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Example 9
This example is not like the others. We will not tell you the steps that it took to get to this computation, but just show the final results. It is intended to show a more realistic fact situation. The computation itself is not realistic, because we have assumed an IRS position that is harsher than normal.
Under these facts, an estate probably would not have elected the 2% rate, but remember, this is just a sample computation. The IRS don't normally take these hard positions, but they might. It is up to the estate to examine the worst case scenario.
Estate of: Sample Run, DD: 1 1 1993
File Name: E:\Test\est3\Sample.ET3
Memorandum: Interest computation to 10/1/98
Inter-Est Version 3.00, Release 27, (Standard Output)
Date and time of run: Wednesday, April 22, 1998, 08:12 AM
LIMIT TO SDTC ELECTED
Fixed Dollar Limit to SDTC 0.00
Use State Interest Computation Option Selected
State: New York
Estimated Last Payment 224,357.60
Limit Used for State 1,197,244.97
Total Limit to State Death Tax Credit 1,197,244.97
Maximum Computed State Death Tax Credit 3,310,022.42
MAIN PRINTOUT SECTION
Gross Estate 30,000,000.00
Sch. JK&L (before interrelated) 500,000.00
Int, Federal 4,118,041.17
Int, New York 1,361,818.70
Debts & Expenses 5,979,859.87
Marital Deduction 0.00
Charitable Deduction 0.00
Total Deductions 5,979,859.87
Taxable Estate 24,020,140.13
Adjusted Taxable Gifts 0.00
Total Amount Drawing Tax 24,020,140.13
Tentative Tax 13,403,877.07
Aggregate Gift Tax Paid 0.00
Tax before Unified Credit 13,403,877.07
Unified Credit from Table 192,800.00
Adjustment to Unified Credit 0.00
Net Unified Credit 192,800.00
Tax before SDTC 13,211,077.07
State Death Tax Credit 1,197,244.97
Net Tax after State Death Tax Credit 12,013,832.10
Gift Tax Credit 0.00
Foreign Death Tax Credit (Statutory) 0.00
Prior Transfer Credit 0.00
Foreign Death Tax Credit (Treaty) 0.00
Total Credits 0.00
Estate Tax 12,013,832.10
Generation Skipping Transfer Tax 0.00
Increased Estate Tax 0.00
Total Federal Tax 12,013,832.10
FEDERAL INTEREST OPTION SELECTED
Interest Table File: E:\Test\est3\Federal.IT4
Interest Table Description: Federal (RProc 95-17)(3/98)
Special Interest Rate Used (old): 4.0000000 %
Special Interest Rate Used (new): 2.0000000 %
INTEREST FACTORS USED
Regular (100%) Special (old) Refund
Pd # 1 c 7.5266030 % 4.0808493 % 6.4568925 %
Pd # 2 c 9.6892747 % 4.0808493 % 8.5981085 %
Pd # 3 c 9.1512628 % 4.0836856 % 8.0646974 %
Pd # 4 c 9.4095083 % 4.0780137 % 8.3218553 %
Pd # 5 c 8.8661525 % 4.0808493 % 7.7831523 %
Regular (45%) Special (new)
Pd # 1 c 3.3196544 % 2.0200781 %
Pd # 2 c 4.2497774 % 2.0200781 %
Pd # 3 c 4.0193349 % 2.0214680 %
Pd # 4 c 4.1300245 % 2.0186882 %
Pd # 5 c 3.8969646 % 2.0200781 %
Sec. 6166 Installment Option Elected
Closely Held Business Amount 25,000,000.00
Fed. Gross Estate 30,000,000.00
JK&L before Int. <500,000.00>
Adjusted Gross Estate (6166) 29,500,000.00
Qualifying Percentage 84.7457627 %
Number of Regular Tax Payments 10
Years Installment Tax Payments Delayed 5
Total Qualified Tax 10,181,213.64
Tax Qualified for Special Rate 153,000.00
Other Qualified Tax 10,028,213.64
Tax Not Qualified 1,832,618.45
Qualified Tax which was Extended 9,538,832.09
PART 1
Date Tax Pmt. Int. Pmt.
