5.5.7. Collecting Estate Tax

(1) Some estates do not pay their estate tax liability or file their estate tax return. This IRM provides guidance on collection issues that are unique to estate tax including locating assets, analysis of assets, and collection against estate assets.

(1) The authority to collect a tax assessment is addressed in IRC 6502, Collection after Assessment. Collection principles are described in IRM 1.2.1.6, Policy Statements for the Collecting Process. This explains why enforcement is a necessary component to move the taxpayer towards compliance with the tax laws and to promote a system of voluntary compliance. Delegation orders for various collection activity are in IRM 1.2.2, Servicewide Delegations of Authority.

(2) IRM 1.2.65.3, SB/SE Functional Delegation Orders - Collection, provides delegation orders that are specific to the Small Business/Self Employed Collection organization.

(3) Internal Revenue Code and Treasury Regulations related to this section include the following:

(1) These procedures apply to Internal Revenue Service (IRS) Field Collection employees who are responsible for investigating and collecting liabilities arising from Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return Estate of nonresident not a citizen of the United States. These procedures also apply to Civil Enforcement Advice and Support Operations (CEASO) employees that review certain revenue officer actions.

(2) Director, Field Collection, is the executive responsible for all Field Collection programs.

(3) Director, Collection Policy, is the executive responsible for the policies and procedures followed by Field Collection employees.

(4) Field Collection Area Directors, Territory Managers and Group Managers are responsible for ensuring Field Collection employees comply with these procedures.

(5) Field Collection revenue officers are responsible for following the procedures in this IRM.

(6) Field Collection CEASO employees and Counsel provide advice and may review some of the Field Collection revenue officer collection activity described in this IRM.

(1) IRM 1.4.50, Resource Guide for Managers, Collection Group Manager, Territory Manager and Area Director Operational Aid, addresses responsibilities of managers in Field Collection case work.

(2) IRM 1.4.53, Resource Guide for Managers, Advisory and Property Appraisal and Liquidation Specialist Group Manager Operational Aid, addresses responsibilities for Civil Enforcement Advice and Support Operations (CEASO) group managers.

(3) Operational and program reviews are conducted to ensure that program delivery and case actions are in accordance with administrative and compliance requirements. National quality and consistency reviews are conducted to ensure program consistency and effectiveness in case processing. See IRM 5.13.1, Embedded Quality Collection Field Organizations Administrative Guidelines.

(1) The Integrated Collection System (ICS) is used to control estate tax accounts and to document case work.

(2) The ENTITY Case Management System can generate reports to assist in managing assigned inventory.

(1) Throughout this IRM, references to IRC 6321 assessment lien should be interpreted as the statutory federal tax lien that arises under IRC 6321, Lien for taxes.

(2) The following table includes common acronyms used in estate tax cases:

(1) Related resources include the following:

(1) Estate and Gift (E&G) Examination groups are located throughout the country. They have the following responsibilities related to estate tax returns:

• Examining estate tax returns.

• Reviewing some amended returns, supplemental returns, and claims for refund for adjustments.

• Making determinations on allowance of IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business elections and IRC 2032A special use valuation elections and referring those cases to Advisory Estate Tax Lien Group to secure collateral. See IRM 5.5.6, Collection on Accounts with Special Estate Tax Elections, and IRM 5.5.8, Advisory Responsibilities for Processing Estate Tax Liens, for more information on these special elections.

• Granting IRC 6163 remainder/reversionary interest elections. See IRM 5.5.8.18, IRC 6163 Remainder/Reversionary Interest Cases, and IRM 4.25.11.11, IRC 6163 Election Examination, for additional information.

• Granting IRC 2056A qualified domestic trust elections. See IRM 5.5.8.21, Qualified Domestic Trusts, and IRM 4.25.4.6.2, Qualified Domestic Trust, for additional information.

(2) If Integrated Data Retrieval System (IDRS) shows an unreversed Transaction Code (TC) 420, the case may be assigned to E&G Examination. To determine the status of an examination, review IDRS command code (CC) AMDIS for the status code. The status code is a two-digit code on the left side of AMDIS underneath the section “CURRENT-STATUS-CD/DATE". Go to Document 6209 Code Retriever. At the drop-down menu, go to Exam Status Code and input the two-digit status code obtained from CC AMDIS. Also see IRM 5.5.7.3, Estate Tax Assessments, for commonly seen AMDIS status codes on estate tax cases.

(3) To locate an E&G Examination employee, check IDRS command code (CC) AMDIS for the group assignment number. Then check Knowledge Management Estate & Gift Examination Contacts for the contact information of the E&G Examination group assigned to the case. If E&G Examination is reviewing the estate tax return, coordinate with the examiner on the status of the examination, obtain copies of the estate tax return and schedules, and determine the potential impact of the examination on the collection account.

(1) Campus Estate and Gift (E&G) is located at the Cincinnati Campus. They have the following responsibilities related to estate tax:

• Approve or deny requests for extensions of time to file estate tax returns and some IRC 6161 extensions of time for paying tax.

• Send notices and monitor accounts with approved and some denied requests for IRC 6161 extensions of time for paying tax.

• Send notices and monitor accounts of estates with IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business elections.

• Terminate IRC 6166 elections and send final demand notices on terminated elections.

• Refer certain IRC 6166 election cases and IRC 2032A special use valuation election cases to Advisory Estate Tax Lien Group to secure collateral.

• Review some adjustments on supplemental or amended estate tax returns and claims for refund.

• Review some abatement of penalty requests that are not assigned to E&G Examination or Collection.

• Issue transfer certificates on international estates.

(2) Campus E&G can provide a copy of an estate’s request for an IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business election while the election is in effect, and they can provide the E&G determination to accept or reject an IRC 6166 election. Campus E&G can provide copies of billings for annual IRC 6166 installment payments, late notices, and IRC 6166 acceleration of tax notices. If an IRC 6166 election goes into default, Campus E&G’s documents related to the election will be with the Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, case file. See IRM 5.5.7.8, Ordering Estate Tax Returns, for information on how to obtain these documents.

(3) Campus E&G ensures that accounts with IRC 6166 elections are put into status 14 to prevent notices from being generated systemically. They also use a specific software to perform interrelated interest calculations. Since IRC 6166 cases include restricted interest, a payoff cannot be computed on Integrated Data Retrieval System (IDRS) using command code (CC) INTST. Campus E&G can provide the amount of tax that was deferred under IRC 6166 and the amount of tax that was not deferred, and they will provide payoffs on accounts with IRC 6166 elections. They can also answer questions regarding penalty or interest assessments. To contact the Campus E&G unit that handles IRC 6166 elections, see IRM 4.25.2.9.6.3, Payoff Requests, for their e-mail information.

(4) Campus E&G monitors international estate tax accounts to provide transfer certificates once the tax is paid in full, and the IRS has completed the review of the estate tax return. Transfer certificates allow the transfers of property of non-resident decedents without fiduciary liability. See IRM 5.5.7.20, International Estate Tax Accounts, and IRM 5.5.7.20.4, Transfer Certificates. For Campus E&G assistance on international estate tax returns, contact them by e-mail at *SBSE EEF CIN E&G. Taxpayers can use fax number (855) 201-8011.

(5) For other estate tax inquiries, Campus E&G can be contacted at telephone number (866) 699-4083.

(1) The Advisory Estate Tax Lien group is a centralized Advisory group that is responsible for the following:

• Making determinations to approve or deny some IRC 6161 extensions of time for paying tax requests.

• Working estate tax lien discharge and subordination requests.

• Filing and releasing liens on estates with IRC 2032A special use valuation elections.

