8.7.4  Appeals Estate and Gift Tax Cases

Manual Transmittal

October 29, 2013

Purpose

(1) This transmits revised IRM 8.7.4, Technical and Procedural Guidelines, Appeals Estate and Gift Tax Cases.

Material Changes

(1) Editorial changes (including grammar, spelling, and minor clarification) were made throughout the IRM.

(2) This IRM is updated as a result of the Account and Processing Support IRM Reorganization.

(3) The significant changes are listed in the table below:

IRM Reference Description of Change
IRM 8.7.4.1 Removed reference to IMS.
IRM 8.7.4.2.1 Created new subsection called Issue Management System (IMS). Creation of new subsection cause other sections to be renumbered.
IRM 8.7.4.2.3 Updated as a result of the APS IRM reorganization.
IRM 8.7.4.2.4 Made corrections to outdated information on valuation issues on cases and information regarding referrals.
IRM 8.7.4.2.5 Updated citations and Delegation Order 66 is now Delegation Order 8–8.
IRM 8.7.4.2.6 Created new subsection called IRC 6161 Cases.
IRM 8.7.4.2.6.1 Created new subsection called Presidential Declarations of Disaster.
IRM 8.7.4.2.6.2 Created new subsection called IRC 6161 Request for Extension of Time to Pay
IRM 8.7.4.2.6.3 Created new subsection called Processing of IRC 6161 Applications
IRM 8.7.4.2.6.4 Created new subsection called Sources of IRC 6161 Cases Worked in Appeals
IRM 8.7.4.2.6.5 Created new subsection called Establishing IRC 6161 Cases on ACDS
IRM 8.7.4.2.6.6 Created new subsection called Receipt of IRC 6161 Cases
IRM 8.7.4.2.6.7 Created new subsection called Appeal Consideration of IRC 6161 Cases
IRM 8.7.4.2.6.8 Created new subsection called Statute Review of IRC 6161 Cases
IRM 8.7.4.2.6.9 Created new subsection called IDRS Transactions in IRC 6161 Cases
IRM 8.7.4.2.6.10 Created new subsection called Deficiency Assessment Where Original Tax is Deferred under IRC 6161
IRM 8.7.4.2.6.11 Created new section called Closing Non-Docketed IRC 6161 Cases
IRM 8.7.4.2.6.11.1 Created new subsection called Closing Estate Tax IRC 6161 Cases
IRM 8.7.4.2.6.11.2 Created new subsection called Closing Gift Tax IRC 6161 Cases
IRM 8.7.4.2.6.12 Created new section called Closing Docketed Estate Tax IRC 6161 Cases
IRM 8.7.4.2.6.12.1 Created new subsection called Closing Agreed Estate Tax IRC 6161 Cases
IRM 8.7.4.2.6.12.2 Created new subsection called Closing Unagreed Estate Tax IRC 6161 Cases
IRM 8.7.4.2.6.12.3 Created new section called Closing Docketed Gift Tax IRC 6161 Cases
IRM 8.7.4.2.6.12.4 Created new subsection called Closing Agreed Gift Tax IRC 6161 Cases
IRM 8.7.4.2.6.12.5 Created new subsection called Closing Unagreed Gift Tax IRC 6161 Cases
IRM 8.7.4.2.9 Revised context. Added reference that Form 1273 can be used for settled cases. Added reference to Notebook for tax computations.
IRM 8.7.4.2.9.1 Added reference to Notebook.
IRM 8.7.4.2.9.2 Form 3610 has been made optional.
IRM 8.7.4.2.9.3 Updated content to identify Form 3614-A.
IRM 8.7.4.2.9.5 Removed the requirement to enter a Code Section on Form 5403 for cases with Restricted Interest.
IRM 8.7.4.2.11 Form 4539 is an obsoleted form. The correct form is Form 4349.
IRM 8.7.4.3.2 Made corrections to outdated information on valuation issues on cases and information regarding referrals.
IRM 8.7.4.3.3 Added comment that Form 3233 can be used instead of Form 3615–A for settled cases.
IRM 8.7.4.3.3.1 Form 3610 has been made optional.
IRM 8.7.4.3.3.2 Revised content: changed will to may with regards to Form 3608.
IRM 8.7.4.4 Revised context to identify the Appeals Engineers or Economists within the Specialty Operations that are typically involved with estate and gift valuation issues.
IRM 8.7.4.5.2 Revised content.
IRM 8.7.4.5.3 Revised content and changed title to prevent confusion.
IRM 8.7.4.7 Revised content by deleting reference to IRC 6660 which has been repealed. Updated references.
Exhibit 8.7.4-2 Revised format.
Exhibit 8.7.4-4 This exhibit was renumbered because the original 4-4 exhibit was deleted. Updated exhibit: First row, second column added...for estates of decedents dying after 12/31/2004. Fourth row, second column added...for reformations to which section 2055(e)(3) as in effect on 7/7/1984 applies.
Exhibit 8.7.4-5 This exhibit was remubered because the original 4-4 exhibit was deleted.

Effect on Other Documents

IRM 8.7.4 dated August 15, 2012 is superseded.

Audience

Appeals

Effective Date

(10-29-2013)


Susan L. Latham
Director, Policy, Quality and Case Support

8.7.4.1  (10-29-2013)
Information Covered on Appeals Estate and Gift Tax Cases

  1. This section covers the procedures used to process estate tax and gift tax cases. The information covers procedures from the time the case is received in Appeals to the time the case is assessed and closed by Appeals.

  2. The beginning subsections address estate tax cases that are processed and closed agreed by Appeals without issuing a statutory notice of deficiency. There are various subsections that address special issues that pertain to estate tax cases such as:

    • Disclosure Rules

    • Section 6161 Estate Tax Cases

    • Section 6166 Elections

    • Special Use Valuation under Section 2032A

    • Restricted Interest Provisions

    • Appeals Coordinated Issues

    • Emerging Issues

  3. Following the estate tax case information are subsections that address gift tax cases processed and closed as agreed cases by Appeals.

  4. The last subsections address procedures that apply to both estate and gift tax cases including the following:

    • Statutory Notices of Deficiency

    • Notice of Adjustment ( Form 1331) for Estate and Gift Tax Cases

    • List of miscellaneous estate and gift tax case procedures found elsewhere in the IRM.

8.7.4.2  (11-06-2007)
Estate Tax Cases Worked in Appeals

  1. Estate tax cases are filed on Form 706.

  2. Procedures for establishing and closing estate tax cases, acknowledging receipt of cases, setting up and holding the conference, preparing the Appeals Case Memo (ACM) and securing agreement, and preparing settlement computations or statutory notices of deficiency are basically the same for estate tax cases as those used in income tax cases.

  3. The statute cannot be extended for estate tax cases. Form 872 is not applicable for estate tax cases.

  4. This subsection provides information on procedures or issues that are unique to estate tax cases.

8.7.4.2.1  (10-29-2013)
Issue Management System (IMS)

  1. Use of Issue Management System (IMS) is mandatory for working Field SB/SE Estate and Gift Tax cases. Cases carded in to ACDS after 02/06/12 must be worked in IMS in order to give Exam our feedback. The Appeals Centralized Database System (ACDS) will remain the Appeals system of record for case management and recording time on cases.

  2. An OnLine 5081 is required to gain access to IMS. Each user should request the “IMS-PRODUCTION-LMSB USER ACCESS” application and add a statement indicating an Examination Return Control System (ERCS) ID is not required. Additional information on the various roles in IMS and training modules can be found on the Appeals BSP IMS Website, Appeals BSP Website.

  3. Verify the case is on IMS. If the case is not on IMS, ask your ATM to search the APS inventory in IMS for cases that are not currently in your Appeals IMS Case Inventory.

    Note:

    At this time IRC 6166 cases are not on IMS

8.7.4.2.2  (10-29-2013)
Disclosure Rules for Estate Tax Cases

  1. Generally, information of a confidential nature is only disclosed when a taxpayer provides written authorization.

  2. Estates, trusts and receiverships may be represented by their trustees, receivers, guardians, executors, or regular full-time employees. See 26 CFR 601.504(b)(2)(iv) and (v). IRC 2203 defines the term "executor" .

  3. The declaration on Form 706, U.S. Estate Tax Return, when executed by an attorney, accountant or enrolled agent meets the "duly authorized in writing" requirement of IRC 6103(e)(6). A separately executed Form 2848 is not required in order for IRS to make disclosures to the attorney, accountant or enrolled agent representing the executor or administrator of the estate when the attorney, accountant or enrolled agent has executed the declaration on Form 706.

8.7.4.2.3  (10-29-2013)
Account and Processing Support Establishing Estate Cases

  1. Many times estate cases are received from the Compliance function with the AIMS records established. The tax period is controlled on AIMS as 000000.

  2. For the Appeals Technical Employee's (ATE's) information, Account and Processing Support (APS) is responsible for carding the case on ACDS, following procedures in IRM 8.20.5 , Account and Processing Support (APS), Carding New Receipts. APS will forward the case to the Appeals Team Manager (ATM) for assignment and acknowledgement of the case using the Uniform Acknowledgement Letter (UAL).

  3. The ATE will verify the case was carded-in ACDS following the procedures contained in IRM 8.2.1, Pre-90–Day Income Tax Cases.

  4. There are a few unique entries required on ACDS when establishing an estate tax case. They are -

    • ACDS Type Code Description Source Document
      ES Estate Tax Case Form 706
      6161 Hardship extension of Time for Prepayment of Estate Tax Form 4768
      6166 Hardship extension of Time for Payment of Estate Tax Form 706 and/or various Counsel documents

    • MFT - 52

    • KEYPERIOD - Date of Death

    • Tax Period - Date of Death

    • Statute Date - see IRM 8.21, Appeals Statute Responsibility, or Document 6209.

    • Unique modifier added to TIN - V for estate and gift tax cases

    Note:

    It is extremely important to look at the statute to ensure there is sufficient time for Appeals to take action. Details about statutes for estate tax cases are found in IRM 8.21.3, Appeals Technical Employees Statute Responsibility.

