Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Lien securing deferred tax of estates including closely held businesses (MS Word)
Lien securing deferred tax of estates including closely held bussinesses (.pdf)
Lien securing deferred tax of estates including closely held
businesses
Dear Reader:
You recently mentioned that you have become the executor of an
estate that includes a closely held business and you are interested
in making the election to defer payment on that portion of the
estate tax that is attributable to the closely held business. You
want to make the election because you are worried about having
enough time to collect the money to pay estate taxes and other
expenses while keeping the business intact, but you are concerned
about the bond that IRS may require the estate to post as security
for payment of the deferred taxes.
You might consider electing to designate property to be subject to a
special lien in lieu of providing a bond securing payment of the
deferred tax. The designation can be made only with the consent of
all interested parties, i.e., each person who has an interest in the
property designated for the special lien. The special lien applies
to the property designated in the agreement, but there are
relatively few restrictions on property that may be designated for
the lien. Property designated for the lien does not have to be
property included in the estate, but must be property that is
expected to survive the tax deferral period. If the unpaid estate
tax plus interest exceeds the value of the property in the
agreement, IRS may require that more property be designated as lien
property or a bond be given in order for the executor to be released
from personal liability for the tax.
The special lien substitutes for the estate tax lien that might
otherwise apply. Although IRS may not require that the executor
designate property as lien property in excess of the sum of the
deferred tax and interest, you might consider voluntarily
designating in excess of the deferred tax and interest. The reason
for designating more than the minimum amount required is that if the
value of the designated property decreases during the consent
agreement period to less than the amount of the deferred tax and
interest, more property must be designated. In order to avoid a
situation where you may find it difficult to obtain consents from
interested parties in the future, you might find it easier to
designate more property now.
If you would like to discuss this area further or have any
additional questions, please call.