation had 45 (15 for decedents dying before 2002) or fewer shareholders.<a href="#_ftn10">¹⁰</a></p><p> For purposes of applying the foregoing rules, community property or property the income from which is community property and property held by two spouses as joint tenants, tenants by the entirety, or tenants in common is treated as though the property were owned by one shareholder or one partner, as the case may be. Also, property owned, directly or indirectly, by or for a corporation, partnership, estate, or trust is considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. For purposes of the preceding sentence, a person is treated as a beneficiary of any trust only if he has a present interest in the trust. All stock and partnership interests owned by the decedent and his family are treated as owned by the decedent. The decedent's family for this purpose includes only his spouse, his ancestors, his lineal descendants, and his brothers and sisters.<a href="#_ftn11">¹¹</a> As to any capital interest in a partnership or any nonreadily-tradable stock (i.e., stock for which at the time of decedent's death there was no market on a stock exchange or in an over-the-counter market) attributable to the decedent under the rules described in this paragraph, the value of such interest does not qualify for the five-year deferral or the special 2 percent or 4 percent interest rates.<a href="#_ftn12">¹²</a><br/> <br/> For purposes of IRC Section 6166, at the executor's election, the portion of the stock of any holding company which represents direct ownership (or indirect ownership through one or more other holding companies) by such company in a "business company" (i.e., a corporation carrying on a trade or business) is deemed to be stock in such business company. However, as to such holding company stock, the five-year delay and the 2 percent or 4 percent interest provisions (see above) will not apply.<a href="#_ftn13">¹³</a><br/> <br/> The value included in the computations necessary to determine if the estate qualifies for an IRC Section 6166 extension is the value determined for purposes of the estate tax.<a href="#_ftn14">¹⁴</a> Thus, in the case of a farm or other business as to which the executor elected special use valuation (see Q <a href="javascript:void(0)">916</a>), the special use valuation is treated as the value of the property as to which it applies, for purposes of IRC Section 6166.<a href="#_ftn15">¹⁵</a><br/> <br/> Also, for purposes of such valuation, the value of passive assets held by the business is not includable. In general, the term "passive asset" includes any stock held in another corporation. However, holding company stock included in the executor's election, explained just above, is not considered a passive asset. Also, if a corporation owns 20 percent or more in value of the voting stock of another corporation, or such other corporation has 45 (15 for decedents dying before 2002) or fewer stockholders, and 80 percent or more of the value of the assets of each such corporation is attributable to active assets, then such corporations are treated as one corporation. In other words, if the foregoing conditions are met, then for purposes of the passive asset rule, the corporation is not considered to hold stock in another corporation.<a href="#_ftn16">¹⁶</a><br/> <br/> For purposes of IRC Section 6166, interests in two or more closely held businesses, with respect to each of which there is included in determining the value of the decedent's gross estate 20 percent or more of the total value of each such business, are treated as an interest in a single closely held business. For purposes of this 20 percent requirement, an interest in a closely held business which represents the surviving spouse's interest in property held by the decedent and the surviving spouse as community property or as joint tenants, tenants by the entirety, or tenants in common is treated as having been included in determining the value of the decedent's gross estate.<a href="#_ftn17">¹⁷</a> However, an interest so attributed will not qualify for the five-year deferral or the special 2 percent or 4 percent interest rates.<a href="#_ftn18">¹⁸</a><br/> <br/> The IRS is permitted to require a bond or a lien to guarantee payment of future installments.<a href="#_ftn19">¹⁹</a> However, the IRS abuses its discretion by arbitrarily requiring a bond or lien in all cases to secure payment of estate tax deferred under IRC Section 6166.