• Determining if collateral should be required from estates with IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business elections.

• Filing and releasing liens and securing bonds on estates with IRC 6166 elections.

• Monitoring and releasing collateral on IRC 2056A qualified domestic trust cases and IRC 6163 remainder/reversionary interest cases.

(2) Advisory can provide copies of recorded estate tax liens, extensions of time to pay estate tax approvals and denials, and copies of discharge and subordination documents from their case files. Integrated Collection System (ICS) histories can also be reviewed for prior actions of the Advisory Estate Tax Lien Group. Their contact information is on Knowledge Management Advisory Estate Tax Lien Group.

(1) IRS Independent Office of Appeals has a centralized group to handle estate tax issues. They make determinations on the following cases:

• Appeals related to the examination of estate tax returns

• Denied IRC 6161 extensions of time for paying tax

• Denied IRC 2032A special use valuation elections

• Requirements for an estate to provide collateral on IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business elections

• Terminations and denials of IRC 6166 elections

• Denied estate tax lien discharges and subordinations

(2) To determine the status of a case assigned to IRS Independent Office of Appeals, review the Appeals Centralized Database System (ACDS). Each Field Collection group should have a point of contact to access this system.

(3) If the case is not yet assigned to an IRS Independent Office of Appeals employee, send an e-mail to *AP Inquiries for assistance.

(4) If a case has a closed examination issue resolved by IRS Independent Office of Appeals, the closed documents should be with the original estate tax return. See IRM 5.5.7.8, Ordering Estate Tax Returns, to obtain information on requesting an estate tax return.

(1) An estate can request an IRC 6161 extension of time to pay estate tax if payment imposes an undue hardship or if the estate has reasonable cause. Extension of time to pay requests can only be granted as follows for up to one year at a time:

• For an original tax assessment with Integrated Data Retrieval System (IDRS) Transaction Code (TC) 150, an extension of time to pay may be granted, up to one year at a time, for up to ten years from the due date of the return. The extension of time to pay estate tax request must be made by the estate tax return due date.

• For an assessment due to a tax deficiency with IDRS TC 290 or TC 300, an extension of time to pay may be granted, up to one year at a time, for up to four years from the date fixed for the payment of the deficiency. The extension of time to pay estate tax request must be made by the due date on the notice and demand for payment of the deficiency.

• An estate can also request an IRC 6161 extension of time to pay an IRC 6166 installment payment. See IRM 5.5.7.6.2, CSED - IRC 6166 Deferred Tax, for more information on this type of request.

(2) A TC 468 is usually input on IDRS when an estate has requested an IRC 6161 extension of time to pay estate tax. TC 468 puts the account into status 14 which keeps the account out of collection status.

(3) On occasion, Campus Estate and Gift (E&G) may input a TC 488 on an account to reflect an IRC 6161 extension of time to pay. TC 488 also puts the account in status 14 to keep the account out of collection status. This is done in the following circumstances:

• If penalties and interest are charged to the account prior to the extension of time to pay being granted.

• If a TC 460 was input first to reflect an extension of time to file for one date, then a TC 468 was later input to reflect an extension of time to pay for a different date.

(4) The date that the extension of time to pay estate tax is granted to is listed on the right side of the TC 468 next to "Ext-Dt>."

(5) The TC 468 may, or may not, have an additional transaction code as follows:

• CC01 = Denied extension on TC 150 assessment

• CC02 = Extension on TC 300 assessment

• CC03 = Denied extension on TC 300 assessment

• CC04 = Appeals case

(6) The collection statute is suspended for the period that an IRC 6161 extension of time to pay estate tax is granted. See IRC 6503(d), Suspension of running of period of limitation, Extensions of time for payment of estate tax.

(7) To update the CSED on Integrated Collection System (ICS) and on IDRS, see IRM 5.5.7.6, Estate Tax Collection Statute Expiration Date (CSED).

(1) An estate may make an IRC 6166 election for an extension of time to pay estate tax that is attributable to an interest in a closely held business when the estate files a timely Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, or on a Form 706 examination assessment. The IRC 6166 election allows for the deferral of payment of estate tax when an estate has an interest in a closely held business or businesses that exceeds 35% of the adjusted gross estate assets. Estates must meet certain criteria, as approved by an Estate & Gift (E&G) examiner, to be granted the IRC 6166 election.

(2) The IRC 6166 election typically allows for an estate to pay up to four years in annual interest only installments then up to ten years of annual principal and interest installments. Some IRC 6166 elections are for shorter periods as determined by an E&G examiner. See IRM 5.5.6, Collection on Accounts with Special Estate Tax Elections, and IRM 5.5.8, Advisory Responsibilities for Processing Estate Tax Liens, for more information on IRC 6166 Elections.

(3) The collection statute that is based on the assessment of tax is suspended while an IRC 6166 election is in effect. See IRC 6503(d), Suspension of running of period of limitations, Extensions of time for payment of estate tax. However, the statute on the unrecorded IRC 6324(a) estate tax lien is not suspended when the IRC 6166 election is in effect. See IRM 5.5.7.11.1, IRC 6324(a)(1) Estate Tax Lien, for a discussion of this lien.

(4) Some indicators on Integrated Data Retrieval System (IDRS) that an estate had been granted an IRC 6166 election include the following:

• If Submission Processing correctly identifies the IRC 6166 election, the account will have a payment indicator 1, which restricts the account and places it in Status 14. This payment indicator is on TXMOD and shown as PYMT-IND>1.

• If Submission Processing did not input PYMT-IND>1, Campus E&G will input a TC 488 to put the account into status 14.

• Accounts with annual TC 340 assessments of interest with associated TC 290 assessments.

• Accounts that were in status 14 on IDRS. However, this can also be an indicator of an IRC 6161, Extension of Time for Paying Tax.

• TXMOD history with statements such as "6166 SETUP", "To 6166", "Default 6166", or "950-H Letter."

• TC 489 input on IDRS. This is the date that the IRC 6166 election went into default.

• TC 582 input with the note "Special Lien."

(5) The estate may have an IRC 6166 election on all the estate tax due or on only a portion of the estate tax due. For the portion of tax that the estate does not have an IRC 6166 election, the tax is due by the return due date.

(6) Form 4349, Computation of Estate Tax Due with Return and Annual Installment, is completed by Estate & Gift (E&G) Examination, Campus E&G, or IRS Independent Office of Appeals. It will show the amount of tax that was deferred under IRC 6166, and the amount of tax that was not deferred. Campus E&G may have this information on their database, Advisory Estate Tax Lien Group may have this information, or the form may be with the tax return. To contact Campus Examination E&G on IRC 6166 accounts, see IRM 4.25.2.9.6.3, Payoff Requests, for their e-mail information. To contact Advisory Estate Tax Lien Group, see Knowledge Management Advisory Estate Tax Lien Group. To order a copy of the estate tax return, see IRM 5.5.7.8, Ordering Estate Tax Returns.

(7) An estate can request an IRC 6161 extension of time for paying tax on an IRC 6166 installment payment for up to one year at a time. Both the IRC 6166 election and the IRC 6161 election suspend the collection statute. When more than one action suspends the running of the collection statute, and the suspensions overlap, the collection statute is suspended only once. See IRM 5.1.19.3, Case Actions That Can Suspend And/Or Extend A CSED. In these situations, the calculation of the CSED should be based on the time that the estate had the IRC 6166 election since the IRC 6161 extension of time to pay the annual installment would overlap with the IRC 6166 election.

(8) To update the CSED on Integrated Collection System (ICS), see IRM 5.5.7.6, Estate Tax Collection Statute Expiration Date.

