Service changes policy on estate tax installment payments.

• Author: Nevius, Alistair M.
• Position: FROM THE IRS

In Notice 2007-90, the IRS announced a policy change, based on the Tax Court decision in Estate of Roski, 128 TC 113 (2007). The Service now will determine on a case-by-case basis whether security will be required when a qualifying estate elects under Sec. 6166 to pay all or a part of the estate tax in installments.

Sec. 6166 allows certain estates to elect to pay estate tax that is attributable to the decedent's interest in a closely held business in up to 10 equal, annual installments, starting no later than the fifth anniversary of the due date of the estate tax liability.

The government's interest in the deferred estate tax is secured by the general federal estate tax lien under Sec. 6324(a) for only the first nine years and three months of the installment payment period. Although this 10-year lien runs from the date of death, the installment payment period generally runs from the normal payment due date, nine months after the date of death, thus reducing the time the general lien protects the government to nine years and three months. Since installment payments generally do not have to start until five years and nine months after the date of death, the payment period can extend well past the time when the lien secures the government's interest. According to the Service, in most cases, approximately half of the total deferred estate tax still remains to be paid during that final, unsecured...