<a href="#_ftn20">²⁰</a> The IRS will determine on a case by case basis whether security will be required when an estate elects to defer estate tax on a closely held business under IRC Section 6166.<a href="#_ftn21">²¹</a><br/> <br/> In general, if any payment of principal or interest is not paid when due, the whole of the unpaid portion of the tax payable in installments must be paid upon notice and demand from the district director. However, if the full amount of the delinquent payment (principal and all accrued interest) is paid within six months of the original due date, the remaining tax balance is not accelerated. Rather, the payment loses eligibility for the special interest rates (see above) and a penalty is imposed, equal to 5 percent per month based on the amount of the payment.<a href="#_ftn22">²²</a><br/> </p><p><hr align="left" size="1" width="33%"></hr><a href="#_ftnref1">1</a>. IRC § 6166(a).<br/> <br/> <a href="#_ftnref2">2</a>. IRC § 6166(b)(6).<br/> <br/> <a href="#_ftnref3">3</a>. IRC § 2035(c)(2).<br/> <br/> <a href="#_ftnref4">4</a>. IRC § 6601(j), prior to amendment by TRA '97.<br/> <br/> <a href="#_ftnref5">5</a>. Rev. Proc. 2022-38, Rev. Proc. 2023-34, Rev. Proc. 2024-40, Rev. Proc. 2025-32.<br/> <br/> <a href="#_ftnref6">6</a>. IRC § 6601(j).<br/> <br/> <a href="#_ftnref7">7</a>. IRC §§ 163(k), 2053(c)(1)(D).<br/> <br/> <a href="#_ftnref8">8</a>. Rev. Proc. 2022-38, Rev. Proc. 2023-34, Rev. Proc. 2024-40.<br/> <br/> <a href="#_ftnref9">9</a>. TRA '97, § 503(d)(2).<br/> <br/> <a href="#_ftnref10">10</a>. IRC § 6166(b)(1).<br/> <br/> <a href="#_ftnref11">11</a>. IRC § 6166(b)(2).<br/> <br/> <a href="#_ftnref12">12</a>. IRC § 6166(b)(7).<br/> <br/> <a href="#_ftnref13">13</a>. IRC § 6166(b)(8).<br/> <br/> <a href="#_ftnref14">14</a>. IRC § 6166(b)(4).<br/> <br/> <a href="#_ftnref15">15</a>. House Report No. 94-1380, pages 32-33.<br/> <br/> <a href="#_ftnref16">16</a>. IRC § 6166(b)(9).<br/> <br/> <a href="#_ftnref17">17</a>. IRC § 6166(c).<br/> <br/> <a href="#_ftnref18">18</a>. IRC § 6166(b)(7).<br/> <br/> <a href="#_ftnref19">19</a>. IRC §§ 6166(k), 6165, 6324A.<br/> <br/> <a href="#_ftnref20">20</a>. <em>Est. of Roski v. Comm.</em>, 128 TC 113 (2007).<br/> <br/> <a href="#_ftnref21">21</a>. Notice 2007-90, 2007-46 IRB 1003.<br/> <br/> <a href="#_ftnref22">22</a>. IRC § 6166(g)(3).</p>

<div class="Section1">Yes.<div class="Section1"><br /> <br /> The estate tax is due nine months after decedent&rsquo;s death, whether or not an extension of time for filing the return has been granted.<a href="#_ftn1" name="_ftnref1">¹</a> However, an extension of time for payment of any part of the tax shown on the return, not to exceed 12 months, may be granted by the district director or the director of a service center, at the request of the executor, if an examination of all the facts and circumstances discloses that such request is based upon reasonable cause.<a href="#_ftn2" name="_ftnref2">²</a> In addition, the Service has been given authority to enter into written agreements to pay taxes in installments when the Service determines that such an agreement will facilitate the payment of taxes.<a href="#_ftn3" name="_ftnref3">³</a> Interest must be paid on any extension (see &ldquo;Extension of Time for Payment,&rdquo; below).<br /> <p style="text-align: center;"><strong>Extension of Time for Payment: Reasonable Cause (ten-year maximum)</strong></p><br /> The IRS may, for &ldquo;reasonable cause,&rdquo; extend the time for payment of any part of the estate tax for a reasonable period not in excess of 10 years from the date the tax is due under the general rule (nine months after decedent&rsquo;s death). This &ldquo;reasonable cause&rdquo; extension also applies to any part of any installment payment of the tax (and deficiency, if any, added to such installment) where an extension has been granted under the &ldquo;closely held business interest&rdquo; provisions (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="870">870</a>).<a href="#_ftn4" name="_ftnref4">⁴</a> Interest is compounded daily and charged on these reasonable cause extensions at an annual rate adjusted quarterly so as to be 3 percentage points over the short-term federal rate.<a href="#_ftn5" name="_ftnref5">⁵</a> The underpayment rate for the second quarter of 2023 is 7 percent.<a href="#_ftn6" name="_ftnref6">⁶</a><br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp;&nbsp; IRC &sect; 6151(a).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp;&nbsp;&nbsp; IRC &sect; 6161(a)(1).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp;&nbsp;&nbsp; IRC &sect; 6159.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp;&nbsp;&nbsp; IRC &sect; 6161(a)(2).<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp;&nbsp;&nbsp; IRC &sect;&sect; 6601(a), 6621(a)(2).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp;&nbsp;&nbsp; Rev. Rul. 2020-13.<br /> <br /> </div></div><br />