(1) Probate property is property that was owned by the decedent at date of death or that is payable to the decedent’s estate. These assets are includable in the gross estate under IRC 2033, Property in which the decedent had an interest.

(2) Probate assets are typically listed on the following Form 706 schedules:

• Schedule A, Real Estate

• Schedule B, Stocks and Bonds

• Schedule F, Other Miscellaneous Property

(3) Assets on the following schedules may be probate assets if there is no named beneficiary or if the named beneficiary is the estate:

• Schedule C, Mortgages, Notes and Cash.

• Schedule D, Insurance on Decedent’s Life. See Form 712, Life Insurance Statement, which should be attached to the estate tax return, to determine if there is a named beneficiary.

• Schedule I, Annuities

(4) Review records filed in probate. See IRM 5.5.7.9(11) for items to review in probate files.

(5) Probate rules vary from state to state. In some states, even if the asset was in the decedent’s name at date of death and the asset didn’t transfer automatically at date of death, the heir may be able to secure title of the property outside of the probate court. For example, in some states, a child of a decedent can have the title of a vehicle transferred to their name by presenting a death certificate. The vehicle, in this example, is technically a probate asset, but the heirs can cause the transfer of the property to occur without petitioning the probate court. Another example is a state that allows an informal or unsupervised probate so that real property can be transferred to the heir without petitioning the probate court.

(6) Administrative enforcement actions are prohibited on assets that are subject to the jurisdiction of the probate court unless the court grants permission for such action. To request judicial actions, prepare a memo to Counsel with documentation, and submit the request through the local Advisory group. See IRM 5.5.2.10, Referral to Area Counsel for Judicial Action, for additional information on making this type of referral to IRS Counsel.

(7) A Notice of Federal Tax Lien (NFTL) may be recorded in the name of the taxpayer estate because probate proceedings are not subject to the automatic stay like they are in bankruptcy proceedings.

(8) Continue your investigation regarding potential collection against non-probate assets. See IRM 5.5.7.10.2, Non-probate Assets. Also consider transferee liability against beneficiaries and personal liability of fiduciaries. See IRM 5.5.7.22.3, Estate Tax Transferee and Fiduciary Liability.

(9) The collection statute is suspended if all, or substantially all, of the estate assets were under the control of the probate court. See IRC 6503(b), Assets of taxpayer in control of court. The collection statute suspension only relates to the assets that were under control of the court. If a revenue officer has questions regarding whether the collection statute was suspended, consult with Counsel.

(10) Normally a proof of claim is not filed for estate tax because it may not be necessary due to the powerful collection tool of the IRC 6324(a)(1) lien. See IRM 5.5.7.11.1, IRC 6324(a)(1) Estate Tax Lien. However, there may be situations in which it is in the government’s best interest to file a proof of claim. In those cases, revenue officers can request the filing of a proof of claim through their local Advisory group as listed in Pub 4235, Collection Advisory Offices Contact Information. See IRM 5.5.4, Proof of Claim Procedures in Decedent Estates.

(1) Non-probate property is primarily those assets of the decedent that were transferred prior to death or were held in a manner that ownership transferred automatically upon death. Administrative action may be pursued against non-probate assets includable on the estate tax return. Types of non-probate assets are identified in the following Internal Revenue Code sections:

• IRC 2034, Dower or curtesy interests

• IRC 2035, Adjustments for certain gifts made within 3 years of decedent’s death

• IRC 2036, Transfers with retained life estate

• IRC 2037, Transfers taking effect at death

• IRC 2038, Revocable transfers

• IRC 2039, Annuities

• IRC 2040, Joint interests

• IRC 2041, Powers of appointment

• IRC 2042, Proceeds of life insurance

(2) Non-probate assets do not come under control of the probate court. They may be distributed to the beneficiaries without court approval.

(3) Some examples of non-probate property include the following:

• Transfers taking effect at death. For example, payable on death accounts such as checking or savings accounts that had a named beneficiary.

• Individual Retirement Accounts (IRA) and other retirement accounts that are payable to a designated spouse or survivor rather than the decedent’s estate.

• Property held jointly with right of survivor by the decedent with any other person (such as a spouse).

• Remainder interest where the decedent held a life estate.

• Certain assets transferred into a trust prior to date of death.

• Life insurance proceeds when there is a named beneficiary that is not the estate.

(4) Non-probate assets are typically listed on the following schedules.

• Schedule E, Jointly Owned Property - Property listed on this schedule is typically property that was owned joint with right of survivor or tenants by the entirety property.

• Schedule G, Transfers During Decedent’s Life - This includes trust property when the decedent retained an interest or certain powers over the assets. See IRM 5.5.7.21.1, Collecting Estate Tax From Trusts. Schedule G property also includes certain property transferred within three years of the decedent’s death. The value of an asset is includable in the decedent’s gross estate if the decedent transferred the retained interest or relinquished the retained power or incidents of ownership during the three-year period ending on the decedent’s date of death. See IRC 2035, Adjustments for certain gifts made within three years of decedent’s death.

• Schedule H, Powers of Appointment - Determines who will own or enjoy the property subject to the power of appointment and when they will own or enjoy it.

(5) Assets on the following schedules may be non-probate assets if there is a named beneficiary that is not the estate:

• Schedule C, Mortgages, Notes and Cash.

• Schedule D, Insurance on Decedent’s Life. See Form 712, Life Insurance Statement, which should be attached to the estate tax return, to determine if there is a named beneficiary.

• Schedule I, Annuities.

(6) The IRC 6324(a)(1) estate tax lien attaches to non-probate assets that are includable in the estate. See IRM 5.5.7.11.1 and IRM 5.5.7.11.2 for a discussion on the effect of the IRC 6324(a)(1) lien on non-probate assets. The IRS may take collection action on non-probate assets to collect on estate tax since non-probate assets are not under the control or custody of the probate court.

(7) A recipient of non-probate property can be held personally liable to pay delinquent estate tax for up to the date-of-death value of all non-probate property that recipient received, or the amount of the balance owed to the IRS, whichever is less. See IRC 6324(a)(2), Liability of Transferees and Others, and see IRM 5.5.7.22.3.1, Estate Tax Liability of Transferee, for a discussion of this personal liability provision.

(1) An unrecorded IRC 6324(a)(1) estate tax lien attaches to all property included in the gross estate for ten years from the date of the decedent’s death. An assessment, notice, or demand are not necessary to create the lien. The estate tax lien only pertains to Form 706 and Form 706-NA estate tax. It does not pertain to Form 1040, Form 941, Form 1041, or any other tax owed by the decedent or by the decedent’s estate.

(2) Features of the IRC 6324(a)(1) estate tax lien include the following:

• Lien arises at the date of death of the decedent and attaches to all the estate assets even if the estate tax return is not filed.

• Lasts for ten years from the date of decedent’s death. Nothing can extend the duration of this lien.

• The lien attaches automatically to all the assets includable in the estate. This includes both probate and non-probate assets.

• The estate tax lien is unrecorded.

• Since the lien attaches automatically, and it is not recorded, the estate does not receive Collection Due Process (CDP) or Collection Appeals Program (CAP) rights on this lien.

(3) When there is an estate tax return filing requirement, the IRC 6324(a)(1) estate tax lien attaches to all the estate assets includable in the decedent’s gross estate no matter how the assets were titled at date of death. This includes any assets in the name of the decedent, assets held in a revocable trust created by the decedent, and the decedent’s interest in assets owned jointly with right of survivor.

