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whether the election may be made, you must figure the adjusted gross estate. (See the Line 3 Worksheet—Adjusted Gross Estate below.) To determine the value of the adjusted gross estate, subtract the deductions (Schedules J, K, and L) from the value of the gross estate. To determine over how many installments the estate tax may be paid, please refer to sections 6166(a), (b)(7), (b)(8), and (b)(10). Time for payment. Under the installment method, the executor may elect to defer payment of the qualified estate tax, but not interest, for up to 5 years from the original payment due date. After the first installment of tax is paid, you must pay the remaining installments annually by the date 1 year after the due date of the preceding installment. There can be no more than 10 installment payments. Interest on the unpaid portion of the tax is not deferred and must be paid annually. Interest must be paid at the same time as and as a part of each installment payment of the tax. Acceleration of payments. If the estate fails to make payments of tax or interest within 6 months of the due date, the IRS may terminate the right to make installment payments and force an acceleration of payment of the tax upon notice and demand. Generally, if any portion of the interest in the closely held business which qualifies for installment payments is distributed, sold, exchanged, or otherwise disposed of, or money and other property attributable to such an interest is withdrawn, and the aggregate of those events equals or exceeds 50% of the value of the interest, then the right to make installment payments will be terminated, and the unpaid portion of the tax will be due upon notice and demand. See section 6166(g)(1)(A). Interest computation. A special interest rate applies to installment payments. For decedents dying in 2021, the interest rate is 2% on the lesser of: • $636,000, or • The amount of the estate tax that is attributable to the closely held business and that is payable in installments. 2% portion. The 2% portion is an amount equal to the amount of the tentative estate tax (on $1 million plus the applicable exclusion amount in effect) minus the applicable credit amount in effect. However, if the amount of estate tax extended under section 6166 is less than the amount figured above, the 2% portion is the lesser amount. Inflation adjustment. The $1 million amount used to figure the 2% portion is indexed for inflation for the estates of decedents who died in a calendar year after 1998. For an estate of a decedent who died in 2021, the dollar amount used to determine the “2% portion” of the estate tax payable in installments under section 6166 is $1,590,000. Computation. Interest on the portion of the tax in excess of the 2% portion is figured at 45% of the annual rate of interest on underpayments. This rate is based on the federal short-term rate and is announced quarterly by the IRS in the Internal Revenue Bulletin. If you elect installment payments and the estate tax due is more than the maximum amount to which the 2% interest rate applies, each installment payment is deemed to comprise both tax subject to the 2% interest rate and tax subject to 45% of the regular underpayment rate. The amount of each installment that is subject to the 2% rate is the same as the percentage of total tax payable in installments that is subject to the 2% rate. The interest paid on installment payments is not deductible as an administrative expense of the estate. Making the election. If you check this line to make a final election, you must attach the notice of election described in Regulations section 20.6166-1(b). If you check this line to make a protective election, you must attach a notice of protective election as described in Regulations section 20.6166-1(d). Regulations section 20.6166-1(b) requires that the notice of election is made by attaching to a timely filed estate tax return the following information. • The decedent's name and taxpayer identification number (TIN) as they appear on the estate tax return. • The amount of tax that is to be paid in installments. • The date selected for payment of the first installment. • The number of annual installments, including first installment, in which the tax is to be paid. • The properties shown on the estate tax return that are the closely held business interest (identified by schedule and item number). • The facts that formed the basis for the executor's conclusion that the estate qualifies for payment of the estate tax in installments. You may also elect to pay certain GST taxes in installments. See section 6166(i). Line 4. Reversionary or Remainder Interests For details of this election, see section 6163 and the related regulations. Part 4—General Information Authorization Completing the authorization will authorize one attorney, accountant, or enrolled agent to represent the estate and receive confidential tax information, but will not authorize the representative to enter into closing agreements for the estate. If you would like to authorize your representative to enter into agreements or perform other designated acts on behalf of the estate, you must file Form 2848 with Form 706. CAUTION ! Line 3 Worksheet—Adjusted Gross Estate 1. Enter the value of the decedent's interest in closely held business(es) included in the gross estate (less value of passive assets, as mentioned in section 6166(b)(9)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Enter the value of the gross estate (Form 706, Part 5, line 13) . . . . .
3. Add lines 18, 19, and 20 from Form 706, Part 5 . . . . . . . . . . . . .
4. Subtract line 3 from line 2 to figure the adjusted gross estate . . . . . .
5. Divide line 1 by line 4 to figure the value the business interest bears to the value of the adjusted gross estate. For purposes of this calculation, carry the decimal to the sixth place; the IRS will make this adjustment for purposes of determining the correct amount. If this amount is less than 0.350000, the estate does not qualify to make the election under section 6166 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Multiply line 5 by the amount on line 16 of Form 706, Part 2. This is the maximum amount of estate tax that may be paid in installments under section 6166. (Certain GST taxes may be deferred as well; see section 6166(i) for more information.) . . . . . . . . . . . . . . . . . . . . . . . .
Instructions for Form 706 (Rev. 09-2021) -15-