The following information provides some general information and an example about installment plans consistent with §6166 of the Internal Revenue Code (IRC). Please see IRC §6166, as it existed on Jan.1, 2005, for details.
Though computing estate tax for estates with closely-held businesses is the same as for other estates, an estate with closely-held businesses may defer the payment of estate taxes attributable to the closely-held businesses.
To qualify for an installment election (as explained in IRC §6166) both of the following must be true:
A deferral applies only to the amount of tax attributed to the value of the closely-held business as compared to the amount of the adjusted gross estate. The non-deferred estate tax is due nine months after the decedent’s death.
An installment election is made on the Washington State Estate and Transfer Tax Return under Part 3 – Elections by the Executor, Line 3.
The “adjusted gross estate” means the gross estate less any allowable deductions under IRC §§2053 or 2054. These allowable deductions generally include funeral expenses, administrative expenses, debts of the decedent, and losses (those deductions properly reported on Schedules J – L).
|Allowable Deductions (Sch J–L)||4,000,000|
|Adjusted Gross Estate||7,000,000|
|Attributable to a Closely–Held Business||3,920,000|
Note: 3,920,000/7,000,000 = .56 (56% of the tax due can be deferred under an installment election).
For this example, if the estate tax due is $1,070,000 then $599,200 is deferrable. The remaining 44% of the tax due must be paid within nine months after the decedent’s date of death ($470,800 non-deferred).
Send us your question or call 360-704-5906, option 1, to speak with an estate tax examiner.