8.7.4.2.3.1  (10-29-2013)
IRC 6161 and IRC 6166 Appeals Cases

  1. Taxpayers who are denied the extension of time for paying estate tax provided under IRC 6161 or IRC 6166 can appeal the denial. These cases are not controlled on AIMS.

  2. These cases come to Appeals from Technical Service Advisory. APS follows the procedures contained in IRM 8.2.1, Pre-90-Day Income Tax Cases, for establishing the cases on ACDS, and transmitting the cases to the ATM to assign and acknowledge receipt to the taxpayer using the UAL.

  3. When establishing an IRC 6161 case, follow normal procedures except for the following:

    1. TYPE — Enter 6161 or 6166

    2. MFT — Enter MFT 52

    3. KEYPER — Enter Date of Death

    4. AIMS Indicator — Enter "E" for exempt from AIMS

    5. Statute Code — Enter ASESD

    6. Proposed $ Def/-OA — Enter $0

8.7.4.2.4  (10-29-2013)
Estate Tax Case Assigned to an Appeals Technical Employee (ATE)

  1. When the ATE receives a newly assigned case, he/she follows the same procedures detailed in IRM 8.2.1, Pre-90-Day Income Tax Cases. Besides the normal items to verify in the preliminary review such as accuracy of the statute date, mailing of the UAL to the taxpayer, accuracy of the database information on the case summary card, and verifying the case is ready for Appeals, the following items are important preliminary review considerations for the ATE:

    • Identify whether the feature code "AI" or "EM" is shown on ACDS or should be shown. If so, the ATE will need to make a referral to the Domestic Technical Specialist on Form 13381, Appeals Technical Guidance Referral. (See referral provisions of IRM 8.2.1).

    • Identify whether there are valuation issues on a case with tax of $10 million or more, or if there is a single work of art with a claimed fair market value of $50,000 or more. A referral to Art Appraisal Services is made by submitting a request for assistance in art valuation via the Specialist Referral System at https://srs.web.irs.gov. See IRM 8.7.4.4.1 and IRM 8.18.1, Valuation Assistance - Valuation Assistance Procedures, for additional information. Information on requesting assistance from Specialty Operations (e.g. Engineer and/or Economist) for other valuation issues can be found in IRM 8.7.3, Technical and Procedural Guidelines - Domestic and International Operations Programs and IRM 1.4.28.9, Referrals to Appeals Domestic Operations, International, and TEGE.

  2. For purposes of deciding whether the case is ready for Appeals, if a valuation issue, check the case file for a government appraisal. If the facts are disputed, check the case file for a rebuttal to the protest.

  3. Remember that the burden of proof provision, under IRC 7491, applies to estate and generation-skipping transfer taxes.

8.7.4.2.5  (10-29-2013)
Consideration of Denials to Extensions under IRC 6166 and 6166(h) Elections

  1. Upon receipt of a IRC 6166 case the ATE contacts the Domestic Technical Specialist for estate tax issues for further instructions. See IRM 1.4.28.9, Referrals to Appeals Technical Guidance and IRM 8.2.1, Pre-90 Day and 90-Day Cases - Agreed Pre-90-Day Income Tax Cases, for procedures on making a referral using Form 13381.

  2. A taxpayer may appeal the determination that the estate does not qualify for an extension under IRC 6161or IRC 6166. (See Delegation Order 8–8 and Rev. Proc. 79-55). Appeals may consider reasonable cause or undue hardship as long as the taxpayer filed the application for extension timely or made the payment timely. Treas. Reg. Section 20.6161-1(b) provides that an application for extension of time for payment of the tax or of an installment under IRC 6166 will not be considered unless the extension is applied for on or before the date for payment of the tax or the installment. The final authority granted to Appeals does not include the authority to consider whether the taxpayer had reasonable cause for filing an application late or making a payment late. If an ATE determines, however that the application was timely filed, the ATE can then determine whether reasonable cause or undue hardship exists for granting an extension of time to pay the taxes. If it is determined the application was filed late, the appeal will be denied. The ATE should cite Treas. Reg. 20.6161-1(b) in the letter to the taxpayer.

  3. Treas. Reg. 20.6161-1(a)(1) provides examples for reasonable cause.

  4. The estate tax return, Form 706, and payment of estate tax liability of a decedent are due within nine months of the decedent’s death. IRC 6166(a)(1), as an exception to this rule, provides that if the value of an interest in a closely held business included in determining the value of the gross estate of a decedent exceeds 35 percent of the adjusted gross estate, the executor of the estate may elect to pay part or all of the estate tax in two or more (but not more than ten) equal installments. The first installment of tax must be paid on or before the date selected by the executor which is not more than five years after the date prescribed by IRC 6151(a) for payment of the tax. An executor electing to defer estate taxes under IRC 6166 must make annual payments of interest during the deferral period. Interest must be paid annually during the five-year period before the first installment of tax is due. When an estate fails to make payments of principal or interest the Service may terminate the deferred payment election and force an acceleration of payment of the estate tax by issuing notice and demand.

  5. An election under IRC 6166(a) to pay the estate tax in installments must be made on a timely filed return.

  6. IRC 6165 and IRC 6324A, allow the Secretary to require security in the case of an extension under IRC 6166.

  7. Technical Advice requests on a disputed extension of time to pay estate tax are permissible when an estate consists largely of an interest in a closely held business. For example, requesting technical advice is appropriate when determining whether a decedent’s farm holding constitute an interest in a closely held business, and if so, whether the value of the holdings constitute the necessary percentage of the total estate as required by IRC 6166. Do not request technical advice on whether the taxpayer should be granted an IRC 6161 extension of time to pay tax on the ground of reasonable cause or undue hardship.

8.7.4.2.6  (10-29-2013)
IRC 6161 Cases

  1. Under IRC 6161, Treas. Regs 20.6161–2, 25.6161–1 and 301.7701–9, the Secretary of the Treasury may extend the time to pay certain taxes for a reasonable period. See IRM 20.1.2.1.3.2, Extensions of Time to Pay- IRC 6161 for additional information.

  2. The Secretary’s authority for (1), above, was delegated, among others, to Appeals Team Managers. See IRM 1.2.47.9, Delegation Order 8-8 (formerly DO-66, Rev. 15).

  3. Estate Tax:

    1. An extension for time to pay estate taxes may be granted for up to ten years (up to one year at a time) for an original TC 150 assessment and up to four years (up to one year at a time) for an examination or deficiency assessment (IRC 6161(a)(2),(b)(2); Treas. Reg. 20.6161-1; Treas. Reg. 20.6161-2). Therefore, different extension periods may apply for different assessments. See IRM 5.5.5, Processing Estate and Gift Tax Extensions for additional information.

    2. IRC 6161(a)(2)(B) also permits an extension of time to pay an installment payment (including deficiency installment payments) under IRC 6166 for a reasonable time not to exceed 10 years (up to one year at a time) from the due date of the installment payment.

    3. Requests for extension of time to pay estate taxes may be subject to either a reasonable cause or an undue hardship standard, depending on the distinguishing criteria outlined in IRM 8.7.4.2.6.7, Appeals Consideration of IRC 6161 Cases.

  4. Gift Tax:

    1. An extension for time to pay gift taxes may be granted for up to six months (or longer in the case of taxpayers who are abroad) for an original TC 150 assessment and up to 30 months for an examination or deficiency assessment (IRC 6161(a)(1),(b)(1); Treas. Reg. 25.6161-1). Therefore, different extension periods may apply for different assessments. See IRM 5.5.5, Processing Estate and Gift Tax Extensions for additional information.

    2. All requests for extension of time to pay gift taxes are subject to an undue hardship standard. For examples of undue hardship, see Treas. Reg. 25.6161-1(b).

  5. If an extension of time to pay is granted under IRC 6161, no failure-to-pay penalty will accrue under IRC 6651(a) until after the expiration of the extended due date for payment.

8.7.4.2.6.1  (10-29-2013)
Declarations of Disaster

  1. If the President of the United States makes a disaster or emergency declaration, IRC 7508A confers upon the IRS expanded authority to provide relief in the form of extensions of time to file under IRC 6081 or pay under IRC 6161. See IRM 25.16.1,Disaster Assistance and Emergency Relief - Program Guidelines for additional information.

  2. To provide relief for a local disaster whose magnitude does not warrant a Presidential declaration, local IRS officials may provide extensions to file IRC 6081 and to pay IRC 6161. See IRM 25.6.1.10.2.9.3, Disaster Area Recognized by Local Service Officials for additional information.

8.7.4.2.6.2  (10-29-2013)
IRC 6161 Request for Extension of Time to Pay

  1. Extensions of time to pay estate tax:

    1. A request for extension of time to pay must be in writing and received no later than the due date of the return, or, in the case of a subsequent extension request, no later than the extended due date for payment (Treas. Reg. 20.6161-1(b)).

    2. The request may be made on Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes and should contain a written statement explaining in detail why it is impossible or impractical to pay the full amount of tax by the due date.

    3. In lieu of filing Form 4768, the application for extension of time to pay may be made through any written statement as long as the estate indicates the period of the extension requested and includes a declaration that the request is made under a penalty of perjury.

    4. The request is filed with the Cincinnati Campus.

      Note:

      See IRM 4.25.2.1.3, Extension of Time to Pay Estate Tax — IRC Section 6161 for additional information.

  2. Extensions of time to pay gift tax:

    1. A request for extension of time to pay must be in writing and received no later than the due date of the return, or, in the case of a subsequent extension request, no later than the extended due date for payment (Treas. Reg. 25.6161-1(c)).

    2. The request may be made on Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship and should contain a written statement of undue hardship explaining in detail why the taxpayer would sustain a substantial financial loss if required to pay the gift tax on the due date.

      Note:

      Form 1127 is used by taxpayers to request an extension of time to pay gift taxes and certain other taxes but not estate taxes. The Form 1127 instructions address the conditions to grant extensions according to IRC 6161. See IRM 20.1.1.3.3.3, Undue Hardship for additional information.