<div class="Section1">Whether or not a return is required depends on the size of the gross estate (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="824">824</a>), and possibly also on what kinds of gifts were made by the decedent during life. Generally, a return must be filed if the gross estate of a decedent who is a U.S. citizen or resident exceeds the estate tax unified credit equivalent ($5,000,000 for 2012-2017 and $10,000,000 for 2018-2025, as adjusted annually for inflation, the amount is $11.18 million in 2018, $11.4 million in 2019, $11.58 million in 2020, $11.7 million in 2021, $12.06 million in 2022, $12.92 million in 2023, $13.61 million in 2024 and $13.99 million in 2025 (projected)).<a href="#_ftn1" name="_ftnref1">¹</a> However, the exemption amount is reduced by the amount of <em>taxable</em> gifts (the value of the property given after subtracting allowable exclusions and deductions &ndash; see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="892">892</a>) made by the decedent after December&nbsp;31, 1976, except gifts includable in the gross estate. Also, if the decedent made any gifts after September&nbsp;8, 1976 and before January&nbsp;1, 1977, the above amounts are further reduced by any amount allowed as a specific gift tax exemption (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="914">914</a>) with respect to such gifts.<a href="#_ftn2" name="_ftnref2">²</a><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp;&nbsp; Rev. Proc. 2013-35, 2013-47 IRB 537, Rev. Proc. 2018-18, Rev. Proc. 2018-57, Rev. Proc. 2019-44, Rev. Proc. 2020-45, Rev. Proc. 2021-45, Rev. Proc. 2022-38, Rev. Proc. 2023-34, Rev. Proc. 2023-34.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp;&nbsp;&nbsp; IRC &sect; 6018(a).<br /> <br /> </div></div><br />

<div class="Section1">A foreign death tax credit is provided for United States citizens and residents. The credit applies to property which is subject to both federal and foreign death taxes.<a href="#_ftn1" name="_ftnref1">¹</a> However, if there is a treaty with the foreign country levying a tax for which a credit is allowable, the executor may elect whether to rely on the IRC credit provisions or the treaty provisions.</div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.    IRC § 2014.<br /> <br /> </div>

<div class="Section1"><br /> <br /> Except for extensions of time granted under conditions explained in Q <a href="javascript:void(0)" class="accordion-cross-reference" id="869">869</a>, a federal estate tax return (Form 706), if required, must be filed, and the tax paid, by the executor within nine months after the decedent&rsquo;s death.<a href="#_ftn1" name="_ftnref1">¹</a> A six month extension for filing is available if requested prior to the due date and the estimated correct amount of tax is paid before the original due date.<br /> <br /> The 2010 TRA provided that, for estates of decedents dying after December&nbsp;31, 2009 and before December&nbsp;17, 2010, the due date for filing an estate tax return, paying the estate tax, and making a disclaimer of an interest in property passing by reason of the decedent&rsquo;s death, is not earlier than the date which is nine months after December&nbsp;17, 2010. However, an estate of a decedent who died in 2010 was permitted to file an election and not be subject to an estate tax, but instead be bound by the modified carryover basis rules under IRC Section&nbsp;1022. An estate that made such election was required to file a Form&nbsp;8939.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> The executor cannot escape responsibility for timely filing of an estate tax return or timely payment of the tax by delegating the responsibility to his attorney or accountant. Ignorance of the necessity to file a return or of the due date of the return is generally no excuse; the executor is required to exercise reasonable care in ascertaining these requirements. An exception to the general rule may exist if an attorney or accountant advised the executor no return was required to be filed.<a href="#_ftn3" name="_ftnref3">³</a> However, the penalty for late filing<a href="#_ftn4" name="_ftnref4">⁴</a> does not apply to an executor who by reason of his age, health, and lack of experience is incapable of meeting the criteria of ordinary business care and prudence required by the regulations.