Current through Register Vol. 61, No. 4, April 1, 2022
(1) An executor may request an extension of
time to pay the estate tax. The extension request must be in writing and
submitted to the department by the date the estate return is due, or 30 days
from the date shown on a notice of deficiency. Collateral determined acceptable
by the department must be secured for payment of the estate tax. An extension
to pay tax does not eliminate penalties for late filing of a return, and
interest continues to accrue on unpaid tax at the rate provided in OAR
150-305-0140. See OAR
150-118-0170.
(a) If a
federal extension of time to pay has been obtained and acceptable collateral is
secured for payment of the Oregon estate tax, the department will grant an
extension to pay the Oregon estate tax for the same period of time as an
approved federal extension. The executor must submit the Oregon extension
request in writing and the estate must secure acceptable collateral for payment
of the Oregon estate tax. A copy of the accepted federal extension must be
submitted with the Oregon return.
(b) If reasonable cause exists and acceptable
collateral is provided to the department, the department may grant an extension
of time for payment of estate tax for up to 14 years, or, in the case of an
estate tax deficiency, for a period of up to four years. If a federal extension
of time to pay federal estate tax has been granted, the department may extend
additional time for the payment of Oregon estate tax for up to 14 years if
reasonable cause exists and collateral acceptable to the department is
provided.
(2) In
general, reasonable cause exists if:
(a) The
estate can pay the tax only by disposing of property for less than market value
or by borrowing money at a rate in excess of the mortgage money market (on
terms that would inflict loss on the estate), or
(b) The gross taxable estate includes a
beneficial interest in one or more closely held businesses whose value exceeds
either 35 percent of the gross taxable estate or 50 percent of the net taxable
estate. For purposes of this rule:
(A)
"Interest in a closely held business" means, as determined immediately before
the decedent's death, an interest that was:
(i) An interest as a proprietor in a trade or
business carried on as a proprietorship;
(ii) An interest as a partner in a
partnership carrying on a trade or business, if the gross taxable estate
includes 20 percent or more of the total capital interest in that partnership,
or the partnership had 15 or fewer partners;
(iii) Stock in a corporation carrying on a
trade or business, if 20 percent or more of the voting stock of such
corporation is included in the gross taxable estate, or such corporation had 15
or fewer shareholders. Stock, or a partnership interest, that is held by
spouses in a marriage as community property or as joint tenants, tenants by the
entirety, or tenants in common, is treated as owned by one shareholder or one
partner, whichever is applicable.
(B) "Trade or business" does not include an
investment or holding company;
(C)
An extension only applies to the portion of tax attributable to the closely
held business. To determine the portion of tax attributable to the closely held
business, divide the value of the interest in the closely held business by the
taxable estate amount, and multiply that ratio by the computed net tax.
Example 1: A's estate assets included a retail
store valued at $900,000 that had been operated by the decedent. Listed
securities, cash, a family residence and miscellaneous personal effects made up
the balance. The taxable estate was $1,300,000. The department may grant an
extension for the payment of tax on the portion attributable to the value of
the store; i.e. $900,000 divided by $1,300,000 multiplied by tax owed.
Example 2: B's taxable estate of $1,400,000
included $950,000 of stock in a closely held corporation. The balance of the
property was listed securities and personal effects. The corporation was a
holding company with the majority of corporate assets invested in real estate.
The estate could not show that money could only be borrowed on terms that would
inflict loss upon the estate. The department will not grant an extension of
time to pay the tax.
Example 3: C's taxable estate of $2,100,000
included farm land valued at $1,050,000. The balance of the estate was real
property, listed securities, cash and personal effects. The estate leased the
farm land for cash rent, which is considered an investment in real property and
not a trade or business; the department will not grant an extension for payment
of tax.
Example 4: D's taxable estate of $1,200,000
included a tree farm valued at $800,000. The farm consisted of all
pre-merchantable timber. The estate demonstrated that the farm could only be
sold at a sacrifice price in a depressed market and that money could only be
borrowed on terms that would inflict loss upon the estate. The department may
grant an extension for payment of the tax that is attributable to the tree
farm's value of $800,000.
(3) For purposes of subsection (2)(a) of this
rule, if a liquid market exists for property, then fluctuations in the market
value of the property will not create reasonable cause for an extension of time
to pay the estate tax. However, if no liquid market exists for the property and
the lack of a liquid market would require the estate to sell the property for
less than its market value, the department may determine that there is
reasonable cause for an extension.
(4) The department generally will accept the
following as collateral for purposes of extending the date for payment of tax:
(a) A first mortgage or trust deed on real
property with a value at least double the amount of the tax paid on extension;
(b) A surety bond executed by a
corporation licensed to do business in the State of Oregon. The bond must be at
least double the amount of the tax paid on extension and must be renewed every
five years.
(5)
Collateral must be received within 60 days from the date the estate return is
due, or within 60 days from the date the estate return is filed, whichever is
earlier.
(6) The executor must
make payments in at least equal annual installments for the tax paid on
extension, plus accrued interest. The department may cancel an extension of
time to pay and collect the tax plus interest if any installment is not paid on
or before its due date.
(7) The
department may cancel an extension of time to pay and collect the tax plus
interest if the value of the interest in a closely held business is reduced by
one-third or more through sale, exchange or other disposition, or through
aggregate withdrawals of money or other property.
Notes
Or.
Admin. R. 150-118-0150
12-31-77; TC
9-1978, f. 12-5-78, cert. ef. 12-31-78; TC 19-1979, f. 12-20-79, cert. ef.
12-31-79; RD 4-1997, f. 9-12-97, cert. ef. 12-31-97; REV 10-2009, f. 12-21-09,
cert. ef. 1-1-10; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f.
& cert. ef. 12-26-13; Renumbered from 150-118.225,
REV
9-2016, f. 8-10-16, cert. ef.
9/1/2016;
REV
82-2016, f. 12-28-16, cert. ef.
1/1/2017
Stat. Auth.: ORS
305.100
Stats. Implemented: ORS
118.225