    3. The request is filed with the Cincinnati Campus.

8.7.4.2.6.3  (10-29-2013)
Processing of IRC 6161 Applications

  1. A Taxpayers, who files a request for an extension of time to pay which lacks the requisite statement of reasonable cause or undue hardship will be allowed an additional fifteen 15 days to perfect the request. A letter is provided to the taxpayer requesting additional information. If a timely response is not provided, the request will be denied.

  2. The Service will examine the application within 30 days. The taxpayer is to be notified whether the application is denied, granted, or tentatively granted due to certain conditions. See IRM 5.5.5.1, Section Overview Request for Extension of Time to Pay Estate Tax for additional information.

  3. Estate Tax:

    1. Before March 2012, IRC 6161 requests for extension of time to pay estate tax (Form 4768) were adjudicated by either the Estate and Gift Tax Unit of the Cincinnati Compliance Services or the Advisory Estate Tax Group (aka "Advisory" ). The distinguishing criteria are outlined in IRM 4.25.2.1.4,Transfer of Extension Requests to Advisory. Generally, first and second applications were adjudicated by the Estate and Gift Tax Unit of Cincinnati Compliance Services, whereas any further requests were forwarded to Advisory.

    2. As of March 2012, all IRC 6161 requests for extension of time to pay estate tax (Form 4768) are adjudicated by Advisory.

  4. All Gift Tax IRC 6161 requests for extension of time to pay gift tax (Form 1127) are adjudicated by the Estate and Gift Tax Unit of the Cincinnati Compliance Services.

  5. The employee assigned to adjudicate the request for extension of time to pay will make a determination based on reasonable cause and undue hardship. See IRM 5.5.5.4, Evaluating Requests for Extensions of Time to Pay for additional information.

  6. The employee assigned to adjudicate the request for extension of time to pay will also analyze extension requests to ensure that the government’s interests are protected before an additional extension of time is granted.

  7. Where the government's interest would be at risk due by allowing a taxpayer to extend the time to pay, the request may be granted on the condition the taxpayer post a bond or other security to pay. See IRC 6165 and IRM 5.6.1.2.3, Estate Tax Bonds and Other Collateral for additional information.

  8. In some cases, the IRS may also file a Notice of Federal Tax Lien as a condition precedent to approving an extension request.

8.7.4.2.6.4  (10-29-2013)
Sources of IRC 6161 Cases Worked in Appeals

  1. IRC 6161 cases are not controlled on AIMS.

  2. Generally, IRC 6161 requests can be denied for any of the following reasons:

    1. Failure to provide the required bond/security.

    2. No reasonable cause.

    3. No undue hardship.

    4. Ability to pay.

    5. Untimely requests.

  3. When the extension is denied because it was not timely requested, Advisory assesses a failure-to-pay penalty from the due date of the return or the previous extended due date for payment. The Advisor will input a TC 270 entry for the penalty on IDRS.

  4. When extension requests are denied, Advisory retains the closed case file and generally sends the second page of Form 4768 (or Form 1127) and Publication 1 to the taxpayer. In lieu of using the second page of Form 4768 (or Form 1127), Advisory may communicate the denial determination through a letter. In either case, Taxpayers may appeal the determination. See Delegation Order 8-8 and Rev. Proc. 79-55. The denial instructions outline that a written appeal may be made by registered or certified mail within 10 days after notice of denial is mailed. See IRM 5.5.5.8, Denial of Requests for Extension of Time to Pay and Treas. Reg. 20.6161–1(b) for additional information. The appeal is considered filed on the date it is postmarked. If the due date falls on a Saturday, Sunday or legal holiday, it will be considered timely if postmarked by the next business day.

  5. When Advisory receives an appeal, the Advisor will date-stamp the protest and verify that the protest was filed timely. The Advisor will then forward all pertinent information on a Form 3210 to the Office of Appeals for the state of the decedent’s last domicile.

  6. Upon receipt of a protest letter, the Advisor will also notify the Estate and Gift Tax Unit of the Cincinnati Compliance Services that the taxpayer has requested an appeal so that the account remains in status 14 and payment due notices are not sent during the Appeals process.

8.7.4.2.6.5  (10-29-2013)
Establishing IRC 6161 Cases on ACDS

  1. IRC 6161 cases come to Appeals from Advisory. For the ATE information, APS is responsible for carding the case on ACDS, within the time frames established in IRM 8.20.5, Account and Processing Support (APS), Carding New Receipts.

  2. The ATE will verify the case was carded-in ACDS following the same procedures used when a regular income tax case is received except for the following:

    • TYPE — Enter 6161

    • MFT — Enter MFT 52 or 51

    • KEYPER — Enter month and year of death (for MFT 52) or calendar year of gift (for MFT 51)

    • AIMS Indicator — Enter "E" for exempt from AIMS

    • Statute Code — Enter ASESD

    • Proposed $ Def/-OA — Enter $0

8.7.4.2.6.6  (10-29-2013)
Receipt of IRC 6161 Cases

  1. Letter 4141, Uniform Acknowledgment Letter, is used for IRC 6161 cases. The Appeals Team Manager (ATM) is responsible for generating and issuing Letter 4141 on the date the case is assigned on ACDS, which cannot be later than 30 days from the ACDS "Received Date" . See IRM 1.4.28.3.1, Assignment of Work Units and Issuance of Letter 4141(CG), Uniform Acknowledgment Letter (UAL), for additional procedures on issuance of UAL.

  2. See Exhibit 1.4.28-6, Pre-Selected Enclosures for the UAL Based Upon the Category and Type of Case, for required enclosures.

8.7.4.2.6.7  (10-29-2013)
Appeals Consideration of IRC 6161 Cases

  1. The Regulations provide that an application for extension of time for payment will not be considered unless the extension is applied for on or before the date for payment of the tax or the installment. Treas. Reg. 20.6161-1(b); Treas. Reg. 25.6161-1(c). The Service has taken the position that timely filing is an absolute requirement. See IRM 4.25.2.1.3, Extension of Time to Pay Estate Tax — IRC Section 6161 for additional information.

  2. The final authority granted to Appeals does not include the authority to consider whether the taxpayer had reasonable cause for filing a late application. If it is determined the application was filed late, the ATE will sustain the denial of the extension request. In the closing letter to the taxpayer, the ATE should cite Treas. Reg. 20.6161-1(b), in estate tax cases, or Treas. Reg. 25.6161-1(c), in gift tax cases.

  3. However, if an ATE determines that the application was timely filed, the ATE should then consider the application on the merits based on reasonable cause or undue hardship.

  4. Estate tax cases: Requests for extension of time to pay estate taxes may be subject to either a reasonable cause or an undue hardship standard, depending on the following distinguishing criteria:

    1. The first request for a 12-month extension of time to pay any part of the estate tax shown on the return may granted based either on reasonable cause, Treas. Reg. 20.6161-1(a)(1), or undue hardship, Treas. Reg. 20.6161-1(a)(2). For examples of reasonable cause, see Treas. Reg. 20.6161-1(a)(1). For examples of undue hardship, see Treas. Reg. 20.6161-1(a)(2).

    2. All subsequent requests for an extension of time to pay any part of the estate tax shown on the return (beyond the first 12-month extension) are subject to an undue hardship standard. Treas. Reg. 20.6161-1(a)(2). For examples of undue hardship, see Treas. Reg. 20.6161-1(a)(2).

    3. All requests for an extension of time to pay an IRC 6166 installment are subject to an undue hardship standard. Treas. Reg. 20.6161-1(a)(2). For examples of undue hardship, see Treas. Reg. 20.6161-1(a)(2).

    4. All requests for an extension of time to pay an estate tax deficiency are subject to an undue hardship standard. Treas. Reg. 20.6161-2. For examples of undue hardship, see Treas. Reg. 20.6161-2.

  5. Gift tax cases: Requests for extension of time to pay gift taxes are always subject to an undue hardship standard. Treas. Reg. 25.6161-1(b). The Regulations provide examples of cases in which granting an extension of time to pay a gift tax liability may be appropriate due to undue hardship. Treas. Reg. 25.6161-1(b).

  6. In addition to establishing reasonable cause or undue hardship, these cases require an analysis of the progress and efforts being made to borrow or liquidate assets to otherwise pay the amount due. The ATE may wish to consider:

    1. Balance sheets listing all assets, disbursements, liabilities and earnings for the estate. This documentation should be compared to any submitted for a prior extension period, to determine what has been liquidated during the extension period.

    2. An account of the actions taken during the past extension period(s) to resolve the indebtedness. Examples include marketing property, resolving lawsuits, or seeking loans.

    3. Information on the executor’s proposal to make partial payments during the extension period requested.

    4. Consideration should be made as to whether the estate has complied with the conditions set for granting prior extensions.

    5. Evaluation of what assets remain under the protection of the IRC 6324 inchoate lien. The ATE should determine if the assets have been distributed or discharged.

    6. An analysis should be made to determine if there is sufficient value or equity in the remaining assets relative to the amount of tax remaining.

8.7.4.2.6.8  (10-29-2013)
Statute Review of IRC 6161 Cases

  1. Appeals employees should always be aware of the statute dates on cases in their physical possession. See IRM 8.21.3.1.3.2, Protecting Statutes on Estate Tax Cases.

  2. The IRC 6501 Assessment Statute Expiration Date (ASED) is not affected by requests for extensions of time to pay under IRC 6161, regardless of whether they are approved or denied.

  3. The IRC 6502 Collection Statute Expiration Date (CSED) may be affected by requests for extensions of time to pay under IRC 6161, as follows:

    1. Pursuant to IRC 6503(d), the CSED is suspended for the period of any extension of time for payment that is granted. See IRM 5.1.19.3.12, Estate Tax Lien and IRM 5.5.5.2, Collection Statute Expiration Date under IRC § 6503(d) for additional information. This applies to extensions for time to pay estate, gift, and income taxes.

    2. In the case of estate taxes, an extension for time to pay may be granted for up to ten years (up to one year at a time) for an original TC 150 assessment and up to four years (up to one year at a time) for an examination or deficiency assessment. Therefore, different extension periods may apply for different assessments. A TC 468 is input on IDRS to identify accounts that were granted additional time to pay estate taxes under IRC 6161. The CSED is extended for the period of time between the TC 468 date and the TC 469 date, which reflects expiration of the extended time to pay estate taxes.