Due Date 10 1 1993 2,475,000.00 0.00 Da P
Pd # 1 10 1 1994 0.00 1,141,683.45 Ba
Pd # 2 10 1 1995 0.00 1,346,567.79 Ba
Pd # 3 10 1 1996 0.00 1,167,660.04 Ba
Pd # 4 10 1 1997 0.00 1,095,022.28 Ba to2
Pd # 5 10 1 1998 -------------- -------------- Ca
Sec. 6166 Flags
First Flag, Principal Allocation:
A = Deficiency or Interim Payment with Normal Allocation
B = Installment Date with Only Interest Payment Due
C = Installment Date with Tax Payment and Interest Payment Due
D = Payment on or Before Date Return was Filed
E = All tax moved to Non-Qualified (Election Terminated)
Second Flag, Interest Allocation:
a = Balance moved to Non-Qualified (Installment Date or Termination)
b = Allocate to All Interest Equally (Deficiency Pmt, Extra Pmt)
c = Allocate to Non-Qualified then Qualified (Special Direction)
d = Allocate to Non-Qua. then, Reg. Qua. then 4% Qua. (Special Dir.)
e = Allocate to Amounts drawing Regular Rate First (Special Direction)
SA = Special Allocation: Non-Qua. Tax, then Interest, then Qual. Tax
All = All qualified tax draws interest at the same rate as the other qualified tax.
to2 = Quit deducting interest - start using 2% rate
P = Period entry for Interest on Penalty Computation
PART 2
Starting Tax Interest Applied
Balance Paid Balance To Balance
Due Date 12,013,832.09 2,475,000.00 0.00 2,475,000.00
Pd # 1 9,538,832.09 0.00 <243,370.29> 243,370.29
Pd # 2 9,295,461.80 0.00 <220,620.94> 220,620.94
Pd # 3 9,074,840.86 0.00 <128,248.89> 128,248.89
Pd # 4 8,946,591.97 0.00 <40,652.27> 40,652.27
Pd # 5 8,905,939.70 0.00 435,457.54 0.00
Estimated Next Installment Tax Payment 320,990.82
PART 3
Interest Total Amount Interest
Drawing Int. Drawing Int. Factor Interest
Period # 1
Qua. (4%) 0.00 153,000.00 4.0808493 % 6,243.70
Oth. Qua 0.00 11,852,218.92 7.5266030 % 892,069.46
Non-Qua. 0.00 0.00 7.5266030 % 0.00
Period # 2
Qua. (4%) 0.00 149,096.41 4.0808493 % 6,084.40
Oth. Qua 0.00 11,557,753.11 9.6892747 % 1,119,862.45
Non-Qua. 0.00 0.00 9.6892747 % 0.00
Period # 3
Qua. (4%) 0.00 145,557.72 4.0836856 % 5,944.12
Oth. Qua 0.00 11,293,163.06 9.1512628 % 1,033,467.03
Non-Qua. 0.00 <0.00> 8.0646974 % 0.00
Period # 4
Qua. (4%) 0.00 143,500.65 4.0780137 % 5,851.98
Oth. Qua 0.00 11,143,175.60 9.4095083 % 1,048,518.03
Non-Qua. 0.00 0.00 9.4095083 % 0.00
Period # 5
Qua. (4%) 0.00 142,848.60 2.0200781 % 2,885.65
Oth. Qua 0.00 11,100,226.16 3.8969646 % 432,571.88
Non-Qua. 0.00 0.00 8.8661525 % 0.00
Total Accrued Interest 4,553,498.71
Interest Accrued before election of low interest 4,118,041.17
NonQualified Interest while Sec. 6166 (2%) active 0.00
Total Interest Deduction 4,118,041.17
FEDERAL RESTRICTED INTEREST SCHEDULE
Total Amounts Drawing Restricted Interest
Pd # 1 2,466,386.83
Pd # 2 2,411,387.72
Pd # 3 2,363,879.92
Pd # 4 2,340,084.27
Pd # 5 2,337,135.05
Amounts Drawing Restricted Interest from New York
Total Credit upon which this computation is based 3,310,022.42
Pd # 1 2,466,386.83
Pd # 2 2,411,387.72
Pd # 3 2,363,879.92
Pd # 4 2,340,084.27
Pd # 5 2,337,135.05
STATE TAX COMPUTATION SECTION - New York
State Tax Computation based upon New York Law
Federal Gross Estate 30,000,000.00
Limited Power of Appointment 0.00
Computed State Gross 30,000,000.00
Federal Debts & Expenses 5,979,859.87
State Debts & Expenses 5,979,859.90
Federal Marital Deduction 0.00
Adj. to Marital Deduction 0.00
Limited Power of App. in M.D. 0.00
State Marital Deduction 0.00
Federal Charitable Deduction 0.00
Adj. to Charitable Deduction 0.00
Limited Power of App. in C.D. 0.00
State Charitable Deduction 0.00
State Total Deductions 5,979,859.90
Adjusted Taxable Estate 24,020,140.10
Adjusted Taxable Gifts 0.00
Total 24,020,140.10
Tentative Tax 4,380,229.42
Aggregate Gift Tax Paid 0.00
Tax before Credits 4,380,229.42
Unified Credit 500.00
Total Credits 500.00
Basic State Net Estate Tax 4,379,729.42
State Pick-Up Tax 0.00
Total Tax for State 4,379,729.42
STATE INTEREST OPTION SELECTED
Interest Table File: E:\Test\est3\NewYork.IT4
Interest Table Description: New York (10-96)
Special Interest Rate Used (old): 4.0000000 %
Special Interest Rate Used (new): 2.0000000 %
INTEREST FACTORS USED
Regular (100%) Special (old) Refund
Pd # 1 c 6.4568925 % 4.0808493 % 6.4568925 %
Pd # 2 c 8.5981085 % 4.0808493 % 8.5981085 %
Pd # 3 c 8.0646974 % 4.0836856 % 8.0646974 %
Pd # 4 c 8.3218553 % 4.0780137 % 8.3218553 %
Pd # 5 c 8.3277571 % 4.0808493 % 8.3277571 %
Sec. 6166 Installment Option Elected
Closely Held Business Amount 25,000,000.00
Fed. Gross Estate 30,000,000.00
JK&L before Int. <500,000.00>
Adjusted Gross Estate (6166) 29,500,000.00
Qualifying Percentage 84.7457627 %
Number of Regular Tax Payments 10
Years Installment Tax Payments Delayed 5
Total Qualified Tax 3,711,635.10
Tax Qualified for Special Rate 54,000.00
Other Qualified Tax 3,657,635.10
Tax Not Qualified 668,094.32
Qualified Tax which was Extended 3,536,093.83
PART 1
Date Tax Pmt. Int. Pmt.
