Section 6166(a)(3) - Date for payment of installments

Section 6166(a)(3) provides;

(a) 5-year deferral; 10-year installment payment

(3) Date for payment of installments

If an election is made under paragraph (1), the first installment shall be paid on or before the date selected by the executor which is not more than 5 years after the date prescribed by section 6151(a) for payment of the tax, and each succeeding installment shall be paid on or before the date which is 1 year after the date prescribed by this paragraph for payment of the preceding installment.

Reg. §20.6166-1(e)(2) provides:

(2) Determination of date for payment of first installment. The executor may defer payment of tax (but not interest) for any period up to 5 years from the date determined under section 6151(a) for payment of the estate tax. The date chosen for payment of the first installment of tax is not required to be on an annual anniversary of the original due date of the tax; however, it must be the date within any month which corresponds to the day of the month determined under section 6151(a).

(See the specific authority in the Code and Regulations cited in the page captioned The Return Due Date.)


Section 6166(a)(3) - Example 1
The estate elects to pay the first installment on the maximum extension date of 5 years after the §6151(a) return due date (determined without regard to any extension of time to file).
Feb-17-2016 Date of death
Nov-17-2016 Section 6075(a) return due date
May-17-2017 Section 6081 extended return filing due date. The return is filed on this date with a regular §6166(a) 14-year election.
Nov-17-2017 1st anniversary date - only interest is due on this anniversary date.
Nov-17-2018 2nd anniversary date - only interest is due on this anniversary date
Nov-17-2019 3rd anniversary date - only interest is due on this anniversary date
Nov-17-2020 4th anniversary date - only interest is due on this anniversary date
Nov-17-2021 5th anniversary date and §6166(a)(3) 1st installment due date. Interest and the first equal installment of tax is due on this anniversary date.

 

Section 6166(a)(3) - Example 2
Because of cash flow considerations the estate elects to pay the first installment on July 1, 2021, which is within the maximum extension period of 5 years after the §6151(a) return due date (determined without regard to any extension of time to file). However, the specific day within July 2021 must be the same as the day on which the return was due, which was the 17th day of November, 2016. Cincinnati Campus will adjust the date selected within July 2021 to the 17th day notwithstanding the election statement specifying a payment date of July 1.
Feb-17-2016 Date of death
Nov-17-2016 Section 6075(a) return due date
May-17-2017 Section 6081 extended return filing due date. The return is filed with a regular §6166(a) 14-year election. Because of cash flow considerations, the estate selects an installment due date of July 1, 2021.
Nov-17-2017 1st anniversary date - only interest is due on this anniversary date. Anniversary dates for the first 4 years (in this case) remain November 17, in 1-year increments after the return due date (determined without regard to any extensions of time to file) pursuant to §6166(f)(1) and (f)(4); the July installment due date requested in the election statement will not be given effect until the 5th anniversary date.
Nov-17-2018 2nd anniversary date - only interest is due on this anniversary date
Nov-17-2019 3rd anniversary date - only interest is due on this anniversary date
Nov-17-2020 4th anniversary date - only interest is due on this anniversary date
Jul-17-2021 5th anniversary date and §6166(a)(3) first installment due date pursuant to the election statement as modified by Cincinnati Campus. Interest plust the first equal installment of tax is due on this anniversary date. July 17 will be the anniversary due date for all future installment payments. (This adjustment creates a "short year" payment situation between the November 2020 fourth anniversary interest payment date and the July 2021 first installment due date.)

 

Section 6166(a)(3) - Example 3
Date of death is May 31, 2015. The return due date is in February of the leap year of 2016. There is no corresponding day number 31 in February 2016, so the return due date is the last day of February, the ninth month after the date of death, or February 29, 2016. Section 6166(f) provides that interest for the first 5 years is payable annually in 1-year increments after the return due date. However, there is no day number 29 in February in non-leap years. Cincinnati Campus will therefore use February 29 as the anniversary due date for all leap years, and February 28 as the anniversary due date for all non-leap years. (Cincinnati Campus has actually administered §6166 installment cases with this situation.)
May-31-2015 Date of death
Feb-29-2016 Section 6075(a) return due date
Aug-29-2016 Section 6081 extended return filing due date. The return is filed with a regular §6166(a) 14-year election.
Feb-28-2017 1st anniversary date modified pursuant to Reg. §20.6075-1 for a non-leap year - only interest is due
Feb-28-2018 2nd anniversary date - only interest is due on this anniversary date
Feb-28-2019 3rd anniversary date - only interest is due on this anniversary date
Feb-29-2020 4th anniversary date modified pursuant to Reg. §20.6075-1 for a leap year - only interest is due on this anniversary date
Feb-28-2021 5th anniversary date and §6166(a)(3) first installment due date, modified pursuant to Reg. §20.6075-1 for a non-leap year.
Feb-28-2022 6th anniversary date and 2nd installment due date.
Feb-28-2023 7th anniversary date and 3rd installment due date.
Feb-29-2024 8th anniversary date and modified leap year 4th installment due date, and so on.

 


6166(a)(3) Comment 1:  The provision regarding the ability to select a date of the executor's choosing for payment of the first installment applies only for a regular §6166(a) 14-year (or less) installment election - it does not apply for an election under sections 6166(b)(7), 6166(b)(8), or 6166(b)(10), because the date for payment of the first installment in those situations is set by statute as the date prescribed by section 6151(a) (the original return due date determined without regard to any extension of time for filing the return).
6166(a)(3) Comment 2:  In a section 6166(b)(7), 6166(b)(8), or 6166(b)(10) election, the executor cannot select a date for payment of the second installment that is different from the original return due date (determined without regard to any extension of time for filing the return) plus 1 year. Sections 6166(b)(7)(A)(ii), 6166(b)(8)(A)(ii), and 6166(b)(10)(A)(ii) each provide "[t]he executor shall be treated as having selected under subsection (a)(3) the date prescribed by section 6151(a)." Each succeeding installment must be paid on or before the date which is 1 year after the date prescribed for payment of the preceding installment.