Treasury Decision 7941

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T.D. 7941
Treasury Decisions
Copyright 2007 LexisNexis Group, All Rights Reserved
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 20 and 301
49 FR 4467
Special Lien for Estate Taxes Deferred Under Section 6166 or 6166A; Procedure and Administration
T.D. 7941
DATE: February 7, 1984
ACTION: Final regulations.
SUMMARY: This document contains final regulations relating to a special lien under section 6324A
for estate taxes deferred under section 6166 or 6166A. Changes to the applicable law were made by
the Tax Reform Act of 1976, the Revenue Act of 1978, and the Economic Recovery Tax Act of 1981.
The regulations would provide the public with the guidance needed to comply with the law and
would affect those estates electing a special lien in favor of the United States on property as security
for deferred payments of estate tax.
DATES: These regulations are generally effective for estates of decedents dying after December 31,
1976. The regulations necessitated by the Economic Recovery Tax Act of 1981 are effective for
estates of decedents dying after December 31, 1981.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT: Neil W. Zyskind of the Legislation and Regulations Division,
Office of the Chief Counsel, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington,
D.C. 20224, Attention: CC:LR:T, (202) 566-3287, not a toll-free call.
SUPPLEMENTARY INFORMATION:
Background
On May 11, 1983, the Federal Register published proposed amendments to the Estate Tax

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Regulations (26 CFR Part 20) and to the Procedure and Administration Regulations (26 CFR Part
301) under section 6324A of the Internal Revenue Code of 1954 (48 FR 21167). No comments were
received and no public hearing was requested. Furthermore, no substantive changes have been
made to the rules contained in the proposed regulations.
This Treasury decision is issued under the authority contained in sections 6324A(a) and 7805 of the
Internal Revenue Code of 1954 (90 Stat. 1808, 68A Stat. 917; 26 U.S.C. 6324A(a), 7805).
Summary
Section 6324A permits the executor of a decedent's estate to elect a lien on section 6166 property
in favor of the United States in lieu of a bond or personal liability if an election under section 6166 or
6166A (as in effect prior to its repeal by the Economic Recovery Tax Act of 1981) was made. The
election under section 6324A will not be effective unless all parties having an interest in the property
subject to the lien sign an agreement in which they consent to the creation of the lien. Regulations
concerning the election of and agreement to the lien may be found in § 301.6324A-1.
These regulations define the term "section 6166 lien property" and determine the maximum value of
the property which the district director may require as section 6166 lien property. Section
20.6324A-1(b)(3) indicates when the district director may require additional property to be subject
to the lien under section 6324A. Section 20.6324A-1(c) discusses the period and priorities of a
section 6324A lien.
Special Analysis
The Commissioner of Internal Revenue has determined that this final rule is not a major rule as
defined in Executive Order 12291 and that a Regulatory Impact Analysis is therefore not required.
Although a notice of proposed rulemaking which solicited public comments was issued, the Internal
Revenue Service concluded when the notice was issued that the regulations are interpretative and
that the notice and public procedure requirement of 5 U.S.C. 533 did not apply. Accordingly, the
final regulations do not constitute regulations subject to the Regulatory Flexibility Act (5 U.S.C.
chapter 6).
The collection of information requirements contained in this regulation have been submitted to the
Office of Management and Budget (OMB) in accordance with the requirements of the Paperwork
Reduction Act of 1980. These requirements have been approved by OMB and have been assigned
No. 1545-0754.
Drafting Information
The principal author of these regulations is Neil W. Zyskind of the Legislation and Regulations
Division of the Office of Chief Counsel, Internal Revenue Service. However, personnel from other
offices of the Internal Revenue Service and Treasury Department participated in developing the
regulations, both on matters of substance and style.
List of Subjects
26 CFR Part 20
Estate taxes.
26 CFR Part 301
Administrative practice and procedure, Bankruptcy, Courts, Crime, Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes, Investigations, Law enforcement, Penalties, Pensions,
Statistics, Taxes, Disclosure of information, Filing requirements.
Adoption of Amendments to the Regulations