(4) The IRC 6324(a)(1) estate tax lien attaches to the extent of the current value of the property. The property may appreciate or depreciate after the date of the decedent’s death.

(5) The estate tax lien is inferior to superpriority liens described in IRC 6323(b), Validity and Priority Against Certain Persons, such as mechanics liens and ad valorem property tax liens. It is also inferior to pre-existing encumbrances that were in effect at date of death such as mortgages or pledges that attached to assets during the decedent’s lifetime.

(6) If probate property is transferred, sold, or encumbered by the executor, the IRC 6324(a)(1) estate tax lien will continue to encumber the property unless the lien expires, or the estate receives a discharge of the property from the lien.

(1) Non-probate property may be part of the gross estate assets. This includes property that passed directly to a specified person by designation or by operation of law. It also includes property the deceased taxpayer had transferred prior to death that is includable in the decedent’s gross estate under IRC 2034 to IRC 2042, inclusive, such as property the decedent transferred to a trust and retained a power or interest.

(2) If the recipient of non-probate property transfers property includable in the decedent’s gross estate to a purchaser (i.e., by selling the property for fair market value) or to a security interest holder (i.e., by encumbering the property and removing the recipient’s equity), the transferred property is divested of the IRC 6324(a)(1) estate tax lien, and an unrecorded IRC 6324(a)(2) "like lien" then attaches to all the personal assets of the recipient that sold or encumbered the property.

(3) The IRC 6324(a)(2) "like lien" expires ten years from the decedent’s date of death. This lien cannot be suspended or extended. The government can take administrative enforcement action using the IRC 6324(a)(2) "like lien", or the government can file a suit to collect on this lien. See IRM 5.5.7.22.1.4, Seizure and Levy Based on IRC 6324(a)(2) Like Lien, and see IRM 5.5.7.22.4, Preparing Suit Referrals on Estate Tax.

(1) After the estate tax has been assessed, notice and demand is given, and there is a neglect or refusal to pay, the IRC 6321 assessment lien arises and attaches to the probate assets in the estate at the time of assessment. The unrecorded IRC 6324(a)(1) estate tax lien operates separately and independently of the IRC 6321 assessment lien. If the IRC 6324(a)(1) estate tax lien expires, the IRS can still use the IRC 6321 assessment lien to collect the liability. The IRC 6324(a)(1) estate tax lien and the IRC 6321 assessment lien are cumulative. The IRS has the right to use either lien to collect on an estate tax liability. See IRM 5.5.7.11.1 for a discussion of the IRC 6324(a)(1) lien.

(2) If there is a neglect or refusal to pay, a Notice of Federal Tax Lien (NFTL) may be filed to protect the interest of the government against purchasers and other creditors. The NFTL should only include the name of the estate, and it should not include the name of the executor. Filing the NFTL will put other creditors, potential buyers, transferees, and title companies on notice of unpaid estate tax. The IRS may lose its lien priority in assets between the expiration of the IRC 6324(a)(1) estate tax lien and the filing of the IRC 6321 assessment lien. See IRM 5.12.1, Lien Program Overview, and IRM 5.17.2, Federal Tax Liens, for more information on the IRC 6321 assessment lien.

(3) NFTLs must be filed in the proper jurisdiction to protect the government’s interest against other creditors. State law dictates the place of filing. See IRM 5.12.7-2, State and Territory Filing Locations.

(4) The IRC 6321 assessment lien applies for ten years from the date of assessment unless an event occurs to suspend or extend the collection statute. A NFTL can be refiled if the collection statute has been suspended or extended. See IRM 5.5.7.6, Collection Statute Expiration Dates, for more information on actions that suspend or extend the collection statute on estate tax cases.

(5) Administrative levy or seizure may be taken to enforce the lien when a NFTL has been filed. For judicial enforcement, a suit to foreclose the IRC 6321 assessment lien may be referred to Department of Justice. See IRM 5.17.12, Investigations and Reports, IRM 5.5.7.22.4, Preparing Suit Referrals on Estate Tax, IRM 25.3.2, Suits by the United States, and Knowledge Management Litigation for more information on suits.

(6) If the estate is selling an asset subject to the IRC 6321 assessment lien, the estate may apply for a discharge of the property from the lien by completing Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien. The Advisory Estate Tax Lien Group handles any lien discharges on Form 706 or Form 706-NA estate tax liabilities.

(1) If an estate had been granted an IRC 6161 extension of time to pay estate tax, Integrated Data Retrieval System (IDRS) will show one or more transaction code (TC) 468 with the date the extension of time to pay or multiple extensions of time to pay were granted through. This date is located to the far right of each TC 468 after "EXT-DT". The failure to pay penalty is not assessed while an extension of time to pay estate tax is in effect.

(2) If the estate has an IRC 6166 election for an extension of time to pay estate tax that is attributable to an interest in a closely held business election, and the estate fails to make their annual installment payment, or the payment is late, a TC 240, late installment penalty, will be assessed. The estate may not appeal the TC 240, late installment penalty. This penalty only applies to accounts which are in an active IRC 6166 status in which the tax has not been accelerated due to a termination of the election.

(3) If the IRC 6166 election is terminated, the late installment penalty associated with the delinquent installment is abated. A TC 241 will reflect the abated late installment penalty. The failure to pay penalty is then assessed on the account.

(1) When a case was previously in status 14 on Integrated Data Retrieval System (IDRS) due to a prior granted IRC 6161 extension of time to pay estate tax or a defaulted IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business election, IDRS may reflect manual assessments of penalties and interest. In these cases, accrued penalties and interest may need to be manually computed, and balances reflected on Integrated Collection System (ICS) might not include these penalty and interest accruals. Since this can affect letters generated on ICS, always check payoff amounts.

(2) For accounts with defaulted IRC 6166 elections, Campus Estate & Gift can assist with calculating the accrued penalties and interest. To request their assistance, see IRM 4.25.2.9.6.3, Payoff Requests, for their e-mail information.

(3) For accounts that had an IRC 6161 extension of time to pay estate tax, contact the restricted interest group in Philadelphia at e-mail address *SBSE CCS RESTINT for penalty and interest calculations.

(4) Another alternative is to calculate the accrued interest using IDRS command code COMPA. The last TC 340 on the account will reflect the date that interest had been last updated. Accrued interest can be calculated from that date. IDRS command code COMPAF can be used to calculate the failure to pay penalty from the extended payment date, shown on the far right of transaction code (TC) 468 on IDRS, or from the last failure to pay penalty assessment to the payoff date that the failure to pay penalty is calculated through.

(5) On accounts that require a manual calculation of penalties and interest, request that the calculated accruals be added to IDRS. To request assessment of the accruals at the same time you are forwarding a payment for processing, make the request on Form 3244, Payment Posting Voucher, and send the request to the Teller Unit with the payment. To make a request for assessment of accruals on IDRS when you are not also forwarding a payment for processing, make your request on Form 4844, Request for Terminal Action, and send your request to Centralized Case Processing - Collection (CCP).

(1) You may receive a request for abatement of penalties on a collection case. If the account is currently assigned to Estate and Gift (E&G) Examination due to an examination, forward the penalty abatement request to the Examination employee conducting the examination. See IRM 4.25.7.2, Assessing or Abating Penalties in Estate and Gift Tax Cases, for information on how Examination processes penalty abatement requests. See Knowledge Management Estate & Gift Examination Contacts for the contact information for E&G Examination groups.

(2) If an examination of the estate tax return is closed, the Revenue Agent Report (RAR) should address any assessed penalties or non-assertion of penalties during the examination. The RAR may be attached to the estate tax return, or it may be available electronically. See IRM 5.5.7.8, Ordering Estate Tax Returns, for information on how to obtain a copy of the estate tax return with the RAR report. Do not abate penalties already determined by E&G Examination, in accordance with their IRM provisions, unless you verify there was an IRS error.