    3. In the case of gift taxes, an extension for time to pay may be granted for up to six months (and more than six months in the case of taxpayers who are abroad) for an original TC 150 assessment and up to 30 months (18 months plus an additional 12 months in exceptional circumstances) for an examination or deficiency assessment. Therefore, different extension periods may apply for different assessments. A TC 470 is input on IDRS to identify accounts that were granted additional time to pay gift taxes under IRC 6161. An Activity Code will be used to identify the extended due date for payment in the following format: F1127EXT PAYMTDUE MMDDYYYY.

    4. An IRC 6166 election also extends the CSED while the election is in effect. A TC 488 will be input to indicate the 6166 election has been granted. If the estate defaults on its installment payment obligations, a TC 489 will be input. The date of the TC 489 indicates the date in which the election has defaulted. The CSED begins to run from the TC 489 date.

8.7.4.2.6.9  (10-29-2013)
IDRS Transactions in IRC 6161 Cases

  1. Estate Tax:

    1. A TC 468 entry carries an extended date and may post before or after the TC 150 entry. This extension gives the taxpayer relief from the 6651(a) failure-to-pay penalty (but not from interest) from the due date of the return to the approved extended due date for payment. The computer will allow more than one TC 468 entry to post on the account and is able to recognize the last entry with the latest extended due date. Therefore, multiple TC 468 entries may be input on the module for subsequent extensions of time to pay.

    2. If the due date of the return (whether extended or unextended) and the due date for payment (whether extended or unextended) are the same, the computer is able to automatically generate appropriate penalties, interest, and notices.

      Note:

      If the extended due date for payment (TC 468) is the same as the unextended due date of the return, this indicates that the extension for time to pay was denied. Therefore, the due date for filing and paying are the same. In these cases, the computer will generate appropriate penalties, interest, and notices.

      Note:

      Likewise, if the extended due date for filing (TC 460) and the extended due date for payment (TC 468) are the same, the computer will generate any necessary penalties, interest, and notices.

    3. If the due date of the return (whether extended or unextended) and the due date for payment (whether extended or unextended) are different, the account will go into status 14 and will be maintained manually for interest and/or penalty adjustments and billing. This generally happens where an estate secures a six-month extension of time to file (or did not secure a filing extension) and a 12-month extension of time to pay. All status 14 modules must be manually maintained and billed.

      Note:

      If the extended due date for filing (TC 460) and the extended due date for payment (TC 468) are different, and there is a tax balance due, the account will go into status 14 and will be maintained manually for interest and/or penalty adjustments and billing.

      Note:

      Likewise, if there is no extension to file (TC 460), but there is an extension to pay (TC 468), and there is a tax balance due, the account will go into status 14 and will be maintained manually for interest and/or penalty adjustments and manual billing.

  2. Gift Tax:

    1. A TC 470 entry carries an Activity Code that identifies the extended due date for payment in the following format: F1127EXT PAYMTDUE MMDDYYYY. An extended date may post before or after the TC 150 entry.

    2. In the case of extensions of time to pay gift tax, the computer is not able to automatically monitor the extended due date for payment and generate appropriate penalties, interest, and notices. Therefore, the account must be manually monitored by the Estate and Gift Tax Unit of the Cincinnati Compliance Services. The Estate and Gift Tax Unit continues to enter a TC 470 on the account every 9 weeks for the whole duration of the extension.

    3. Because this extension gives the taxpayer relief from the 6651(a), failure-to- pay penalty (but not from interest) from the due date of the return to the approved extended due date for payment, the Estate and Gift Tax Unit also enters a TC 270 with an amount of $0.00 to prevent the computer from assessing any failure-to-pay penalty during the period of the extension.

    4. When the extension for time to pay gift tax expires, the Estate and Gift Tax Unit manually reverses the TC 470 with a TC 471 and assesses a failure-to-pay penalty (TC 270) from the extended due date for payment until the payment date.

8.7.4.2.6.10  (10-29-2013)
Deficiency Assessment Where Original Tax is Deferred under IRC 6161

  1. Although the time for payment of a balance due from the original return may have been extended under IRC 6161, a deficiency assessment is not automatically covered in the extension but is subject to payment on notice and demand. Conversely, the assessment of a deficiency does not disturb the existing extension for time to pay the balance due from the original return. See IRM 4.25.2.1.20, Deficiency assessments—Estate Tax for additional information.

  2. Estate Tax deficiency:

    1. Upon a showing of undue hardship, estates may obtain an extension of time to pay an estate tax deficiency for a reasonable time not to exceed four years from the date fixed for payment of the deficiency. Treas. Reg. 20.6161-2. Extensions may be granted in increments of up to one year at a time.

    2. Extensions for time to pay an estate tax deficiency will not be granted if the deficiency is due to negligence, intentional disregard of the rules and regulations or to fraud with intent to evade tax. See IRC 6161(b)(3); Treas. Reg. 20.6161-2.

    3. Because an extension for time to pay may be granted for up to ten years (up to one year at a time) for an original TC 150 assessment and up to four years (up to one year at a time) for an examination or deficiency assessment, different extension periods may apply for different assessments.

  3. Gift Tax deficiency:

    1. Upon a showing of undue hardship, IRC 6161(b)(1) permits an extension of time to pay a gift tax deficiency for a reasonable time not to exceed 18 months from the date fixed for payment of the deficiency. In exceptional circumstances, the time for payment may be extended for an additional 12 months. This extension will not be granted if the deficiency is due to negligence, intentional disregard of the rules and regulations or to fraud with intent to evade tax. See IRC 6161(b)(3); Treas.Reg. 25.6161-1(a)(2).

    2. Because an extension for time to pay may be granted for up to six months (and more than six months in the case of taxpayers who are abroad) for an original TC 150 assessment and up to 30 months (18 months plus an additional 12 months in exceptional circumstances) for an examination or deficiency assessment, different extension periods may apply for different assessments.

8.7.4.2.6.11  (10-29-2013)
Closing Non-Docketed IRC 6161 Cases

  1. Closing IRC 6161 cases requires special action by Advisory to unfreeze an account and manually bill it. For this reason, Advisory continuously monitors IRC 6161 cases in Appeals. Generally, the Advisor will follow up with the ATE assigned to the case every 90 days to inquire into the status of the case. If the ATE does not respond to the Advisor’s inquiries, Advisory will contact the Appeals Account Resolution Specialist (AARS) team to locate a case and obtain an update on its status. IRM 5.5.5.8, Denial of Requests for Extension of Time to Pay, for additional information.

  2. For the reasons stated above, Appeals must communicate its final determination on a IRC 6161 case to Advisory. Therefore, when closing a IRC 6161 case, it is important that the ATE, through APS, send the administrative case file as well as the Appeals Case Memorandum (ACM) to the originating Advisor. The ATE should include an additional copy of the ACM in the closing folder to be retained by Advisory.

8.7.4.2.6.11.1  (10-29-2013)
Closing Estate Tax IRC 6161 Cases

  1. Communicating Appeals’ determination to Advisory is particularly critical in cases where Appeals sustains the denial of an extension of time to pay because, in these cases, the Advisor must manually compute and assess the applicable failure-to-pay penalty. IRM 20.1.2.1.3.2, Extensions of Time to Pay - IRC 6161, for additional information.

  2. The ATE will prepare a customized Form 5402 that includes special IRC 6161 closing procedures for APS. The ATE will identify the following special processing instructions on the Form 5402:

    • Under "APS Route Case" , select "Advisory" .

    • Use Closing Code 14 if unagreed or 15 if agreed.

    • Under "Disposal Information" check the box for "APS Instructions for IRC 6161 Cases" .

    • Include the following in the remarks field if the box for "APS Instructions for IRC 6161 Cases" does not exist:

      "Instructions to APS for closing case: Return the case file with Form 3210 to the originator at the following address: [Use the name and address of the Advisor who sent the case to Appeals.] You can close the case in ACDS once the Form 3210 is returned acknowledging receipt."

    • Complete all other selections on Form 5402 according to established Appeals procedures.

  3. The ATE will send out a closing letter to the taxpayer.

    • Suggested language for the closing letter for approved IRC 6161:

    "We completed our review of your request for an extension of time to pay estate taxes pursuant to 26 U.S.C. Section 6161. Based on the information submitted, we are pleased to advise you that your application for extension of time to pay has been approved. The date for payment of the tax has been approved. The date for payment of the tax has been extended to [INSERT EXTENDED DUE DATE FOR PAYMENT]."

    "Your file is being returned to the Service Center for processing. Future extension requests should be sent to the Internal Revenue Service at 201 West Rivercenter Blvd., Stop 824G, Covington, KY 41011."

    • Suggested language for the closing letter for denied IRC 6161:

    "We completed our review of your request for an extension of time to pay estate taxes to [INSERT EXTENDED DUE DATE FOR PAYMENT] pursuant to 26 U.S.C. Section 6161. After reviewing the facts of the case along with any additional information you submitted, we find no basis to change the original determination to deny your request for an extension of time to pay."

8.7.4.2.6.11.2  (10-29-2013)
Closing Gift Tax IRC 6161 Cases

  1. Communicating Appeals’ determination to Advisory is particularly critical in cases where Appeals sustains the denial of an extension of time to pay because, in these cases, the Advisor must manually compute and assess the applicable failure-to-pay penalty. IRM 20.1.2.1.3.2, Extensions of Time to Pay - IRC 6161, for additional information.

  2. The ATE will prepare a customized Form 5402 that includes special IRC 6161 closing procedures for APS. The ATE will identify the following special processing instructions on the Form 5402:

    • Under "APS Route Case" , select "E&G Campus" .

    • Use Closing Code 14 if unagreed or 15 if agreed.

    • Under "Disposal Information" check the box for "APS Instructions for IRC 6161 Cases" .

