Magazine article The CPA Journal

Interest Deductions on IRC Sec. 6161

Magazine article The CPA Journal

Interest Deductions on IRC Sec. 6161

Article excerpt

An estate that pays its estate taxes in installments under the hardship provisions of IRC Sec. 6161 can take annual deductions for the accrued interest, allowing it to recompute and reduce both the total liability and the annual installments. This is done by filing a "supplemental information" estate tax return (Form 706) (TAM 9241002).

The ruling deals with an estate that had been granted a six-month extension of time to file and pay Federal estate tax, pursuant to the filing of Form 476B, until July 9, 1986. Form 706, filed by the estate's representatives on July 14, 1986, reflected a total estate tax liability of $5,973,210, of which $1,170,424 was paid prior to the filing of the return. An examination of the return resulted in a decrease in tax of $201,092, due in part to administration expense deductions for interest on unpaid Federal and state estate tax accrued and paid by the dose of the audit.

The estate was granted several annual exten sions to pay estate tax under IRC Sec. 6161. Applying the procedures provided in Rev. Proc. 81-27, then ostensibly' applicable only to estates qualifying for installment payments under IRC Sec. 6166, the estate filed "supplemental returns" on Form 706 in 1988, 1989, and 1990, claiming additional deductions for interest accrued and paid on the deferred Federal and state estate tax. …

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