(3) Other documentation with the estate tax return may reflect penalty abatement requests that were previously addressed by E&G Examination, Campus E&G, IRS Independent Office of Appeals, or Tax Court. You might also find an indication of a prior penalty abatement request in the Integrated Data Retrieval System (IDRS) TXMOD history.

(4) Do not abate penalties previously determined in Tax Court. Taxpayers are barred from obtaining a subsequent administrative abatement, refund claim, or refund suit if a determination was made in Tax Court that the penalty is owed. See IRC 6512(a), Effect of position to Tax Court.

(5) Address any penalty abatement requests that have not already been considered by the IRS or in Tax Court. If the penalty abatement request is due to an IRS error, determine if the penalties were assessed in accordance with IRM and IRC guidance. If the request for abatement is based on reasonable cause, follow the procedures in IRM 20.1.1.3, Criteria for Relief from Penalties, to determine if the reasonable cause criteria has been met. Also see IRM 5.1.15.16, Penalty and Interest Abatements.

(6) If an abatement is warranted, prepare Form 3870, Request for Adjustment, and fax your request to Campus E&G to fax number (855) 386-5127 or (855) 386-5128. Include the documentation provided by the estate requesting abatement of the penalties with Form 3870. Penalty abatements on estate tax cases cannot be requested through the Reasonable Cause Assistant (RCA) program because of the "V" or "W" that follows the taxpayer identification number.

(7) If a penalty abatement request is denied, notify the taxpayer in writing. See IRM 20.1.1.3.5.3, Taxpayer Not Entitled to Relief. If the estate files an appeal, date stamp the protest and document in the case file history that the protest was received. Forward the protest letter to IRS Independent Office of Appeals within 30 days from the postmark date of the protest letter. Also include the following:

• Documentation considered in analyzing reason for penalty assessment

• Case file history

• Any pertinent correspondence with the taxpayer

(8) Route the penalty denial protest to IRS Independent Office of Appeals. The routing information is on the IRS Independent Office of Appeals Case Routing website.

(9) There are many court cases sustaining assessment of penalties. Below are a few examples:

• Estate of Marion Derksen v. United States, 2012-2 USTC ¶ 50,668 (E.D. Pa.) - The U.S. district court held that an estate wasn't entitled to an abatement of late filing penalties that was offered to the estate in an informal agreement because the court found that the estate failed to enter into a binding agreement.

• Estate of Nancy P. Young v. United States, 2013-1 USTC ¶ 50,104 (D. Mass. Dec. 17, 2012) - In upholding the penalty for the late filing, the U.S. district court determined that the estate was aware of the deadline, but deliberately filed the return late based on the advice of its tax advisors that there would be no late filing penalty because the estate had already paid more than its tax liability.

• Peter Knappe et al. v. United States, 713 F.3d 1164 (9th Cir. 2013) -The Ninth Circuit, affirming a district court, held that an estate was liable for a late filing penalty, finding no reasonable cause for the missed deadline because the executor failed to exercise ordinary business care and prudence by relying on the accountant's advice regarding the filing deadline, which was a non-substantive matter.

(1) If a notice of levy will be issued, Letter 1058, Final Notice, must first be sent to the estate executor. If there is no executor, send Letter 1058 to the last known address of the decedent. The executor of the estate has the authority to exercise Collection Due Process (CDP) appeal rights on behalf of the estate. Since other individuals holding estate property are not entitled to a CDP hearing, do not send Letter 1058 to beneficiaries or third parties in possession of estate assets. Instead provide those individuals with Form 10492, Notice of Federal Taxes Due. See IRM 5.5.7.15, Notice of Tax Due. If a beneficiary or third party later obtains the authorization of the probate court to serve as executor, that individual may then receive Letter 1058 and represent the estate in a CDP proceeding.

(2) If a CDP lien request or equivalent hearing request is filed, levy action may be appropriate if collection is at risk. Situations when the government may be at risk include the dissipation of assets or when the unrecorded estate tax lien is about to expire since this lien cannot be extended. See IRM 5.1.9.3.5.1, Levy Action During the Period of the CDP or EH. Contact Counsel to determine if a jeopardy levy is appropriate, and see IRM 5.17.15.4, Jeopardy Collection, for criteria and procedures.

(3) If an account was previously in status 14, follow the procedures in IRM 5.5.7.12.2, Manual Assessment of Penalties and Interest, to obtain an updated payoff when issuing a final demand notice.

(1) A protective claim may be filed at any time before the expiration of the assessment statute expiration date (ASED) to protect the estate’s right to file a future claim for refund or amend the return. It is usually requested when the estate's entitlement to the claim for refund is contingent upon the resolution of litigation, and the estate anticipates that the litigation might not be resolved until after the ASED.

(2) Once litigation is concluded, depending on the outcome of the litigation and its impact on the tax due, the estate can file either a supplemental estate tax return to amend the return with the new information, or they may file Form 843, Claim for Refund and Request for Abatement.

(3) Integrated Data Retrieval System (IDRS) may show transaction code 971, action code 700 which indicates a protective claim has been filed. Estate and Gift Examination determines if a protective claim should be allowed. See IRM 5.5.7.16, Estate Tax Adjustments and Claims for Refund, for the location to send a protective claim received during a collection investigation.

(1) An executor can amend a previously filed estate tax return by filing another estate tax return with "Supplemental Information" on the top of page one, or the return may be marked as "Amended." A supplemental return or amended return may be filed to increase or decrease the tax balance reflected on the original return. It must be submitted prior to the assessment statute expiration date (ASED) unless the estate had filed a protective claim. See IRM 5.5.7.16.1, Protective Claim on Estate Tax. Any documentation supporting the changes should be attached to the supplemental return. See Instructions for Form 706 or Instructions for Form 706-NA for more information concerning necessary documentation.

(2) See IRM 5.5.7.16, Estate Tax Adjustments and Claims for Refund, for the location to send an amended or supplemental estate tax return.

(1) While working an estate tax collection account, an executor may indicate that they intend to file a claim for refund. Generally, a claim for a refund must be filed within three years from the date the original return was filed, or two years from the date the tax was paid, whichever is later. If the estate does not file a claim within this period, the estate is normally no longer entitled to a claim for refund unless they had previously filed a timely protective claim. See IRM 5.5.7.16.1, Protective Claim on Estate Tax.

(2) Form 843, Claim for Refund and Request for Abatement, is typically used for the following:

• Claim for refund - The IRS can consider a claim for refund for estate tax.

• Request for abatement of Tax - Although Form 843 can be used to request abatement of tax in other types of cases, IRC 6404(b) does not permit a taxpayer to file a claim for abatement of estate tax.

(3) If you receive an 843 claim during your investigation, forward the request to Estate and Gift Examination or to Campus Estate and Gift. See IRM 5.5.7.16, Estate Tax Adjustments and Claims for Refund, for locations to send Form 843.

(1) United States (U.S.) citizen estates and some U.S. resident non-U.S. citizen estates are subject to U.S. estate taxation with respect to their worldwide assets. These estates must file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, when the value of the gross estate and the amount of adjusted taxable gifts exceeds the filing threshold, i.e., the basic exclusion amount. See Form 706 instructions for the filing threshold for the year of the decedent’s death.

(2) Assets includable in the gross estate on Form 706 should be listed on the schedules that are submitted with the estate tax return or on examination documents. See IRM 5.5.7.8 for information on ordering an estate tax return.