    • Include the following in the remarks field if the box for "APS Instructions for IRC 6161 Cases" does not exist:

      "Instructions to APS for closing case: Return the case file with Form 3210 to the originator at the following address:
      Internal Revenue Service
      Estate & Gift Tax Unit
      201 West Rivercenter
      Covington, KY 41011–0000. You can close the case in ACDS once the Form 3210 is returned acknowledging receipt."

    • Complete all other selections on Form 5402 according to established Appeals procedures.

  3. The ATE will send out a closing letter to the taxpayer.

    • Suggested language for the closing letter for approved IRC 6161:

      "We completed our review of your request for an extension of time to pay gift taxes pursuant to 26 U.S.C. Section 6161. Based on the information submitted, we are pleased to advise you that your application for extension of time to pay has been approved. The date for payment of the tax has been approved. The date for payment of the tax has been extended to [INSERT EXTENDED DUE DATE FOR PAYMENT]."

      "Your file is being returned to the Service Center for processing. Future extension requests should be sent to the Internal Revenue Service at 201 West Rivercenter Blvd., Stop 824G, Covington, KY 41011."

    • Suggested language for the closing letter for denied IRC 6161:

    "We completed our review of your request for an extension of time to pay gift taxes to [INSERT EXTENDED DUE DATE FOR PAYMENT] pursuant to 26 U.S.C. Section 6161. After reviewing the facts of the case along with any additional information you submitted, we find no basis to change the original determination to deny your request for an extension of time to pay."

8.7.4.2.6.12  (10-29-2013)
Closing Docketed Estate Tax IRC 6161 Cases

  1. A docketed Estate Tax case with a IRC 6161 issue will always have at least another substantive issue because the mere denial of an IRC 6161 request is not subject to review by the Tax Court.

  2. When payment of an estate tax liability has been deferred the amount of interest to be incurred on the estate tax liability may be deducted as an administrative expense under IRC 2053 only as that interest accrues.

  3. On the other hand, in Estate of Bailly v. Comm’r, 81 TC 246 (1983), the Tax Court held that under IRC 7459(c) a decision requires a specific dollar amount. Therefore entry of a decision that would, by its terms, be an indefinite amount changing over time is precluded.

  4. To reconcile the conflict between the previous two paragraphs, the ATE will follow special procedures when closing docketed IRC 6161 cases.

8.7.4.2.6.12.1  (10-29-2013)
Closing Agreed Estate Tax IRC 6161 Cases

  1. No final decision should be entered by the Tax Court until the deferred tax is due or paid, whichever occurs earlier. Therefore, the ATE will not prepare decision documents, but rather forward the case to Counsel along with the audit statement and statement of account. See IRM 8.4.1.17.2, Stipulation/Decision Preparation for additional information. In lieu of decision documents Counsel will prepare a Stipulation of Agreed Adjustments and a Joint Motion to Stay Proceedings. See CCDM Exhibits 35.11.1–170 & 35.11.1–171. The purpose of these documents is to allow the estate to waive the restrictions on assessment and collection contained in IRC 6213(a), while at the same time postponing entry of a final decision until the deferred tax is due or paid. See CCDM 35.8.5.3.

  2. The ATE will prepare a customized Form 2828. Under "Action Required" , the ATE will check the box for "Preparation of Settlement Stipulation" . In the "Brief Remarks" section, the ATE will cite CCDM 35.8.5.3 and note that the case involves a IRC 6161 issue.

  3. The ATE will prepare a customized Form 5402, as follows:

    • Under "APS Route Case" , select "Counsel-Other" .

    • Under "Closing Code" , select "08 - Agreed Docketed" .

    • Under "Disposal Information" , select "File to Counsel for Preparation of Decision Documents" .

    • Under "Remarks" the ATE will cite CCDM 35.8.5.3 and note that the case involves a IRC 6161 issue.

    • Complete all other selections on Form 5402 according to established Appeals procedures.

  4. The ATE will send out a closing letter to the taxpayer.

    • Suggested language for the closing letter for approved IRC 6161:

      "We have approved the proposed settlement you reached with the Appeals Officer and have forwarded your case to Area Counsel to formalize our agreement."

      "The Area Counsel attorney will notify you upon receipt of your case and will work with you to prepare and file a stipulated decision document with the United States Tax Court."

8.7.4.2.6.12.2  (10-29-2013)
Closing Unagreed Estate Tax IRC 6161 Cases

  1. Unagreed Cases - The ATE will follow established procedures for closing an unagreed docketed cases in IRM 8.4.1.24, Docketed Case Not Settled by Appeals - Jurisdiction Released to Counsel

8.7.4.2.6.12.3  (10-29-2013)
Closing Docketed Gift Tax IRC 6161 Cases

  1. A docketed Gift Tax case with a IRC 6161 issue will always have at least another substantive issue because the mere denial of an IRC 6161 request is not subject to review by the Tax Court.

8.7.4.2.6.12.4  (10-29-2013)
Closing Agreed Gift Tax IRC 6161 Cases

  1. The ATE will not prepare decision documents in these cases, but will rather forward the case to Counsel along with the audit statement and statement of account. See IRM 8.4.1.17.2 , Stipulation/Decision Preparation for additional information.

  2. The ATE will prepare a customized Form 2828. Under "Action Required" , the ATE will check the box for "Preparation of Settlement Stipulation" . In the "Brief Remarks" section, the ATE will indicate that the case involves a IRC 6161 issue.

  3. The ATE will prepare a customized Form 5402, as follows:

    • Under "APS Route Case" , select "Counsel-Other" .

    • Under "Closing Code" , select "08 - Agreed Docketed" .

    • Under "Disposal Information" , select "File to Counsel for Preparation of Decision Documents" .

    • Under "Remarks" the ATE will indicate that the case involves a IRC 6161 issue.

    • Complete all other selections on Form 5402 according to established Appeals procedures.

  4. The ATE will send out a closing letter to the taxpayer.

    • Suggested language for the closing letter for approved IRC 6161:

      "We have approved the proposed settlement you reached with the Appeals Officer and have forwarded your case to Area Counsel to formalize our agreement."

      "The Area Counsel attorney will notify you upon receipt of your case and will work with you to prepare and file a stipulated decision document with the United States Tax Court."

8.7.4.2.6.12.5  (10-29-2013)
Closing Unagreed Gift Tax IRC 6161 Cases

  1. Unagreed Cases - The ATE will follow established procedures for closing an unagreed docketed cases in IRM 8.4.1.24, Docketed Case Not Settled by Appeals - Jurisdiction Released to Counsel

8.7.4.2.7  (10-29-2013)
Special Use Valuation Elections Under IRC 2032A and IRC 2057

  1. IRC 2032A and IRC 2057 cases require a Form 6111, Notice of Special use Valuation Election, (IRC 2032A). The Estate Tax Attorney prepares the Form 6111 and includes it in the case file. Because of the Appeal, if the information contained on the Form 6111 needs to change, the Appeals Officer prepares a new Form 6111, which supersedes the form prepared by the Estate Tax Attorney. If an IRC 2032A or IRC 2057 issue arise in Appeals and the Estate Tax Attorney did not prepare a Form 6111, the ATE will prepare a new Form 6111 following the instructions on the form with the required attachments.

  2. The ATE will provide closing procedure instructions to APS on the customized Form 5402. The instructions will be to perform normal closing procedures and then return the case file to the Group Manager of the Estate Tax Attorney that closed the case to Appeals so they can provide Technical Service Advisory with the Form 6111 and attachments for filing the lien. See IRM 8.7.4.2.11, Closing Agreed Estate Tax Cases for additional information.

8.7.4.2.8  (10-29-2013)
Consideration of Appeals Coordinated Issues and Emerging Issues

  1. The feature code for an Emerging Issue is "EM" The feature code for an Appeals Coordinated issue is "AI" . Upon receipt of the case the ATE will verify feature code "EM" or "AI" is used if there is an Emerging Issue or an Appeals Coordinated Issue. The ATE will update the feature code when it is missing.

  2. The ATE will submit Form 13381 to Domestic Technical Specialist through the Team Manager.

  3. IRC 6166 – Installment payment of Estate Taxes is an estate and gift tax emerging issue. At issue is whether Compliance can require taxpayers to agree to the posting of a bond or the filing of a lien as a condition of the 6166 election. Tracking of these cases in CIRS is not required.

  4. Current Appeals Coordinated Estate and Gift Tax Issues can be found by searching the Domestic & International Issue Locator at http://appeals.web.irs.gov/TG_locator/application/query.asp on the Domestic Operations webpage.

8.7.4.2.9  (10-29-2013)
Settlement Computations for Estate Cases

  1. Tax Computation Specialists (TCS) usually prepare the settlement computations for estate tax cases following the general procedures outlined in IRM 8.17.2, General Settlement and Rule 155 Computations.

  2. Form 3614-A, Estate Tax, is used for the computation on most cases. Form 1273, Report of Estate Tax Examination Changes, may be used for settled cases.

  3. The Notebook tool is used for report writing for estate and gift tax cases. Until the Inter-Est program is removed from the computers and as long as the program is updated, it may be used for inter-related calculations that Notebook does not have the capability of performing and also as a check of the accuracy of Notebook. It may also be used for revising cases previously prepared using Inter-Est.

8.7.4.2.9.1  (10-29-2013)
Settlement Computations with IRC 6166

  1. The Inter-Est and Notebook programs can prepare the IRC 6166 election computation. If either of these programs are used, attach a copy of the detailed computation to the settlement computation.

  2. If the Inter-Est or Notebook programs are not used, prepare Form 4349, Computation of Estate Tax Due With Return and Annual Installment, and attach it to the settlement computation. See Exhibit 8.7.4-3. for an example of a completed Form 4349.

8.7.4.2.9.2  (10-29-2013)
Preparing Form 3610 in Estate Tax Cases

  1. Form 3610, Audit Statement, may be used as the face or summary sheet in the settlement computation package when needed. The items to be completed are self explanatory.

  2. The settlement computation may omit Form 3610, provided all needed information is clearly and adequately presented in other parts of the settlement computation.

    Note:

    For more information about Form 3610 requirements for specific types of cases, click on the “Procedures and Resources” link on the TCS web site, and then see the “Audit Statement Notations and Form 3610 Requirements” folder.

  3. If the Date of Death is after 12/31/2004 then Form 3610 is not required. If the Date of Death is before 01/01/2005 then Form 3610 may be required. If Form 3614-A, Estate Tax is used, Form 3610 is not required. If Form 1273, Report of Estate Tax Examination Changes is used, prepare Form 3610 using the following information:

    1. Insert "Estate" as kind of tax.

    2. Change "Tax Year Ended" to "Date of Death."

    3. Show gross deficiency and net deficiency similar to the following:

    Gross deficiency and net deficiency format:
    Gross deficiency determined 125,000.00
    Additional credit allowable, if substantiated (35,000.00)
    Net deficiency 90,000.00
    =========

8.7.4.2.9.3  (10-29-2013)
Listing Estate Tax Adjustments in Computation

  1. If form 3614-A is used for the computation, it is a good practice to list estate tax adjustments in the order of the schedules shown on the estate tax return (Form 706). For example:

    Example:

    Order of Estate Tax Adjustments

    a. Schedule A, real estate ($500,000)
    b. Schedule D, insurance $100,000
    c. Schedule M, marital deduction $200,000

8.7.4.2.9.4  (10-29-2013)
Deduction for Estate Tax (Income in Respect of a Decedent)

  1. See Exhibit 8.7.4-1. This exhibit shows a computation of the deduction for estate tax allowable for income in respect of a decedent. This is an income tax deduction, but involves estate tax computations.

  2. Determination of the amount of the allowable deduction can be quite technical so consult Treas. Reg. 1.691(c)-1 for details.

8.7.4.2.9.5  (10-29-2013)
Restricted Interest in Estate Tax Cases

  1. Special interest provisions apply to estate tax cases when installment payments under IRC 6166 are elected.

  2. In addition restricted interest applies when any of the following situations occur:

    • Recovery of foreign death taxes or a net overpayment due to the foreign death tax credit.

    • Net overpayment due to the state death tax credit.

    • Case includes a Form 1366, Tax Analysis Worksheet for Overassessment of Estate Tax Involving Restricted Interest previously prepared for tax previously assessed (Appeals provides a corrected Form 1366).

  3. See Exhibit 8.7.4-4, for a table showing the restricted interest provisions that apply to estate tax cases.

  4. If any of these are present, the TCS prepares Form 1366 as part of the settlement computation for use by APS in computing the restricted interest.

  5. TCS notates that restricted interest applies on the Form 5403 Instructions for APS spreadsheet when a Form 1366 is present. This alerts APS to look for the Form 1366.

  6. The ATE is responsible for ensuring that the Form 1366 is attached to the Form 5403 Instructions for APS spreadsheet and that both documents are attached to the inside left flap of the administrative file folder when the case is closed.

  7. See IRM 20.2.10.1.5, Interest on Estate Tax Returns, Combination Adjustments, for further discussion of Form 1366.

8.7.4.2.9.6  (10-29-2013)
Estate State Death Tax Deduction (and Credit) for Estates

  1. The state death tax credit was repealed for estates of decedents dying after December 31, 2004 reducing the credit by 25% stages beginning in 2002, eliminating it completely after 2004 and thereafter replacing it with a deduction for the amount of taxes actually paid. Beginning in 2005, the estate may claim a state death tax deduction on line 3(b), page 1 of the estate tax return.

  2. Many states have their own estate tax statutes that impose a tax on transfers at death. Estates are allowed a deduction (credit in 2004 and before) for some of the tax in the calculation of the federal estate tax.

  3. An Estate Tax Attorney's unagreed report only allows the credit or deduction for amounts paid with the original return. If the examination deficiency is supported by the taxpayer in Appeals, there will be an increase in the state tax deduction (credit). The required change to this deduction or credit can reduce the deficiency.

  4. The IRS has a reciprocity agreement with various states for estate tax. See Exhibit 8.7.4-2.

  5. The deduction will be limited to a percentage of the state death taxes. That percentage will be determined by the ratio that the value of the property in the gross estate that is subject to the state death taxes bears to the value of the total gross estate. For this purpose, deductible state death taxes are any estate, inheritance, legacy, or succession taxes paid to a state or to the District of Columbia, with respect to property included in the decedent's gross estate.

8.7.4.2.10  (10-29-2013)
Securing an Agreement on an Estate Case

  1. Form 890-AD, Estate Tax Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and of Acceptance of Overassessment is the special purpose agreement form used for estate tax cases.

  2. Proof of taxes paid is generally required before allowing a credit under IRC 2011 for state death taxes or under IRC 2014 for foreign death taxes.

  3. As previously stated, Appeals may close an estate tax case without credit evidence when the SB/SE Area Director of the office with jurisdiction is satisfied local enforcement procedures for the collection of state death taxes are adequate to insure that the claimed IRC 2011 credit will be paid to the state.

  4. When the credit is required to be established but is not, and a limited time remains on the statute for assessment or scheduling an overassessment (usually six months or less), obtain a Form 890 or Form 890-AD for the gross deficiency.

    1. The taxpayer must file a claim within the statutory period of limitation and furnish credit evidence to the SB/SE Area Director for the amount of any subsequently allowable credit.

    2. Inform the taxpayer that interest is restricted on refunds resulting from credit for state and foreign death taxes subsequently allowed.

  5. Secure a Form 890 or Form 890–AD agreement for the net deficiency following these procedures:

    1. Complete the appropriate blank spaces on the Form 890 or Form 890-AD to permit a subsequent assessment of the amount of unverified credit if proof of credit is not received by the SB/SE Area Director by a specified date.

    2. Insert a date in each of the two provided spaces that allows the taxpayer a reasonable time to pay and furnish the SB/SE Area Director the required credit evidence. The specified date cannot be later than three months before expiration of the statute of limitations.

    3. Insert the difference between the gross and net deficiencies, in the other blank space provided.

    4. Modify the first sentence in the center paragraph of Form 890 to refer to the credit for foreign death taxes.

    5. Add a paragraph similar to the following when using a Form 890–AD:
      "It is understood that evidence of payment of (estate, inheritance, legacy, or succession taxes to any state, the District of Columbia, or any possession of the United States) (foreign death taxes), as required by (Section 20.2011) (Section 20.2014) of the Estate Tax Regulations under the 1986 Code, will be filed with the SBSE Area Director, as soon as possible. If evidence is not filed on or before  ____________ , the undersigned executor(s) or administrator(s) waive(s) the restrictions provided in Section 6213(a) of the Internal Revenue Code of 1986, and consent(s) to the assessment and collection of a further deficiency in Estate Tax of $  ____________ , with interest at the statutory rate to the 30th day after  ____________ , or until the further deficiency is assessed, whichever is earlier."

  6. When closing estate tax cases with tax credits requiring subsequent verification, process them through the office of the SB/SE Area Director. The SB/SE Area Director issues the final closing letter. Statute control on returned cases is maintained by the SB/SE Area office. (See IRM Part 4).

8.7.4.2.11  (10-29-2013)
Closing Agreed Estate Tax Cases

  1. ATE will provide special processing instructions to APS for processing and closing IRC 6166, IRC 6161, IRC 2032A and IRC 2057 cases by using the customized Form 5402. These cases require special action by Compliance to unfreeze an account, identify a IRC 6166 election or to secure a bond or lien.

  2. For IRC 6161 cases see IRM 8.7.4.2.6.11.1, Closing Estate Tax IRC 6161 Cases.

  3. For IRC 6166 cases, the ATE will prepare a customized Form 5402 that includes IRC 6166 closing procedures for APS. These procedures apply to both type "ES" cases that include 6166 issues and type "6166" cases. Where this information does not already exist on the Form 5402 template, write it in on the Form 5402 in the Disposal Section. State the following:

    • APS instructions for IRC 6166 Election

    • Make the assessment/close case

    • Fax a copy of a revised Form 4349, Form 5402/Appeals Case Memo with settlement computations and Form 870 or Form 870-AD to the Campus employee working the case at fax number (866) 699-5497

    • Before faxing first call (859) 669-4083 to get the name of the campus employee working the IRC 6166 case

    • Confirm receipt of the fax. If problems receiving the fax, mail the documents to:
      Internal Revenue Service
      201 West Rivercenter Blvd. Stop 824G
      Covington, KY 41011

    • Make a dummy file of the closing documents to send to refile

    • Transfer control of the case by recharging the return to E&G by putting an ESTAB on IDRS

    • Send the entire case file back to the E&G Group Manager who’s name is on the Form 5402

    • If this is a new IRC 6166 election, not made before the appeal, state "New 6166 election" . (The Campus/Group Manager will need to establish the 9589 ERCS tracking number)

  4. For IRC 2057 and IRC 2032A cases, the ATE will prepare a customized Form 5402 that includes IRC 2057 and IRC 2032A closing procedure instructions for APS. State the following on the Form 5402:

    • APS instructions for IRC 2057 or IRC 2032A case

    • Make assessment/close case

    • Transfer control of the case by recharging the return to E&G putting an ESTAB on IDRS and

    • Make a dummy file of the closing documents to send to refile

    • Send the entire case file back to E&G Group Manger who’s name is on the Form 5402

  5. To properly close estate tax cases, it is important to understand the definitions of net deficiency/overassessment and gross deficiency/overassessment:

    1. Net deficiency/overassessment - the amount determined when the maximum amount of state or foreign death taxes is allowed as a credit in the settlement computation.

    2. Gross deficiency/overassessment - the amount determined when the settlement computation only allows the amount of state or foreign death taxes that have been paid.

  6. When closing a net deficiency estate tax case, show the "net" deficiency in Item 12 of Form 5403 if either of the following two situations exists:

    1. substantiation of payment of state or foreign death taxes is not required; or

    2. substantiation of payment of state or foreign death taxes is required, but the waiver provides for an additional assessment in event substantiation is not timely submitted, and ample time remains for assessment of the unsubstantiated credit.

  7. For estate cases that do not involve state or foreign death tax credits, enter the "gross" deficiency/overassessment in Item 12, Form 5403.

