July, 2018 Newsletter
Provided by Leimberg Information Services
See other issues.
Estate Planning At The Movies®: CATCH 22…IRS Showing a Disturbing Recent Pattern of Rejecting One-Year Extensions of Time to Pay Estate Tax When a QTIP Trust Is Part of the Estate Plan on the Death of the First Spouse
“In recent weeks, this author has encountered the arbitrary refusal of the IRS to grant one-year extensions to pay federal estate tax on the death of the first spouse when a qualified terminable interest property (QTIP) election might be made on the death of the first spouse. Several practitioners have reported similar encounters to this author as well.
Such extensions should be granted as a matter of course because the estate will not know until the filing date (preferably as extended) whether the QTIP election will be made, and if elected, whether it will be timely amended. The failure of the IRS to grant a one-year extension of time to pay federal estate tax when a six-month automatic extension of time is timely filed is arbitrary and wrong. Until recently, this author has neither experienced nor heard from practitioners that a one-year extension to pay estate tax had been denied by the IRS in comparable cases involving the death of the first spouse.
Now, things appear to have changed. Why? Is it change of personnel in the IRS?... lack of awareness of the necessity to grant the extension?... or simply an arbitrary denial? If this trend becomes the norm, the taxpayer is placed in a “Catch 22”i—yes you have a regulatory right and potential prior transfer tax credit to use but you will be given insufficient time to pay estate tax without penalty if you wish to fully utilize all of the time the regulations allow, or hope that the IRS will grant an additional extension to which the taxpayer likely will not receive a response from the IRS until after the initial six-month extension to pay expires.
This newsletter reviews the importance of obtaining both a six-month extension of time to file the estate tax return and a one-year extension of time to pay estate tax on the death of the first spouse, including the language that has historically secured the one-year extension of time to pay, and the potential damage done by the IRS when a one-year extension to pay estate tax is not granted.”
Keith Schiller has authored a host of LISI newsletters respecting federal estate and gift tax law and the preparation of the Form 706.
Keith Schiller, Esq., shareholder of the Schiller Law Group, a PLC, of Alamo California, has more than 43 years of experience with taxation, and estate and business succession planning. Keith works with clients, teaches and consults on estate planning, tax compliance, business succession and trust administration. Keith has contributed over two dozen articles for LISI. Keith is the author of the award-winning book, Art of the Estate Tax Return — Estate Planning At The Movies® (“706 Art”).ii The book reveals Keith’s best practice pointers, his insights from co-teaching with the IRS for greater than thirteen years, and practical recommendations from over a dozen leading practitioners across the country who contributed to the book. The Second Edition and upcoming 2018 Supplement of 706 Art is published by Bloomberg BNA Books and is available at http://www.bna.com/bnabooks/aetr. Keith is a member of the Advisory Board for Bloomberg BNA’s Estates, Gifts and Trusts Journal and the Consulting Board for the Leimberg Information Services, Inc. (“LISI”) Newsletter. He has taught 11 courses for the CalCPA Education Foundation and received the 2000 and 2010-2011 awards for Outstanding Course Materials. From passion, Keith chaired the Yosemite License Plate Campaign, during which he lobbied passage for the law approving the Yosemite License Plate and directed the state-wide marketing and sales campaign. The Yosemite License Plate has raised in excess of $35 million for the preservation of Yosemite and California conservation.
Also, you can stay current on estate tax law by subscribing to the author’s Update Service. To learn more and to subscribe, visit: http//shop.estateplanningatthemovies.com.
Here is Keith’s commentary:
All NAEPC-affiliated estate planning councils are eligible to receive a discounted subscription rate to the Leimberg LISI service. Please see more information about the offering. You may also contact your local council office / board member to find out whether they are offering the service as a member benefit.