(3) The estate may be eligible for foreign death tax credit, and treaties may affect the U.S. tax liability as determined by Estate and Gift Examination.

(4) Assets may be in the United States or in other countries. In addition, probate proceedings, or the equivalent of a probate, may be open in a foreign country to administer the decedent’s assets. Different executors may administer assets in different jurisdictions. Administration of these estates may be time-consuming when estates must work with multiple courts in foreign jurisdictions.

(1) When a non-resident non-U.S. citizen decedent owned United States (U.S.) situs assets that exceed $60,000.00 at date of death, the decedent’s estate is required to file Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return Estate of nonresident not a citizen of the United States. Examples of U.S. assets include real estate, personal property, securities, and stock of U.S. companies that have a U.S. situs even though the certificates may have been held abroad.

(2) When doing a compliance check on other possible tax delinquencies, remember there might not have been a Form 1040, U.S. Individual Income Tax Return, filing requirement for the decedent if the decedent never had U.S. income.

(3) Since these decedents were not U.S. citizens, they might not have been assigned a U.S. social security number. In these cases, the IRS Service Center assigns a taxpayer identification number (TIN) which usually begins with the number "9". There is normally a "W" at the end of these assigned TINs. These accounts are in the format, 9XX-XX-XXXXW on Integrated Data Retrieval System (IDRS).

(4) When there has been an assigned TIN, additional TINs may get assigned to the case at different stages of the case. For example, a TIN may be assigned if the estate requests an extension of time to file, and a different TIN may be assigned when the return is posted. If you suspect assignment of multiple TINs, research IDRS command codes NAMEI, NAMES, ENMOD, INOLE, and IAT Name Search to locate potential TINs. You can also contact Campus Estate & Gift (E&G) at *SBSE EEF CIN E&G or fax number (855) 201-8011 to check their files for additional TINs that may be associated with the estate.

(5) The U.S. assets includable on Form 706-NA are listed on Schedule A and on examination documents. Collection action can be taken on these assets. The IRC 6324(a)(1) estate tax lien attaches to the U.S. gross estate assets, and personal liability transferee provisions of IRC 6324(a)(2) apply to these estates. See IRM 5.5.7.8 for information on ordering an estate tax return.

(6) Executor information on Form 706-NA is listed on Part 1, Line 9, and the information may be available on IDRS command code INOLES or ENMOD.

(1) If there are insufficient assets located in the United States (U.S.) to satisfy the estate tax liability, it may be possible to seek recovery of assets located outside of the U.S. through domestic judicial actions. The following options may be available:

• Suit for a Repatriation Order: Such an order would require a taxpayer who transferred U.S. based assets offshore to transfer those assets back to the U.S. where they will be subject to tax collection. If an executor refuses, an order for civil contempt of court can be enforced with the possible sanction of incarceration. See IRM 5.21.3.7, Suit to Repatriate Property - Repatriation Orders.

• Suit for Appointment of a Receiver: A receiver may be appointed by the court to administer estate assets. The receiver may be able to repatriate assets of the estate to pay taxes owed. See IRM 5.21.3.6, Appointment of a Receiver.

• Levy on a U.S. branch of a foreign bank: The U.S. bank office that is issued the levy must be a branch of the foreign bank home office. The levy notice must specify it is reaching overseas deposits. Include the statement, "The Area Director intends to attach funds held outside the U.S. or U.S. Territory." Further instructions are available in IRM 5.21.3.3, Levy on a Domestic Branch of a Financial Institution.

(2) The IRS can request assistance from some of our treaty partners to collect taxes owed by an estate administered or with assets located in the treaty country by submitting a Mutual Collection Assistance Request (MCAR). See IRM 5.21.7.4 , Mutual Collection Assistance Requests (MCAR), for procedures. The three mutual collection estate tax treaty partners are France, Canada, and Japan. After all reasonable domestic collection actions are exhausted, the IRS may then pursue a Mutual Collection Assistance Request (MCAR) pursuant to the following:

• US-France Estate Tax Convention (signed 11/24/1978, amended by Protocol 12/8/2004)

• US-Canada Income Tax Convention (signed 09/26/1980, amended by Protocol 9/21/2007)

• US-Japan Income Tax Convention (signed 11/6/2003, amended by Protocol 6/29/2022)

(3) See Knowledge Management International Tools and Actions for additional international locator and enforcement tools.

(1) Transfer certificates are issued by Campus Estate and Gift (E&G). They may be provided to an estate of a nonresident decedent if there is no executor or administrator appointed, acting, and qualified within the United States (U.S.).

(2) The transfer certificate permits the transfer of property of a nonresident decedent without liability of the statutory executor (the individual or entity that has possession of the asset). See 26 CFR 20.6325-1, Release of lien or partial discharge of property; transfer certificates in nonresident estates.

(3) Campus E&G monitors international estate tax accounts with balances due. They will issue Form 5173, Transfer Certificate, when the tax is paid in full, and the IRS completed the review of the estate tax return, or if the government has received its interest in the property that is being sold.

(4) Forward transfer certificate applications received during a collection investigation to Campus E&G at fax number (855) 201-8011 or e-mail *SBSE EEF CIN E&G.

(5) If an asset falls under the jurisdiction of an executor or administrator that is appointed, acting, and qualified within the U.S., the estate will need an estate tax lien discharge instead of a transfer certificate. SeeIRM 5.5.8.12, Evaluating Applications for Discharge under IRC 6325(c), for estate tax lien discharge procedures.

(1) The collection statute is suspended on an estate tax return if the executor is absent from the U.S. for a continuous period of six months or more. The executor will be deemed to be absent from the U.S. if the executor is generally and substantially absent from the U.S., even though the executor makes casual temporary visits during the period. See IRM 5.1.19.3.7, Taxpayer Living Outside the U.S.

(2) If the statute was suspended because the executor was out of the U.S., and there is less than six months left on the collection statute, upon the executor’s return, the statute is further extended so that it does not expire until after six months from the date of the executor’s return to the U.S.

(3) See IRM 5.5.7.6, Estate Tax Collection Expiration Date, for procedures to follow to update the CSED on Integrated Data Retrieval System (IDRS) and Integrated Collection System (ICS) when the statute was suspended on an international estate.

(1) Although there are many different types of trusts, determining whether the value of the trust assets will be includible in the gross estate, and therefore subject to collection, will depend on whether the decedent retained an interest or certain powers over the assets in the trust at the date of death.

(2) The value of an asset held on the decedent’s date of death in a revocable trust created by the decedent during life is includable in the decedent’s gross estate.

(3) The value of an asset held in an irrevocable trust is includable in the decedent’s gross estate if the decedent transferred the asset to the trust and retained an interest in or power over the asset as described in IRC 2036, Transfers with retained life estate, IRC 2037, Transfers taking effect at death, or IRC 2038, Revocable transfers. Similarly, the proceeds of a life insurance policy payable upon decedent’s death to a trust are includable in the decedent’s gross estate under IRC 2042(b), Proceeds of life insurance, if the decedent possessed any incidents of ownership over the insurance policy at date of death.

(4) When a trust is a potential source of collection for unpaid estate tax, review the estate tax return to determine which trust assets were included in the gross estate. These trust assets are subject to the ten year IRC 6324(a)(1) estate tax lien. Schedules listing the assets and debts of the estate are normally attached to the estate tax return. Trust assets are usually reported on Schedule G or included in the examination report, if additional tax was assessed. The information from these schedules are a valuable starting place to gather information and documentation about the trust and its assets. Information may include the identity of banks, brokerage firms, and account information listed in the name of the trust. Beware that, on occasion, an estate may not correctly report the assets on Schedule G, and trust assets may be incorrectly included on a different schedule.

