Tax Type
Estate Tax
Description
Deferral of payment of federal estate taxes; Virginia extension
Topic
Payment and Refund
Date Issued
08-20-1992
August 20, 1992
Re: §58.1-1821 Application: Estate Tax
Dear****************
This will reply to your letters of July 11, 1991 and July 18, 1991, in which you seek correction of an estate tax assessment for ****************("the Taxpayer"),
FACTS
Pursuant to §6166 of the Internal Revenue Code (IRC), the administrator of the estate elected to defer payment of federal estate taxes. The administrator sought an extension for payment of Virginia estate taxes as well, pursuant to Va. Code §58.1-905. A notice of the §6166 election was filed with the Virginia estate tax return and payment was made for the amount of estate tax the administrator believed was due at the time. The deferral of payment was disallowed by the department, and an assessment was issued for the balance of the tax due, along with penalty and interest. You contend that the extension request was properly filed and request that the payment extension be granted and the assessment abated.
DETERMINATION
Va. Code §58.1-905 provides that if the personal representative of an estate has obtained an extension of time for filing the federal estate tax return or paying the federal estate tax or any portion thereof, then the filing of the Virginia estate tax return or the payment of Virginia estate tax shall be similarly extended until the end of the time period granted in the federal extension. A copy of the approved federal extension must be provided by the representative to the Department of Taxation.
Under IRC §6166, an estate may elect to defer taxes up to five years and pay estate taxes on an installment program up to 10 years. The amount of tax deferred and payable in installments is limited to the amount of tax which bears the same ratio to the total estate tax as (I) the closely held business amount bears to (ii) the amount of the adjusted gross estate. An election to pay taxes in installments under IRC §6166 does not require the filing of a federal extension request.
In this case, the payment extension for Virginia estate taxes was disallowed because there was no federal extension filed with the Virginia estate tax return, as required under Va. Code §58.1-905. However, when Va. Code §58.1-905 was amended by the 1990 Session of the General Assembly, the intention was to conform the Virginia estate tax extension to the same time and terms of the federal estate tax extension. The law change, effective for initial Virginia estate tax returns due on or after July 1, 1990, means that any Virginia extension for the filing of an estate tax return or payment of estate taxes will parallel exactly the federal extension, including the election to pay the estate tax in installments.
The amount of Virginia estate tax subject to extension or deferral is computed by taking the ratio of (I) the value of the decedent's interest in property eligible for extension or deferral over (ii) the amount of the federal adjusted gross estate (the same ratio computed for the federal return), and applying it to the amount of Virginia estate tax due. The extended or deferred tax is due at the same time the federal extended or deferred tax is due. The remaining tax is due with the filing of the Virginia estate tax return.
Because the Taxpayer's Virginia payment extension was computed in accordance with the method outlined above, and a copy of the federal election under IRC §6166 was filed with the Virginia estate tax return, the payment of Virginia estate tax will be extended in a manner consistent with the federal election. Accordingly, the assessment will be abated, and the department will bill the estate for each installment of Virginia estate tax as it becomes due.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner