Notice 2020-23 Covid-19 Automatic Extensions of Time to Pay 6166 and 6161 Installments - Computation Example 3

NOTICE 2020-23 COVID-19 EXTENSION OF CURRENT SECTION 6166 INSTALLMENT AND
 
SECTION 6161 EXTENSION OF PRIOR INSTALLMENT
 

COMPUTATION EXAMPLE 3

Variation on the Facts in Computation Example 2

Variation in Facts:

  • The estate did not have cash with which to pay the third installment due May-25-2019. It timely filed Form 4768 to request a one-year extension of time to pay the 2019 installment until May-25-2020.
  • Section 6621 regular rate interest began accruing on the 2019 installment extended under section 6161, computed from May-25-2019 through May-25-2020.
  • The 2019 installment, plus section 6621 interest, was due May-25-2020 under the section 6161 extension, payment of which was automatically extended to Jul-15-2020 per Notice 2020-23.
  • The fourth section 6166 installment was also due May-25-2020. Notice 2020-23 automatically extended the time for payment of this 6166 installment to Jul-15-2020.
  • On Jul-15-2020 the estate paid both installments and interest. 
  • Details are shown below.
Estate Tax Payment Due Under The Section 6161 Election
 2,291,533.86Section 6166 tax installment due May-25-2019, extended to May-25-2020 under section 6161
   449, 014.72Section 6601(j) interest due May-25-2019, extended to May-25-2020 under section 6161
 2,740,548.58Total section 6166 installment due May-25-2019, extended to May-25-2020 under section 6161
    143,581.09Section 6621 interest on total installment due May-25-2019 computed from May-25-2019 through May-25-2020
 2,884,129.67Section 6161 payment due May-25-2020 automatically extended to Jul-15-2020 per Notice 2020-23
Estate Tax Payment Due Under The Section 6166 Election
 2,291,533.86Section 6166 tax installment due May-25-2020, extended to Jul-15-2020 per Notice 2020-23
    371,883.32Section 6601(j) interest due May-25-2020, extended to Jul-15-2020 per Notice 2020-23
 2,663,417.18Total section 6166 installment due May-25-2020, extended to Jul-15-2020 per Notice 2020-23
Total Notice 2020-23 Payment Due Jul-15-2020 Under The Sections 6161 and 6166 Elections
 2,884,129.67Section 6161 payment due May-25-2020, extended to Jul-15-2020 per Notice 2020-23
 2,663,417.18Section 6166 installment due May-25-2020, extended to Jul-15-2020 per Notice 2020-23
5,547,546.85Total sections 6161 and 6166 amounts due May-25-2020, extended to Jul-15-2020 per Notice 2020-23
Notice 2020-23 Computation Example 3, Comment 1:  The section 6621 interest is allowable as a new administration expense deduction on Schedule J of the estate tax return. It cannot be claimed as a deduction on any income tax return. Accordingly, the estate can file a supplemental estate tax return to claim this new deduction, which will cause a recomputation of tax and interest for all prior periods. 

Notice 2020-23 Computation Example 3, Comment 2:  The section 6621 interest accruing on the 2019 installment, payment of which was extended under section 6161 to May-25-2020, does not continue accruing after its section 6161 extended payment due date of May-25-2020. Notice 2020-23 provides that -

Estate tax payments of principal or interest due as a result of an election made under sections 6166, 6161, or 6163 and annual recertification requirements under section 6166 of the Code

are Specified Payments described in section III A of the Notice that are automatically extended to Jul-15-2020. Accordingly, the section 6621 interest on the 2019 installment does not accrue after May-25-2020. Only if the 2019 installment was not paid on Jul-15-2020 would section 6621 interest resume accruing.