(5) If the estate was involved with litigation, Chief Counsel files and Tax Court records may also contain documentation about the trust and its assets.

(6) The trustee of a trust with assets includable on the decedent’s estate tax return is personally liable for any unpaid estate tax under IRC 6324(a)(2), for up to the date of death value of the trust’s assets included in the gross estate or the remaining tax liability, whichever is less.

(7) The IRC 6324(a)(1) estate tax lien that attaches to trust assets includable in an estate provides a strong collection tool for the government when it seeks to collect unpaid estate taxes. However, traditional tools of fraudulent transfers, alter ego, nominee, and state law provisions that allow creditors to reach assets of self-settled grantor trusts may also be used to collect estate tax in some circumstances.

(1) The transfer of certain trust assets may have resulted in a taxable gift that should have been reported on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. In this way, the estate tax and the gift tax support each other by preventing untaxed transfers of wealth without consideration. In such a case, there may be an uncollected gift tax account to collect. See IRM 5.5.9, Collecting Gift tax and Generation-Skipping Transfer Tax, for information on collecting on gift tax liabilities.

(2) The following trust assets are generally not part of the gross estate but may be includable on an estate tax return under IRC 2035, Adjustments for certain gifts made within 3 years of decedent’s death:

• Prior to death, the decedent had transferred the retained interest or relinquished the retained power or incident of ownership of a trust asset that would otherwise be includable in the decedent’s gross estate under IRC 2036, IRC 2037, IRC 2038, or IRC 2042 during the three-year period ending on the decedent’s date of death.

• Assets transferred prior to death of the decedent to an irrevocable trust in which the decedent retained no interest during the three-year period ending on the decedent’s date of death.

(3) When the transfer of assets is reportable as a gift instead of being included in the decedent’s gross estate, the IRC 6324(b) gift tax lien attaches to those assets instead of the IRC 6324(a)(1) estate tax lien. If Field Collection employees have a question regarding whether an asset is considered a gift, or if it is includable in the decedent’s gross estate, make a referral to Estate and Gift Examination through the Specialist Referral System (SRS). Field Collection employees can also contact their local Counsel to determine if a gift tax lien or estate tax lien attaches to assets that were transferred prior to the decedent’s date of death.

(1) Under IRC 6324(a)(2), the trustee is liable for unpaid estate taxes for up to the date-of-death value of the trust assets that were includable in the gross estate. In some cases, however, certain trust provisions may allow no limit to the trustee’s liability. This may occur when the grantor trust document includes language that obligates the trustee to pay the decedent’s last debts and any estate tax or gift tax that may arise upon the decedent’s death. This language may be useful when collecting a decedent’s pre-death income tax, employment tax, and gift tax, or when establishing a trustee’s fiduciary liability arising from an insolvent trust.

(2) Certain language in trust documents may also be useful in establishing transferee liability of the trust for unpaid estate tax. However, reliance on such language may not be necessary since IRC 6324(a)(2) already makes the trustee liable for unpaid estate tax for up to the date of death value of the trust assets includable in the gross estate or the remaining tax liability, whichever is less.

(3) Here is an example of language to look for in a trust document:

(4) However, if the trust’s assets have grown in value or new assets were added to the trust, and the words "and which are attributable to the trust assets" were not included in the trust instrument, the government might be able to bring an IRC 6901 assessment or a suit against the trust for an amount greater than the value of its assets included on Form 706 or Form 706-NA.

(5) Some states allow creditors to sue the trust directly. There may be an advantage to the IRS if the trust is administered in one of these states, and the trust document does not limit the trust’s liability to the value of the trust assets. In these cases, The IRS may be able to file a suit or make an IRC 6901 administrative transferee assessment against the trustee (in the trustee’s official capacity) for the full amount of estate tax due. On the other hand, when we rely on collection against a trust using the IRC 6324(a)(1) estate tax lien, the IRS is limited to collect on the current value of the trust assets. When we rely on the personal liability of the trustee provision in IRC 6324(a)(2), we are limited to collect from the trustee for up to the date-of-death value of the trust assets.

(1) Unlike corporations and partnerships, trusts are not required to file their organization documents or register in most states. Therefore, it may be difficult to obtain the trust instrument or the identity of the trustees and beneficiaries. A summons may be issued to obtain the actual trust instrument and records regarding trust assets. Check name and address records on Integrated Data Retrieval System (IDRS) for the last known trustee of the trust to serve a summons. Alternatively, the executor of the estate, and any person who prepared the estate tax return, may be summoned to identify the trusts included in the gross estate and the names of their respective trustees for service of a second summons.

(2) Additional information regarding potential collection sources can be found in the following income tax records and returns:

• The decedent’s prior Form 1040, U.S. Individual Income Tax Return, may reveal assets and income from a revocable trust that were not included on the estate tax return.

• Information regarding a trust’s current assets and distributions to its beneficiaries may be on IRS internal records such as IDRS command code IRPTR which may include information from Form 1099 to reveal income received by the estate, trusts, and beneficiaries.

• Form 1041, U.S. Income Tax Return for Estates and Trusts, and related Schedule K-1, issued to the beneficiaries, may provide additional information on trust assets.

(3) State court records can also be a valuable source of information regarding trust assets. In some states, the administration of trusts is handled in the state probate courts. In other states, the administration of trusts is handled in court proceedings that do not involve the probate court.

(4) IRC 645, Certain Revocable Trusts Treated as Part of Estate, allows a trust to report their income under the same employer identification number (EIN) and on the same Form 1041 that is filed by the estate to report their income. The trust and estate also have the option of filing a separate Form 1041 to report their income separately.

(1) Seizure and levy action may be used to collect on assets held by the executor of an estate, except for assets that are under control of a probate court. See IRM 5.5.7.10.1, Probate Assets, for information on assets under control of a probate court.

(2) If there is an IRC 6321 assessment lien or an IRC 6324(a)(1) estate tax lien that still attaches to property that was transferred to heirs or other third parties, the IRS can seize or levy on that property for payment of estate tax. This does not require a separate IRC 6901 transferee assessment against those heirs or third parties. Like any other collection case, consider encumbrances on the property by priority creditors and by superpriority creditors as listed in IRC 6323, Validity and Priority Against Certain Persons.

(3) Collection by seizure or levy can be made using any of the following liens:

• Regular IRC 6321 assessment lien that is in effect on balance due accounts to be collected on just like in other collection cases. The lien attaches to probate assets in the estate at the time of assessment. A Notice of Federal Tax Lien (NFTL) establishes the date of the IRC 6321 assessment lien’s attachment to the probate estate assets that remain in the estate at the time the NFTL was filed.

• Special liens filed when an estate has either an IRC 2032A special use valuation election or IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business election. See IRM 5.5.6 for more information on collecting on these liens.

• IRC 6324(a)(1) estate tax lien that automatically attaches to all assets includable in the decedent’s gross estate when there is an estate tax return filing requirement. This unrecorded lien arises at date of death and lasts for ten years.

  Example: Decedent’s estate filed a Form 706 listing real property on Schedule A, Real Estate. The property was in the decedent’s name at date of death. Since the real property was includable in the gross estate, the ten-year IRC 6324(a)(1) estate tax lien has attached to the real property.
  
  If the executor distributes the property to the decedent’s children, the IRC 6324(a)(1) estate tax lien continues to attach to the property. If the property is no longer under the jurisdiction of the probate court, the IRS can take administrative seizure on the real property that is now in the names of the children without the need to make a separate IRC 6901 transferee assessment against them.
  