  8. In docketed cases, whether settled or tried, if required substantiation of state or foreign death tax has not been submitted, make the assessment for gross deficiency or gross overpayment and follow the same credit procedure as in agreed nondocketed cases. The petitioner may obtain credit for state inheritance taxes after the decision is entered in the United States Tax Court case if a claim is submitted to the Service within the statutory period.

  9. Enter the "net" deficiency or overassessment in Item 800/801, Form 5403.

  10. Appeals will expedite the closing of a certain "agreed and unpaid deficiency" or overpayment case, if the case meets the "large dollar" criteria described in IRM 4.4.18, AIMS Procedures and Processing Instructions - Large Dollar Cases. For additional procedures see IRM 8.2.1.11.1 and IRM 8.2.1.12.2, Expedite Processing for Certain Large Dollar Cases

    Note:

    This guidance does not apply to a deficiency and/or overpayment case that requires Joint Committee. See IRM 8.7.9.2, Cases Requiring JC Review

    .

8.7.4.3  (11-06-2007)
Introduction to Gift Tax Cases

  1. This subsection covers procedures and information that apply to gift tax cases received in Appeals. The gift tax return is filed on Form 709.

  2. Gift tax returns are required when taxpayers give someone money or property during their life that is subject to federal gift tax. These cases are generally received from Compliance function with AIMS records established.

  3. For information on determining statutes of limitation, see IRM 8.21, Appeals Statute Responsibility.

8.7.4.3.1  (10-01-2012)
APS - Establishing Receipt of a Gift Tax Case

  1. Account and Processing Support (APS) follows the procedures contained in IRM 8.2.1, Pre-90-Day Income Tax Cases, when establishing the case on ACDS, and transmitting the case to the Appeals Team Manager (ATM) for assignment and acknowledging receipt of the case using the Uniform Acknowledgment Letter (UAL).

  2. There are a few unique entries required on ACDS when establishing an estate tax case. They are -

    • Type - Enter G for gift

    • Statute - see IRM 8.21 or Document 6209.

8.7.4.3.2  (10-29-2013)
Gift Tax Case Assigned to an Appeals Technical Employee (ATE)

  1. When the ATE receives a newly assigned case, he/she follows the same procedures detailed in IRM 8.2.1, Pre-90-Day Income Tax Cases. Besides the normal items to verify in the preliminary review such as accuracy of the statute date, mailing of the UAL to the taxpayer, accuracy of the database information on the case summary card, and verifying the case is ready for Appeals, the following items are important preliminary review considerations for the ATE:

    • Identify whether the feature code "AI" or "EM" is shown on ACDS or should be shown and whether to make a referral to the Domestic Technical Specialist using Form 13381 (See referral provisions of IRM 8.2.1),

    • Identify whether there are valuation issues on a case with tax of $10 million or more, or if there is a single work of art with a claimed fair market value of at least $50,000 or more. A referral to Art Appraisal Services is made by submitting a request for assistance in art valuation via the Specialist Referral System at https://srs.web.irs.gov. See IRM 8.7.4.4.1 and IRM 8.18.1 , Valuation Assistance - Valuation Assistance Procedures, for additional information. Information on requesting assistance from Specialty Operations (e.g. Engineer and/or Economist) for other valuation issues can be found in IRM 8.7.3 , Technical and Procedural Guidelines - Domestic and International Operations Programs and IRM 1.4.28.9 , Referrals to Appeals Domestic Operations, International, and TEGE.

  2. For purposes of deciding whether the case is ready for Appeals, if there are valuation issues, check the case file for a government appraisal. If the facts are disputed, check the case file for a rebuttal to the protest.

8.7.4.3.3  (10-29-2013)
Preparing Settlement Computations on Gift Tax Cases

  1. Generally, Tax Computation Specialists (TCSs) prepare settlement computations on gift tax cases using Form 3615-A, Gift Tax. Gift tax rates are found in IRC 2502. Form 3233, Report of Gift Tax Examination, may be used for settled cases.

  2. Tax is computed on the total taxable gifts for the calendar year and for preceding calendar periods (see IRC 2502(b)) at current tax rates. This tax is reduced by tax on taxable gifts for preceding periods to arrive at the tax on current gifts.

8.7.4.3.3.1  (10-29-2013)
Preparing the Form 3610 for Gift Tax Cases

  1. Form 3610, Audit Statement, may be used as the face or summary sheet in the settlement computation package when needed. The items to be completed are self explanatory.

  2. The settlement computation may omit Form 3610, provided all needed information is clearly and adequately presented in other parts of the settlement computation.

    Note:

    For more information about Form 3610 requirements for specific types of cases, click on the “Procedures and Resources” link on the TCS web site, and then see the “Audit Statement Notations and Form 3610 Requirements” folder.

  3. If Form 3610 is prepared, then:

    1. Enter "Gift Tax" as type of tax.

    2. Change "Tax Year Ended" to "Calendar Year."

8.7.4.3.3.2  (10-29-2013)
Reference Numbers for Forms 706 and 709

  1. Reference numbers for Form 706 and Form 709 are provided by the TCS on the Form 5403 Instructions to APS spreadsheet as follows:

    1. 074 — Generation skipping tax for 8610 and subsequent years (MFT's 51 and 52)

    2. 075 — IRC 4981A tax (MFT 52)

    3. 076 — Net estate tax (MFT 52)

    4. 077 — Net gift tax (MFT 51)

  2. The employee who prepares the settlement computations is responsible for completing the Form 5403 instructions to APS spreadsheet at the time the computations are done. If a Counsel case is received by APS and no worksheet was previously completed in Appeals or a revised worksheet is needed, APS may prepare a Request for Audit Work, Form 3608, requesting that TCS complete the Form 5403 Worksheet.

8.7.4.3.4  (10-01-2012)
Agreement and Closing of Gift Tax Cases

  1. The special purpose agreement form for gift tax cases is Form 870-AD or a Form 890. Form 890 is only used when the only issue is the amount of the exemption and there is no tax due.

  2. The detailed instructions for preparing Form 5403 are found in IRM Exhibit 8.20.7-1, Form 5403 - Appeals Closing Record (Instructions.)

  3. Appeals will expedite the closing of a certain "agreed and unpaid deficiency" or overpayment case, if the case meets the "large dollar" criteria described in IRM 4.4.18, AIMS Procedures and Processing Instructions - Large Dollar Cases. For additional procedures see IRM 8.2.1.11.1 and IRM 8.2.1.12.2, Expedite Processing for Certain Large Dollar Cases

    Note:

    This guidance does not apply to a deficiency and/or overpayment case that requires Joint Committee. See IRM 8.7.9.2, Cases Requiring JC Review

    .

8.7.4.4  (10-29-2013)
Valuation Issues on Estate and Gift Tax Cases Over $10 Million

  1. Valuation issues in estate and gift tax cases with tax of $10 million, or more, are required to be referred to Art Appraisal Services, and/or Specialty Operations (e.g. Engineer and/or Economist) for consultation. It is important that these issues be identified and submitted at the earliest possible time during the Appeals process. See IRM 8.18.1, Valuation Assistance Procedures, for information on requesting assistance from Art Appraisal Services. Made corrections to outdated information on valuation issues on cases and information regarding referrals. See IRM 8.7.3 , Technical and Procedural Guidelines - Domestic and International Operations Programs and IRM 1.4.28.9 , Referrals to Appeals Domestic Operations, International, and TEGE for information on requesting assistance from Specialty Operations (e.g. Engineer and/or Economist).

  2. An art appraiser, engineer, or economist recommends values, identifies strengths and weaknesses in both the government's and taxpayer's expert report or position, and provides any other assistance that will bring about final resolution of the valuation issues.

8.7.4.4.1  (10-29-2013)
Art Appraisal Service Assistance

  1. ATEs are encouraged to contact Art Appraisal Services when needed.

  2. These offices maintain a core of financial analysts and art appraisers to assist service personnel on their cases. In addition, these offices can assist Appeals Officers in locating experts in other fields.

  3. The ATE consults with Art Appraisal Services on any case claiming a value for a single work of art in excess of $50,000.

  4. Telephone discussions with this office are encouraged in order to take advantage of expert advice and to facilitate the handling of all referrals for valuation assistance. Assistance is also available in determining fair market value of objects with less than a $50,000 value.

  5. See IRM 8.18.1, Valuation Assistance Procedures, for detailed instructions and procedures to determine information and items necessary to obtain valuation assistance on works of art.

  6. Submit requests for assistance in art valuation matters via the Specialist Referral System, https://srs.web.irs.gov. Upon notification of assignment to an appraiser, send a copy of the referral with the supporting documents and Form 3210, Document Transmittal, via UPS Ground to:


    Internal Revenue Service/Appeals
    AP:SO:ART
    1111 Constitution Ave, NW, Suite 700
    Washington, DC 20224-0002

8.7.4.5  (11-06-2007)
Notices of Deficiency for Estate and Gift Tax Cases

  1. Procedures for preparing a notice of deficiency for estate and gift tax cases are the same as the general procedures for preparing Notices of Deficiency found in IRM 8.17.4, Settlement Computations and Statutory Notices of Deficiency - Notices of Deficiency. The only exceptions are those detailed in this subsection.

  2. Some procedures are unique to estate and gift tax cases. These are described in detail in the subsections below.

8.7.4.5.1  (10-29-2013)
Notices of Deficiency Letter 901(cg)

  1. Letter 901(cg), Statutory Notice Letter, is used for estate and gift tax cases and is available on the Appeals Centralized Database System (ACDS) through the Appeals Generator of Letters and Forms (APGolf).

  2. In ACDS, there is an option to select one of two opening paragraphs for Letter 901(cg). Select the paragraph that reads as follows:

    "We've determined that you have a deficiency in your tax account(s). This means you owe additional tax, other amounts such as penalties or additions to tax, or both, as shown above. This letter is your NOTICE OF DEFICIENCY that the law requires. The enclosed statement shows how we figured your deficiency."


  3. Letter 901(cg) has lines in the heading for the type of tax and form number. Since the opening paragraph does not specify the type of tax, it is important to complete this information.

