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each holding company is not readily

same time as and as a part of each

of a decedent dying in calendar year

tradable.

2008, the dollar amount used to

installment payment of the tax.

determine the “2% portion” of the estate

For purposes of the 20% voting

Acceleration of payments. If the

tax payable in installments under

stock requirement, stock is treated as

estate fails to make payments of tax or

section 6166 is $1,280,000.

voting stock to the extent the holding

interest within 6 months of the due

company owns voting stock in the

Computation. Interest on the

date, the Service may terminate the

business company.

portion of the tax in excess of the 2%

right to make installment payments and

portion is figured at 45% of the annual

force an acceleration of payment of the

If the executor makes this election,

rate of interest on underpayments. This

tax upon notice and demand.

the first installment payment is due

rate is based on the federal short-term

when the estate tax return is filed. The

Generally, if any portion of the

rate and is announced quarterly by the

5-year deferral for payment of the tax,

interest in the closely held business

IRS in the Internal Revenue Bulletin.

as discussed below under Time for

which qualifies for installment payments

payment, does not apply. In addition,

If you elect installment payments

is distributed, sold, exchanged, or

the 2% interest rate, discussed below

and the estate tax due is more than the

otherwise disposed of, or money and

under Interest computation, will not

maximum amount to which the 2%

other property attributable to such an

apply. Also, if the business company

interest rate applies, each installment

interest is withdrawn, and the

stock is readily tradable, as explained

payment is deemed to comprise both

aggregate of those events equals or

on page 10, the tax must be paid in 5

tax subject to the 2% interest rate and

exceeds 50% of the value of the

installments.

tax subject to 45% of the regular

interest, then the right to make

underpayment rate. The amount of

installment payments will be

Determine how much of the estate

each installment that is subject to the

terminated, and the unpaid portion of

tax may be paid in installments

2% rate is the same as the percentage

the tax will be due upon notice and

under section 6166. To determine

of total tax payable in installments that

demand. See section 6166(g).

whether the election may be made, you

is subject to the 2% rate.

must calculate the adjusted gross

Interest computation. A special

estate. (See Line 3

interest rate applies to installment

The interest paid on installment

Worksheet — Adjusted Gross Estate

payments. For decedents dying in

payments is not deductible as

below.) To determine the value of the

an administrative expense of the

2008, the interest rate is 2% on the

adjusted gross estate, subtract the

CAUTION

estate.

lesser of:

deductions (Schedules J, K, and L)

•

from the value of the gross estate.

$576,000 or

Making the election. If you check

•

The amount of the estate tax that is

this line to make a final election, you

To determine over how many

attributable to the closely held business

must attach the notice of election

installments the estate tax may be paid,

and that is payable in installments.

described in Regulations section

please refer to sections 6166(a), (b)(7),

20.6166-1(b). If you check this line to

(b)(8), and (b)(10).

2% portion. The 2% portion is an

make a protective election, you must

amount equal to the amount of the

Time for payment. Under the

attach a notice of protective election as

tentative estate tax (on $1,000,000 plus

installment method, the executor may

described in Regulations section

the applicable exclusion amount in

elect to defer payment of the qualified

20.6166-1(d). Regulation section

effect) minus the applicable credit

estate tax, but not interest, for up to 5

20.6166-1(b) requires that the notice of

amount in effect. However, if the

years from the original payment due

election is made by attaching to a

amount of estate tax extended under

date. After the first installment of tax is

timely filed estate tax return the

section 6166 is less than the amount

paid, you must pay the remaining

following information:

computed above, the 2% portion is the

•

installments annually by the date 1 year

The decedent’s name and taxpayer

lesser amount.

after the due date of the preceding

identification number as they appear on

installment. There can be no more than

the estate tax return;

Inflation adjustment. The

10 installment payments.

•

The amount of tax which is to be paid

$1,000,000 amount used to calculate

in installments;

the 2% portion is indexed for inflation

Interest on the unpaid portion of the

•

for the estates of decedents dying in a

The date selected for payment of the

tax is not deferred and must be paid

calendar year after 1998. For an estate

first installment;

annually. Interest must be paid at the

•

The number of annual installments,

Line 3 Worksheet — Adjusted Gross Estate

including first installment, in which the

tax is to be paid;

•

What is the value of the decedent’s interest in closely held

The properties shown on the estate

business(es) included in the gross estate (less value of passive

tax return which constitute the closely

assets, 6166(b)(9))? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

held business interest (identified by

What is the value of the gross estate (Form 706, page 3, Part 5,

schedule and item number); and

line 12)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

•

The facts which formed the basis for

Add lines 17, 18, and 19 from Form 706, page 3, Part 5. . . . . . . . . .

the executor’s conclusion that the

Subtract line 3 from line 2 to calculate the adjusted gross estate. . . .

estate qualifies for payment of the

Divide line 1 by line 4 to calculate the value the business interest

estate tax in installments.

bears to the value of the adjusted gross estate. For purposes of this

calculation, carry the decimal to the sixth place; the IRS will make this

You may also elect to pay certain

adjustment for purposes of determining the correct amount. If this

GST taxes in installments. See section

amount is less than 0.350000, the estate does not qualify to make the

6166(i).

election under section 6166. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Multiply line 5 by the amount on line 16 of Form 706, page 1, Part 2.

Line 4. Reversionary or

This is the maximum amount of estate tax that may be paid in

installments under section 6166. (Certain generation-skipping transfer

Remainder Interests

taxes may be deferred as well, see section 6166(i) for more

For details of this election, see section

information.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6163 and the related regulations.

-11-

Part Instructions

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2008 Page 11

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