Rev. Rul. 83-103

ISSUE

May an estate prepay a portion of the estate tax liability that was postponed under section 6163(a) of the Internal Revenue Code without triggering the liability for the remaining unpaid portion of the tax and any accrued and unpaid interest?

FACTS

The decedent died in 1976. Included in the taxable estate was the decedent's interest in a trust created by the decedent s father. The decedent's mother was the life tenant of the trust. Of the $400x total estate tax liability, the executor timely paid $1OOx and properly elected under section 6163(a) of the Code to postpone $300x of the tax, the portion representing the remainder interest. In June, 1982, in order to terminate a portion of the interest accruing at the higher interest rates then in effect, the executor prepaid $200x and requested that the amount be applied toward the deferred tax liability.

LAW AND ANALYSIS

Section 6151 of the Code states that when a return of tax is required, the person responsible for making the return must pay the tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return).

Section 6163(a) of the Code permits the executor of an estate to postpone payment of that part of the estate tax attributable to a reversionary or remainder interest in property that is included in the value of the gross estate until 6 months after the precedent interest or interests in the property terminates.

Under section 6601(a) of the Code, if any amount of tax imposed is not paid on or before the last day prescribed for payment, interest must be paid at an annual rate established under section 6621 for the period from the last day prescribed for payment to the date paid.

Under section 301.6601-1(c) of the Regulations on Procedure and Administration, any extension of time granted for payment of tax (including any postponement elected under section 6163(a)) will be disregarded in determining the last day prescribed for payment. The granting of the extension of time for payment of tax does not relieve the taxpayer from liability for the payment of interest during the period of the extension.

Section 6660(a)(1) of the Code states that additions to the tax will be assessed, collected, and paid in the same manner as taxes. Section 6660(a)(2) provides that any reference to "tax" will also refer to the additions to the tax, additional amounts and penalties.

Neither the Code nor the regulations require acceleration of any unpaid portion of the tax or accrued interest thereon if a partial payment is made before the deferral period terminates. Accordingly, a partial payment of tax or interest will not accelerate the liability for any remaining unpaid tax or interest.

HOLDING

The estate may prepay $200x of the outstanding tax liability postponed under section 6163(a) of the Code. No other amounts, either of tax liability or accrued interest, is due and payable until 6 months after the precedent interest terminates.