  4. Change the "Tax Year Ended" default selection on the input screen, using the drop down menu and change to -

    1. "Date of Death" for estate tax cases

    2. "Calendar Year" for gift tax cases.

  5. Use the salutation "Dear Taxpayer" .

  6. The gross deficiency is the amount that is entered on Letter 901(cg).

8.7.4.5.2  (10-29-2013)
Preparing Form 4089 in Estate and Gift Tax Notices

  1. Form 4089, Notice of Deficiency - Waiver, is used as a summary of the deficiency and is the first page of the notice statement in all estate tax and gift tax cases.

  2. Modify the form as follows:

    1. Change "Tax Year Ended" to "Date of Death" for estate tax cases.

    2. Change "Tax Year Ended" to "Calendar Year"

  3. Enter penalties or additions to tax in columnar format under and to the right of the deficiency block. List each penalty separately.

  4. The gross deficiency is the amount that is entered on Form 4089.

    Note:

    Form 4089-A with a Form 890 may be used for the notice instead of Form 4089.

8.7.4.5.3  (10-29-2013)
Preparing Form 3614-A (Estates) or Form 3615-A (Gifts) in Estate and Gift Tax Notices

  1. This section covers instructions for preparing the estate and gift tax computation forms. Use Form 3614-A for estate tax cases and Form 3615-A for gift tax cases when preparing a notice of deficiency.

8.7.4.5.3.1  (10-29-2013)
Preparing Form 3614-A (Estate)

  1. Use Form 3614-A, Estate Tax, for Persons who Died After December 31, 1976 for estate tax computations. The starting point for taxable estate is usually the return as filed or the latest processed amended return.

  2. If applicable, allow a credit for the amount of state death taxes paid on the estate.

    1. Many times credit evidence substantiating the amount paid is attached to the return or is secured prior to the issuance of the notice of deficiency.

    2. Regardless of the amount of credit taken on the return, insert the amount of substantiated credit on Line 10 of Form 3614-A. Allowing only the substantiated credit results in a gross deficiency amount on Line 18 of Form 3614-A.

    3. If the estate is entitled to additional credit for state death tax that has not been substantiated, insert the amount on line 19 of Form 3614-A. Allowing this additional credit results in a net deficiency amount on Line 20 of Form 3614-A.

  3. The gross deficiency from line 18 of Form 3614-A is the amount that should be used on Form 4089, and the Notice of Deficiency letter.

8.7.4.5.3.2  (10-29-2013)
Preparing Form 3615-A (Gift)

  1. Use Form 3615-A (Gift Tax For Donors Making Gifts After December 31, 1976) to compute the actual gift tax.

  2. When a deficiency notice covers two or more calendar periods, start the computation with the earliest calendar period because the earlier year generates taxable gifts and tax that is used in the computation of tax for the later calendar periods.

    1. If the earlier calendar period is adjusted but does not result in a deficiency, the adjustments, explanations, and computation of tax are still included in the notice.

    2. Since there is no deficiency in the earlier calendar period, do not list it on the notice of deficiency letter. However, the earlier period would be included on Form 4089.

  3. See Exhibit 8.7.4-5. This is an example of Form 3615-A and explanations of adjustment for a gift tax notice. In this example, the earlier year (1996) does not result in a deficiency because the increase in tax is offset by an increase in the unused credit.

8.7.4.5.4  (11-06-2007)
Preparing Explanation of Adjustments

  1. Write an explanation for each item changed. The explanations of adjustments must be computer-generated using the Form 886-A or a separate schedule such as Word document. See TCS web page on the Appeals web site for sample paragraphs.

  2. For estate tax cases, use a Form 3228 (Adjustments to Taxable Estate) if it helps clarify the notice of deficiency. Use a Form 3229 (Computation of Credit for Tax on Prior Transfers), pages 1 and 2 (and page 3, if applicable) in notices of deficiency to explain complicated adjustments involving credits for tax on prior transfers.

  3. For gift tax cases, an explanation for the Adjustments to Total Taxable Gifts for Prior Periods amount may be necessary.

    1. It may be necessary to adjust the value of taxable gifts made in a prior period in determining the gift tax liability for a gift made in a subsequent period.

    2. If the prior period in which the gift was made is before August 6, 1997, the value of that gift may be adjusted in determining the gift tax liability for a gift made in a subsequent year unless, with respect to the earlier gift, the statute of limitations on assessment has expired and a gift tax was either paid or assessed.

    3. However, if the earlier gift was made after August 5, 1997, the value of that gift cannot be adjusted if the statute of limitations on assessment has expired with respect to that gift.

    4. The gift tax statute of limitations may not expire if a gift is not adequately disclosed on a gift tax return. See Treas. Reg. 301.6501(c)-1(c) and (c)-1(f).

    5. Include the adjustments made to taxable gifts for the prior period, along with appropriate explanations, as a separate attachment. See Exhibit 8.7.4-5.

8.7.4.6  (11-06-2007)
Notice of Adjustment (Form 1331) for Estate and Gift Tax Cases

  1. This form is a three-part assembly, and depending upon local arrangements, is prepared in part by the Appeals Processing Section (APS) and in part by the Campus on Non-Master File overassessments. The form is not required for an overassessment when a restricted interest worksheet is prepared.

  2. See Form 1331 for the instructions to Form 1331.

8.7.4.7  (10-29-2013)
Miscellaneous Estate and Gift Tax Procedures Covered Elsewhere

  1. There are miscellaneous procedures that cover estate and gift tax cases with special guidelines that are covered in other IRMs. The following table lists the special topics:

    Topic IRM Location
    Statutes and Consents IRM 8.21, Appeals Statute Responsibility
    Valuation Understatement Penalty - IRC 6662(g). IRM 20.1.5.11, IRC 6662(g), Substantial Estate or Gift Tax Valuation Understatement
    Jeopardy Assessment IRM 8.7.1, Technical and Procedural Guidelines - Guidelines for Cases with Special Issues
    Interest on Transferee Liability IRM 8.7.5, Technical and Procedural Guidelines - Transferee and Transferor Liabilities

Exhibit 8.7.4-1 
Computation of Deduction for Estate Tax (Income in Respect of a Decedent)

Computation of Deduction for Estate Tax
Name  
(See Reg. 1.691(c)-1)
Adjusted gross estate per Schedule $829,864.81
Less:  
Income in respect of decedent included in gross estate

520,087.64
Adjusted gross estate revised $309,777.17
Adjusted marital deduction 154,888.59
Balance 154,888.29
Less: 60,000.00
Taxable Estate $ 94,888.58
   
Gross estate tax 19,268.80
State Tax Credit 478.22
Estate tax without including income in respect of decedent 18,790.95
Total estate tax 92,000.53
Estate tax attributable to income in respect of decedent

$ 73,209.95
1978
$ 69,309.06*     x    $73,209.95    or
$520,087.64


$9,756.26
1979
$ 66,963.37*      x    $73,209.95   or
$520,087.64

$9,426.07
* Income reported and received by taxpayers.  
Note: This is a basic computation. In each case it is best to consult regulations cited above and related statutes for method of computing deduction.

Exhibit 8.7.4-2 
States with Reciprocity Agreements

State Contact
Alaska Alaska Department of Revenue (DOR)
Arizona Arizona DOR
California California Franchise Tax Board and The California
State Controller
Connecticut Connecticut DOR
Delaware Delaware DOR
Florida Florida DOR
Georgia Georgia DOR
Illinois Illinois Attorney General
Iowa Iowa Department of Revenue and Finance
Kansas Kansas DOR
Kentucky Kentucky Revenue Cabinet
Maine Maine Revenue Service
Maryland Maryland Comptroller of the Treasury
Massachusetts Massachusetts DOR
New Jersey New Jersey Division of Taxation
Ohio City of Cleveland
Oregon Oregon DOR
Pennsylvania Pennsylvania DOR
South Carolina South Carolina DOR
Texas Texas Workforce Commission
Utah Utah State Tax Commission
Vermont Vermont Department of Taxes
Virginia Virginia Department of Taxation
Wisconsin Wisconsin DOR

Exhibit 8.7.4-3 
Completion of Form 4349, Computation of Estate Tax

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Exhibit 8.7.4-4 
Restricted Interest Provisions for Estate Tax

Code Section Subject Interest Restricted on Underpayments Overpayments
2011(a) Credit for State Death Taxes (Repealed for estates of decedents dying after 12/31/2004).   2011(c)
2014(a) Credit for Foreign Death Taxes   2014(e)
2016 Recovery of Taxes Claimed as Credit 2016  
2055(e) as Amended by P.L. 93-483 Sec. 3 Interest Restricted for 180 Days on a Credit or Refund for Certain Deductions on Estate Tax Returns (for reformations to which section 2055(e)(3) as in effect on 7/7/1984 applies).   2055(e)
7405 Erroneous Refunds   6404(e)(2)

Exhibit 8.7.4-5 
Form 3615-A and Explanations for Notice of Deficiency in Gift Tax

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NAME OF TAXPAYER: SCHEDULE 2
John L. Jones, Donor CALENDAR YEAR: 1996 and 1997
EXPLANATION OF ADJUSTMENTS
 
VALUE OF GIFTS - STOCK  
It is determined that the common shares of ABC Company, Inc. which you transferred by gift to John Doe is $1,175,000.00 rather than $775,000 as shown on your return for calendar year 1997. Therefore, the total amount of taxable gifts is increased $35,800.00 for calendar year 1997.
TOTAL AMOUNT OF TAXABLE GIFTS FOR PRIOR YEARS (PERIODS)
It is determined that due to changes made to the total amount of taxable gifts for calendar year 1996, the total amount of taxable gifts for prior years (periods) is $236,350.00 instead of $200,550.00 for calendar year 1997.
TAX ON TOTAL AMOUNT OF TAXABLE GIFTS FOR PRIOR YEARS (PERIODS)
It is determined that due to the increase in the total amount of taxable gifts in calendar year 1966, the tax computed on the total amount of taxable gifts for prior years (periods) is $66,432.00 instead of zero for the calendar year 1997.

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