Due Date 10 1 1993 843,635.59 0.00 Da P
Pd # 1 10 1 1994 0.00 282,037.82 Ba
Pd # 2 10 1 1995 0.00 344,414.73 Ba
Pd # 3 10 1 1996 0.00 298,616.61 Ba
Pd # 4 10 1 1997 0.00 284,497.30 Ba
Pd # 5 10 1 1998 -------------- -------------- Ca
Sec. 6166 Flags
First Flag, Principal Allocation:
A = Deficiency or Interim Payment with Normal Allocation
B = Installment Date with Only Interest Payment Due
C = Installment Date with Tax Payment and Interest Payment Due
D = Payment on or Before Date Return was Filed
E = All tax moved to Non-Qualified (Election Terminated)
Second Flag, Interest Allocation:
a = Balance moved to Non-Qualified (Installment Date or Termination)
b = Allocate to All Interest Equally (Deficiency Pmt, Extra Pmt)
c = Allocate to Non-Qualified then Qualified (Special Direction)
d = Allocate to Non-Qua. then, Reg. Qua. then 4% Qua. (Special Dir.)
e = Allocate to Amounts drawing Regular Rate First (Special Direction)
SA = Special Allocation: Non-Qua. Tax, then Interest, then Qual. Tax
All = All qualified tax draws interest at the same rate as the other qualified tax.
to2 = Quit deducting interest - start using 2% rate
P = Period entry for Interest on Penalty Computation
PART 2
Starting Tax Interest Applied
Balance Paid Balance To Balance
Due Date 4,379,729.42 843,635.59 0.00 843,635.59
Pd # 1 3,536,093.83 0.00 <54,999.11> 54,999.11
Pd # 2 3,481,094.72 0.00 <47,507.81> 47,507.81
Pd # 3 3,433,586.92 0.00 <23,795.64> 23,795.64
Pd # 4 3,409,791.27 0.00 <2,949.22> 2,949.22
Pd # 5 3,406,842.05 0.00 281,504.03 0.00
Estimated Next Installment Tax Payment 224,357.60
PART 3
Interest Total Amount Interest
Drawing Int. Drawing Int. Factor Interest
Period # 1
Qua. (4%) 0.00 54,000.00 4.0808493 % 2,203.66
Oth. Qua 0.00 3,482,093.83 6.4568925 % 224,835.06
Non-Qua. 0.00 0.00 6.4568925 % 0.00
Period # 2
Qua. (4%) 0.00 53,160.10 4.0808493 % 2,169.38
Oth. Qua 0.00 3,427,934.62 8.5981085 % 294,737.54
Non-Qua. 0.00 0.00 8.5981085 % 0.00
Period # 3
Qua. (4%) 0.00 52,434.61 4.0836856 % 2,141.26
Oth. Qua 0.00 3,381,152.31 8.0646974 % 272,679.70
Non-Qua. 0.00 0.00 8.0646974 % 0.00
Period # 4
Qua. (4%) 0.00 52,071.22 4.0780137 % 2,123.47
Oth. Qua 0.00 3,357,720.05 8.3218553 % 279,424.60
Non-Qua. 0.00 0.00 8.3218553 % 0.00
Period # 5
Qua. (4%) 0.00 52,026.18 4.0808493 % 2,123.11
Oth. Qua 0.00 3,354,815.86 8.3277571 % 279,380.92
Non-Qua. 0.00 0.00 8.3277571 % 0.00
Total Accrued Interest 1,361,818.70
Total Interest Deduction 1,361,818.70
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