Annual Installment Example 2


Annual Installment Example 2

Feb-17-2016 Date of death
Nov-17-2016 Estate tax return due date. Form 4768 is filed to request an automatic 6-month extension of time to file with a separate request to extend the time to pay. The estimated amount of tax that will not be deferred under §6166 is $2,500,000, which designated sum is paid with the Form 4768 filing.
May-17-2017 Estate tax return filing date. The estate makes a regular section 6166(a) 14-year election. The first installment will be due on Nov-17-2021.
  There is a $2,000,000 charitable deduction.

The payments due with the return are:

  • the balance of non-deferred tax, plus
  • regular rate interest thereon.
  The actual amount of non-deferred tax is $2,803,802.19. The unpaid balance of non-deferred tax is $303,802.19. Regular rate interest on the balance of non-deferred tax calculated through the return filing date of May-17-2017 is $4,550.13, for a total payment of $308,352.32.


Annual Installment Computation - Example 2
§6166(b)(6) Adjusted Gross Estate Computation
Gross estate   50,000,000.00
Schedule J -    
  A. Funeral expenses 25,000.00  
  B. 1. Executors' commissions 1,000,000.00  
    2. Attorney fees 1,400,000.00  
    3. Accountant fees 415,000.00  
    4. Miscellaneous    
      a. Appraisals 250,000.00  
      b. Utilities 14,375.00  
      c. Other 1,215.00  
      d. Interest accrued and paid on unpaid non-deferred tax calculated through the return filing date 4,550.13  
  Total Schedule J 3,110,140.13  
Schedule K - Debts    
  Debts of decedent 144,535.00  
Schedule K - Mortgages and Liens    
  Mortgages 876,550.00  
  Total Schedule K 1,021,085.00  
Total Schedules J and K debts and expenses 4,131,225.13  
Allowable amount of deductions 4,131,225.13  
Schedule L - Net Losses 0  
Schedule L - Expenses on property not subject to claims 0  
Total Schedules J, K, and L debts and expenses 4,131,225.13 4,131,225.13
Section 6166(b)(6) adjusted gross estate   45,868,774.87



Annual Installment Computation - Example 2
§6166(a)(2) Ratio Computation
Section 6166 business value, divided by   37,500,000.00
Section 6166(b)(6) adjusted gross estate, yields   45,868,774.87
Section 6166(a)(2) ratio for the maximum amount of tax which may be paid in installments   0.817550


Annual Installment Computation - Example 2
Estate Tax Computation
1 Gross estate   50,000,000.00
    Schedules J, K, and L deductions 4,131,225.13  
    Marital deduction 0.00  
    Charitable deduction 2,000,000.00  
2 Total allowable deductions   6,131,225.13
3a Tentative taxable estate   43,868,774.87
3b State death tax deduction   0.00
3c Taxable estate   43,868,774.87
4 Adjusted taxable gifts   0.00
5 Add lines 3c and 4   43,868,774.87
6 Tentative tax on the line 5 amount   17,493,309.95
7 Total gift tax paid or payable   0.00
8 Gross estate tax   17,493,309.95
9a Basic exclusion amount 5,450,000.00  
9b DSUE amount 0.00  
9c Applicable exclusion amount 5,450,000.00  
9d Applicable credit amount 2,125,800.00  
10 Adjustment to applicable credit amount   0.00
11 Allowable applicable credit amount   2,125,800.00
12 Subtract line 11 from line 8   15,367,509.95
13 Credit for foreign death taxes 0.00  
14 Credit for tax on prior transfers 0.00  
15 Total credits   0.00
16 Net estate tax   15,367,509.95
17 Generation-Skipping taxes payable   0.00
18 Total transfer taxes   15,367,509.95


Annual Installment Computation - Example 2
§6166(a) Catch-Up Payment Due May-17-2017
Net estate tax (equal to total transfer taxes in this example) 15,367,509.95
Section 6166(a)(2) ratio expressed as a percentage 81.7550%
Maximum amount of tax which may be paid in installments under §6166 12,563,707.76
Tax not deferred and due on the return due date of Nov-17-2016 2,803,802.19
Non-deferred tax paid on the return due date 2,500,000.00
Balance of non-deferred tax due 303,802.19
The Annual Installment
Maximum amount of tax eligible for the section 6166(b)(7) election 12,563,707.76
Number of installments selected 10
The annual installment, the first of which will be due Nov-17-2021 1,256,370.78
The Catch-Up Payment Due May-17-2017
Balance of non-deferred tax due 303,802.19
Interest at regular underpayment interest rates on this sum due May-17-2017 4,550.13
Total catch-up payment due May-17-2017 308,352.32