Interest on deferral of estate taxes.Estate taxes can hit a closely held A phrase used to describe the ownership, management, and operation of a corporation by a small group of people. In a closely held corporation, the same people often act as shareholders, directors, and officers, and no outside investors exist. business very heavily. Sec. 6166 allows for the deferral/installment payment of estate taxes to the extent attributable to the decedent's interest in a closely held business. Prior to the Taxpayer Relief Act of 1997 (TRA TRA Training TRA Transfer TRA Transition TRA Tennessee Regulatory Authority TRA Telecommunications Regulatory Authority (Oman) TRA Tax Reform Act (1976, 1984, or 1986) TRA Teachers Retirement Association '97), the interest on the deferral deferral - Waiting for quiet on the Ethernet. was itself deductible in arriving at the ultimate estate tax. Rev. Rul. 80-250 outlined the IRS's position; estimated interest could not be deducted at the time the return was filed and supplementary returns had to be prepared (see Rev. Proc. 81-27). One of the most mindless exercises in the estate tax area has been the recomputation of estate tax each time an interest payment is made. The TRA '97 changed all this. Under Sec. 6601 (j)(1)(B), interest on the deferral was made nondeductible non·de·duct·i·ble adj. Not deductible, especially for income-tax purposes. Adj. 1. nondeductible - not allowable as a deduction deductible - acceptable as a deduction (especially as a tax deduction) and was generally set at 45% of what would have been the deductible rate (to avoid any negative effect to taxpayers). Sort of. New estates have no choice; they must accept the new scheme. This "opportunity" is also offered to existing estates until Dec. 31, 1998. An executor executor n. the person appointed to administer the estate of a person who has died leaving a will which nominates that person. Unless there is a valid objection, the judge will appoint the person named in the will to be executor. and his advisers should think carefully before taking up the offer. Previously, when interest was paid, it was allowed as an estate tax deduction Tax deduction An expense that a taxpayer is allowed to deduct from taxable income. tax deduction See deduction. reaching back to the time the estate tax return was filed, even though the interest was paid years later. The interest reduced the tax and all of the subsequent interest that would otherwise have been paid. Existing estates may elect to pay the reduced interest rate in exchange for giving up the opportunity to "back date" later interest payments. Those estates making the election would also surrender the benefits of future reductions in estate tax that would have resulted from the amended returns Amended Return A return filed in order to make corrections to a tax return from a previous year. It can be used to correct errors and claim a more advantageous filing. Notes: An amended return is filed using Form 1040X. . The decision itself will require some calculations. An essential part of the decision process is not to limit the review to the gross tax but to compare present values as well, since under the old method, the greatest savings were in the later years. There may be extra paperwork involved, but it is important to ascertain what is being given up before accepting the "easy" way out. |
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