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Accordingly, 26 CFR Parts 20 and 301 are amended as follows:
§ 20.2204-1 [Amended]
Paragraph 1. Section 20.2204-1 is amended as follows:
(a) Paragraph (a) is amended by removing the phrases "(1 year with respect to the estate of a
decedent dying before January 1, 1974)" and "(1 year if applicable)" wherever they appear.
(b) Paragraph (b) is amended by removing the phrases "(1 year with respect to the estate of a
decedent dying before January 1, 1974)" and "(or 1 year period if applicable)" wherever they
appear.
Par. 2. A new § 20.2204-3 is added immediately following § 20.2204-2 to read as set forth below.
PART 20 -- [AMENDED]
§ 20.2204-3 Special rules for estates of decedents dying after December 31, 1976; special lien
under section 6324A.
For purposes of §§ 20.2204-1(b) and 20.2204-2(b), in the case of a decedent dying after December
31, 1976, if the executor elects a special lien in favor of the United States under section 6324A,
relating to special lien for estate taxes deferred under sections 6166 or 6166A (as in effect prior to
its repeal by the Economic Recovery Tax Act of 1981), such lien shall be treated as the furnishing of
a bond with respect to the amount for which the time for payment has been extended under section
6166. If an election has been made under section 6324A, the executor may not thereafter substitute
a bond pursuant to section 2204 in lieu of that lien. If a bond has been supplied under section 2204,
however,the executor may, by filing a proper notice of election and agreement, substitute a lien
under section 6324A for any part or all of such bond. See §§ 20.6324A-1 and 301.6324A-1 for rules
relating to a special lien under section 6324A.
Par. 3. Section 20.6324A-1 is revised to read as set forth below.
§ 20.6324A-1 Special lien for estate tax deferred under section 6166 or 6166A.
(a) In general. If the executor of an estate of a decedent dying after December 31, 1976, makes an
election under section 6166 or 6166A (as in effect prior to its repeal by the Economic Recovery Tax
Act of 1981) to defer the payment of estate tax, the executor may make an election under section
6324A. An election under section 6324A will cause a lien in favor of the United States to attach to
the estate's section 6166 lien property, as defined in paragraph (b)(1) of this section. This lien is in
lieu of the bonds required by sections 2204 and 6165 and in lieu of any lien under section 6324 on
the same property with respect to the same estate. The value of the property which the district
director may require under section 6324A as section 6166 lien property may not exceed the sum of
the deferred amount (as defined in paragraph (e)(1) of this section) and the required interest
amount (as defined in paragraph (e)(2) of this section). The unpaid portion of the deferred amount
(plus any unpaid interest, additional amount, addition to tax, assessable penalty, and cost
attributable to the deferred amount) shall be a lien in favor of the United States on the section 6166
lien property. See § 301.6324A-1 of this chapter (Regulations on Procedure and Administration) for
provisions relating to the election of and agreement to the special lien for estate tax deferred under
section 6166 or 6166A (as in effect prior to its repeal by the Economic Recovery Tax Act of 1981).
(b) Section 6166 lien property.- (1) In general. Section 6166 lien property consists of those
interests in real and personal property designated in the agreement referred to in section 6324A (c)
(see paragraph (b) of § 301.6324A-1 of this chapter). An interest in property may be designated as
section 6166 lien property only to the extent such interest can be expected to survive the deferral
period (as defined in paragraph (e)(3) of this section). Property designated, however, need not be
property included in the decedent's estate.
(2) Maximum value of required property. The fair market value of the property required by the