<a href="#_ftn5" name="_ftnref5">⁵</a><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp;&nbsp; IRC &sect;&sect; 6018(a), 6075(a), 6151(a).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp;&nbsp;&nbsp; See Notice 2011-66, 2011-35 IRB 184.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp;&nbsp;&nbsp; <em>U.S. v. Boyle</em>, 105 S. Ct. 687 (1985).<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp;&nbsp;&nbsp; IRC &sect; 6151(a)(1).<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp;&nbsp;&nbsp; <em>U.S. v. Boyle</em> (concurring opinion); <em>Brown v. U.S.</em>, 630 F. Supp.&nbsp;57, 86-1 USTC &para; 13,656 (M.D. Tenn. 1985).<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> A deduction is available for federal estate tax purposes for estate, inheritance, legacy, or succession taxes (i.e., death taxes) paid to any state or the District of Columbia with respect to the estate of the decedent.<a href="#_ftn1" name="_ftnref1">¹</a> The deduction is available for tax years beginning in 2005 and thereafter. A credit for state death taxes (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="861">861</a>) was available before 2005.<br /> <br /> The deduction is available only for state death taxes actually paid and claimed as a deduction before the later of (1) four years after the filing of the federal estate tax return; (2) 60 days after a decision of the Tax Court with respect to a timely filed petition for redetermination of a deficiency; or (3) with respect to a timely filed claim for refund or credit of the federal estate tax, the later of (a) 60 days of the mailing of a notice of disallowance by the IRS, (b) 60 days after the decision of any court of competent jurisdiction on such claim, or (c) two years after the taxpayer files a notice of waiver of disallowance.<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp;&nbsp; IRC &sect; 2058, as added by EGTRRA 2001.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> The unified credit is a dollar amount allocated to each taxpayer that can be applied against the gift tax and the estate tax. The estate tax unified credit is equal to $5,541,800 in 2025 (projected), which translates into a tentative tax base (or unified credit exemption equivalent or applicable exclusion amount) of $5,541,800 in 2025 (projected) ($13.99 million). In 2018, the credit was $4,419,800 ($11.18 million), $4,505,800 in 2019 ($11.4 million), $4,577,800 in 2020 ($11.58 million), $4,625,800 in 2021 ($11.7 million), and $4,769,800 in 2022 ($12.06&nbsp;million), $5,113,800 in 2023 ($12.92&nbsp;million) and $5,389,800 in 2024 ($13.61 million).<a href="#_ftn1" name="_ftnref1">¹</a> See Appendix D for amounts in other years (and gift tax amounts).<br /> <br /> Under EGTRRA 2001, no estate tax is imposed on an estate if the decedent died in 2010, but the beneficiaries are subject to a modified carryover basis. Therefore, 2010 TRA permitted estates to elect to be subject to the modified carryover basis rules and no estate tax or subject to an estate tax, with a step-up in basis, and a $5 million applicable exclusion amount.<br /> <br /> The credit is reduced directly by 20 percent of the amount of lifetime gift tax exemption the decedent elected to use on any gifts made after September&nbsp;8, 1976 (this $30,000 exemption was repealed by the Tax Reform Act of 1976 as to gifts made after 1976). The 20 percent reduction is made even though the value of the property to which the exemption applied is brought back into the estate for estate tax purposes. The reduction is not a deprivation of property under the due process clause of the U. S. Constitution.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> The credit is also reduced (but indirectly) by the amount of unified credit applied against any gift tax imposed on the decedent&rsquo;s post-1976 gifts. The indirect reduction is accomplished by adding to the taxable estate the amount of all taxable gifts made by the decedent after 1976, other than gifts includable in the gross estate, and then applying the estate tax rates to the sum (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="821">821</a>).<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp;&nbsp; The unified credit is calculated using the formula specified in IRC Section&nbsp;2001(c).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp;&nbsp;&nbsp; <em>U.S. v. Hemme</em>, 476 U.S. 558, 86-1 USTC &para; 13,671 (U.S. 1986); <em>Est. of Allgood v. Comm.</em>, TC Memo 1986-455.<br /> <br /> </div></div><br />