  If the children transfer the property to a purchaser for fair market value without getting the estate tax lien discharged from the property, the IRC 6324(a)(1) estate tax lien will follow the property into the hands of the new owner. The property can then be administratively seized from the new owner since the estate tax lien follows the property.

• IRC 6324(a)(2) "like lien" that automatically attaches to the personal assets of a recipient of non-probate property for up to the date-of-death value of the asset that individual received (or the remaining liability, whichever is less) when that recipient transfers the non-probate property to a purchaser (i.e., by selling the property for fair market value) or to a security interest holder (i.e., by encumbering the property and removing the recipient’s equity). After the transfer, the "like lien" attaches to all the personal assets of the recipient of the non-probate property. The IRS can seize or levy on an asset based on the "like lien". See IRM 5.5.7.11.2, IRC 6324(a)(2) Like Lien.

Example: Decedent had an interest in real property with a date of death value of $4M and in a bank account with a date of death value of $2M that was in the name of a trust at date of death and was includable on Form 706, Schedule G, Transfers During Decedent’s Life. The assets passed to the beneficiary of the trust (decedent’s sister) outside of probate. The ten-year IRC 6324(a)(1) estate tax lien attaches to these assets and can be enforced by administrative seizure and levy without the need to make a separate IRC 6901 administrative transferee assessment against the sister.

If the sister later re-transfers the real property to a purchaser for fair market value, the IRC 6324(a)(1) estate tax lien no longer follows this non-probate real property. Similarly, if the sister spent the funds in the bank account, the IRC 6324(a)(1) estate tax lien no longer attaches to those funds. A "like lien" then attaches to the sister’s other property.

This "like lien" can be enforced against the sister’s other property through administrative seizure and sale without the need to make an IRC 6901 transferee assessment against the sister. The "like lien" is for the amount up to the date-of-death value of the real property ($4M) and the date-of-death value of the cash in the bank account ($2M) for a total of $6M or in the amount of the remaining tax liability, whichever is less.

Note: There are two aspects to IRC 6324(a)(2). First, there is the "like lien" that is discussed in this IRM section. In addition, the individuals that received non-probate property have an automatic personal liability for the estate tax for up to the date-of-death value (or the remaining tax liability, whichever is less) of the asset they received. The IRS can collect against these individuals under IRC 6324(a)(2) by making an IRC 6901 administrative transferee assessment or through a transferee suit. This aspect of IRC 6324(a)(2) is discussed in IRM 5.5.7.22.3.1, Estate Tax Liability of Transferee.

(4) The local Civil Enforcement Advice and Support Operations (CEASO) Advisory group reviews seizures of assets includable in an estate just like in any other collection case.

(1) In some probate proceedings, the estate administrator will be required to post a bond. For more information on this type of bond see IRM 5.5.2.9, Probate Bonds.

(2) Bonds may also be furnished when an estate has been granted an IRC 6161 extension of time to pay estate tax, or if the estate has been granted an IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business election. See IRM 5.6.1.3.3, Estate Tax Bonds and Other Collateral, and see IRC 6165, Bonds where time to pay tax or deficiency has been extended.

(3) It may be necessary to demand payment from the surety that has underwritten the bond to collect on the tax liability. When considering enforcement, secure a copy of the bond and related documentation. The bond will identify the surety company, the amount of coverage, and potential parties who would be served with a demand or suit letter. Bonds are generally renewed on an annual basis. If the bond was renewed, previous bonds may reflect changes in the amount of coverage, which may be based on a reduction in estate assets or creditor claims for debts owed. Typically, a financial statement for the applicant representing the estate is submitted with the bond application. A summons may be issued to the surety company for a copy of the application and financial statement.

(4) Once you determine enforcement will be necessary on the bond, issue a demand for payment letter to the surety company. Pattern letter P-300 has been modified in IRM Exhibit 5.5.7-1, Pattern Letter P-300 Revised for Estates, for use in estate tax cases. This letter must be sent by certified mail to the surety company.

(5) If the surety company does not respond by the deadline date in the demand letter, attempt contact with the surety company representative and document the Integrated Collection System (ICS) case history with the following:

• Indicate if the surety company acknowledged receipt of the demand letter.

• Identify the name, title, contact phone number, and address of the individual in the surety company that is responsible for ensuring payment of the tax.

• If the surety company representative states they will pay, indicate the date to expect the payment.

• If the surety company representative states they will not pay, document the reason for nonpayment and ask them to send the IRS a written response stating the reason for nonpayment.

(6) If there is no response from the surety company or if the surety company representative indicates they will not pay the tax based on the bond amount, prepare a referral to bring suit against both the fiduciary, alleging the fiduciary is personally liable under 31 USC 3713, and the surety company, alleging liability under the surety bond. See IRM 25.3.2, Suits by the United States, for procedures to follow when making this type of suit recommendation. Enforcement of a bond for an IRC 6166 liability may not require proof of fiduciary liability, since the bond is for security, and it is not a bond for misconduct.

(7) State law and/or terms of the bond may dictate the time-period to file a suit against the surety company that provided the bond. Beware that the time-period may be as short as 30 days. Timely referrals must be made to IRS Counsel. Therefore, begin the referral process early. IRS Counsel needs time to review the case, and Department of Justice needs time to file a suit.

(1) It may be possible to pursue collection against parties who received estate assets, as transferees, or against the fiduciary for personal liability. Complete a timeline of the transfer of estate assets to determine who may be transferees or who may have fiduciary liability.

(2) Transferee liability against recipients of estate assets or against the fiduciary may be made administratively or through judicial means. It is independent of the estate tax lien and may be pursued by the government without first pursuing the estate’s assets, tax liens, or the liability of other transferees.

(1) If you are unable to take administrative actions, and you are considering a suit recommendation, begin the referral process early. Civil Enforcement Advice and Support Operations (CEASO) Advisory and IRS Counsel need time to review the case, and Department of Justice (DOJ) will need time to make the initial pleading. Once DOJ receives the suit, they typically send a pre-suit letter giving the taxpayer 30 days to respond with payment or a settlement offer before a suit is filed. If there is an imminent Collection Statute Expiration Date (CSED), see IRM 25.3.2.4.5.5, Cases with Imminent CSEDs.

(2) Suit recommendations on estate tax cases are routed to IRS Counsel and reviewed through e-Approval. See IRM 25.3.2.4.3.1, Recommendations Processed Through e-Approval.

(3) In many cases, the estate or heirs may pay all or a substantial portion of the tax just because DOJ may file a suit.

(4) Make suit recommendations to address all possible judicial actions to collect the tax so that DOJ can proceed with any actions they deem necessary after their analysis of your case. For example, a referral for a suit to foreclose a tax lien on one property might also include a referral to foreclose a lien on all other properties, as well as reducing the assessment to judgment. Additionally, a referral for a suit to obtain judgments of personal liability on all transferees and fiduciaries might be included.

(5) Key benefits to suit referrals to DOJ are the following:

• Additional discovery, subpoenas, depositions.

• May include multiple causes of action against multiple defendants.

• Once judgment is obtained, DOJ will take initial efforts to collect.

(6) Once a case is with DOJ, depending on the case and the court, it can take between one to two years to reach a trial. If an appeal is filed, it may take another year.

(7) See IRM 5.17.4, Suits by the United States, IRM 5.17.12, Investigations and Reports, IRM 25.3.1, General Guidelines, IRM 25.3.2, Suits by the United States, and Knowledge Management Litigation, for additional information on suits.