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district director to be designated as section 6166 lien property with respect to any estate shall not
be greater than the sum of the deferred amount and the required interest amount, as these terms
are defined in paragraphs (e) (1) and (2) of this section. However, the parties to the agreement
referred to in section 6324A (c) may voluntarily designate property having a fair market value in
excess of that sum. The fair market value of the section 6166 lien property shall be determined as of
the date prescribed in section 6151(a) (without regard to any extension) for payment of the estate
tax. Such value must take into account any encumbrance on the property (such as a mortgage or a
lien under section 6324B).
(3) Additional lien property may be required. If, at any time, the unpaid portion of the deferred
amount and the required interest amount exceeds the fair market value of the section 6166 lien
property, the district director may require the addition of property to the agreement in an amount
up to such excess. When additional property is required, the district director shall make notice and
demand upon the agent designated in the agreement setting forth the amount of additional property
required. Property having the required value (or other security equal to the required value must be
added to the agreement within 90 days after notice and demand from the district director. Failure to
comply with the demand within the 90-day period shall be treated as an act accelerating payment of
installments under section 6166(g) or 6166A(h) (as in effect prior to its repeal by the Economic
Recovery Tax Act of 1981).
(4) Partial substitution of bond. See paragraph (c) of § 301.6324A-1 of this chapter for rules relating
to the partial substitution of a bond for the lien where the value of property designated as section
6166 lien property is less than the amount of unpaid estate tax plus interest.
(c) Special rules. -- (1) Period of lien. The lien under section 6324A arises at the earlier of the date (i) The executor is discharged from liability under section 2204; or
(ii) Notice of lien is filed in accordance with § 301.6323(f)-1 of this chapter.
The section 6324A lien continues until the liability for the deterred amount is satisfied or
becomes unenforceable by reason of lapse of time. The provisions of § 301.6325-1(c),
relating to release of lien or discharge of property, shall apply to this paragraph (c)(1).
(2) Requirement that lien be filed. The lien imposed by section 6324A is not valid against a
purchaser (as defined in paragraph (f) of § 301.6323(h)-1), holder of a security interest (as defined
in paragraph (a) of § 301.6323(h)-1), mechanic's lienor (as defined in paragraph (b) of § 301.6323
(h)-1), or judgment lien creditor (as defined in paragraph (g) of § 301.6323(h)-1) until notice of the
lien is filed. Once filed, the notice of lien remains effective without being refiled.
(3) Priorities. Although a notice of lien under section 6324A had been properly filed, that lien is not
valid -(i) To the extent provided in section 6323(b)(6), relating to real property tax and special
assessment liens, regardless of whether such liens came into existence before or after the filing of
the notice of Federal tax lien;
(ii) In the case of any real property subject to a lien for repair or improvement, as against a
mechanic's lienor, whether or not such lien came into existence before or after the notice of tax lien
was filed; and
(iii) As against any security interest set forth in section 6323(c)(3), relating to real property
construction or improvement financing agreements, regardless whether such security interest came
into existence before or after filing of the notice of tax lien.
However, paragraphs (c)(3) (ii) and (iii) of this section shall not apply to any security
interest that came into existence after the date of filing of notice (in a manner similar to a
notice filed under section 6323(f)) that payment of the deferred amount has been

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accelerated under section 6166(g) or 6166A(h) (as in effect prior to its repeal by the
Economic Recovery Tax Act of 1981).
(d) Release or discharge of lien. For rules relating to release of the lien imposed by section 6324A or
discharge of the section 6166 lien property, see section 6325 and § 301.6325-1 of this chapter.
(e) Definitions. For purposes of section 6324A of this section -(1) Deferred amount. The deferred amount is the aggregate amount of estate tax deferred under
section 6166 or 6166A (as in effect prior to its repeal by the Economic Recovery Tax Act of 1981)
determined as of the date prescribed by section 6151(a) for payment of the estate tax.
(2) Required interest amount. The required interest amount is the aggregate amount of interest
payable over the first four years of the deferral period. For purposes of computing the required
interest amount, the interest rate prescribed by section 6621 in effect on the date prescribed by
section 6151(a) for payment of the estate tax shall be used for computing the interest for the first
four years of the deferral period. The 4-percent interest rate prescribed by section 6601(j) shall
apply to the extent provided in that section. For purposes of computing interest during deferral
periods beginning after December 31, 1982, interest shall be compounded daily.
(3) Deferral period. The deferral period is the period for which the payment of tax is deferred
pursuant to the election under section 6166 or 6166A (as in effect prior to its repeal by the
Economic Recovery Tax Act of 1981).
(4) Application of definitions. In the case of a deficiency, a separate deferred amount, required
interest amount, and deferral period shall be determined as of the due date of the first installment
after the deficiency is prorated to installments under section 6166 or 6166A (as in effect prior to its
repeal by the Economic Recovery Tax Act of 1981).
PART 301 -- [AMENDED]
§ 301.6324A-1 [Amended]
Par. 4. Paragraphs (a), (b)(1)(iv), (b)(4), and (f) of § 301.6324A-1 are amended by adding the
phrase "(as in effect prior to its repeal by Economic Recovery Tax Act of 1981)" after each time the
phrase "6166A" appears.
This Treasury decision is issued under the authority contained in sections 6324A(a) and 7805 of the
Internal Revenue Code of 1954 (90 Stat. 1808, 68A Stat. 917; 26 U.S.C. 6324A(a), 7805).
Approved by the Office of Management and Budget under control number 1545-0754.
Roscoe L. Egger, Jr.,
Commissioner of Internal Revenue.
Approved: January 20, 1984.
John E. Chapoton,
Assistant Secretary of the Treasury.
[FR Doc. 84-3321 Filed 2-6-84; 8:45 am]
BILLING CODE 4830-01-M

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