a discharge from this liability. The fiduciary will be notified after the executor is discharged or after 6 months from the making of his own application, whichever is later, the amount of tax if any that he is liable for. Upon payment of this amount (other than the amount for which an extension of time to pay the tax has been granted), and upon furnishing a bond (if required), the fiduciary shall be discharged from personal liability for any such tax thereafter found to be due. This does not preclude, however, the assessment and collection of any deficiency in estate tax from the fiduciary out of the assets still in his possession.

If the decedent died without a will, or his will did not specify out of which bequests to satisfy the Federal estate tax, State law will determine which assets included in the gross estate are liable. However, if the assets designated by state law are insufficient to pay the estate tax, the Federal Government may collect the taxes out of any asset or assets included in the gross estate. The beneficiaries of these assets are liable to the extent of the value of the assets received, valued on the decedent's date of death. In such a case a beneficiary may demand a reimbursement out of any part of the estate still undistributed, or a just and equitable contribution by other beneficiaries.

The executor may recover for the benefit of the estate a proportionate share of the Federal estate tax from a beneficiary of life insurance proceeds on the life of the decedent and included in the gross estate, unless the decedent's will directs otherwise or, if the surviving spouse is the beneficiary of the life insurance proceeds, only the amount in excess of the marital deduction may be recovered.

The executor may also recover for the benefit of the estate a proportionate share of the Federal estate tax from a person who receives property that was subject to a general power of appointment and was included in the decedent's gross estate, unless the decedent's will directs otherwise, or, if the surviving spouse is that person, only amounts in excess of the marital deduction.

Generally, no tax may be assessed later than 3 years after the estate tax return is filed or is due, whichever is later. The period of assessment is 6 years if 25 percent or more of the gross estate is not reported on the return.

Once the tax has been assessed, a tax lien will attach to all property included in the gross estate (except property used to pay certain administrative expenses and claims) to cover the assessment. The lien will be considered to attach at decedent's date of death and will not lapse until 10 years after that date.

If the estate tax is not paid when due, all persons receiving such property are personally liable for the tax to the extent of the value of the property on the date of the decedent's death.

THE ESTATE TAX RETURN

A Federal estate tax return, if required, is due 9 months (15 months if the decedent died before 1971) after the date of the decedent's death. This time limit applies to all estates regardless of the nationality or residence of the decedent.

In the case of the estate of a citizen or resident of the United States, a Form 706 Estate Tax Return must be filed by the executor or administrator if the value of the gross estate was in excess of $60,000 on the

date of death. Form 706 should be filed with the Internal Revenue Service Center serving the district in which the decedent was domiciled at the time of his death. Hand-carried returns may be filed with the District Director of the Internal Revenue District in which the decedent was domiciled at his death. If the decedent was domiciled outside the United States at the time of his death, the return should be filed with the Internal Revenue Service Center, Philadelphia, Pa. 19155.

In the case of a nonresident not a citizen of the United States, a Form 706NA Estate Tax Return should be filed if the part of the decedent's gross estate situated in the United States (plus any foreign corporation stock in the case of certain expatriates) was in excess of $30,000 on the date of death. The Form 706NA should be filed with the Internal Revenue Service Center, Philadelphia, Pa. 19155, by the executor or administrator.

The return must be accompanied by various documents pertinent to the determination of tax liability. These include a certified copy of the will if the decedent died testate, copies of instruments executed in connection with transfers of property by the decedent in his lifetime or by others, if the decedent was granted certain benefits, and statements on Form 712 which is to be obtained from the insurance company for each insurance policy listed in the return. If the return lists shares of stock in closely held corporations or interests in partnerships, documents that are an aid in determining the value of the property must be furnished, such as balance sheets, profit and loss statements for each of the 5 years preceding the valuation date, and statements of dividends paid during that period. With returns for estates of nonresident citizens, the following must also be submitted: a certified copy of any inventory of property and schedule of liabilities, claims against the estate, and expenses of administration filed with the foreign court of probate jurisdiction; and a certified copy of any return filed under an applicable foreign inheritance, estate, legacy, or succession tax act. If deductions are claimed for the estate of a nonresident not a citizen, a copy of the inventory of property filed under the foreign death tax act must be included. If no such inventory was filed, a certified copy of the inventory filed with the foreign court of probate jurisdiction must be included. Failure to include these documents will delay the processing of the estate tax return.

Penalties are provided for willful failure to make and file a return on time and for willful attempts to evade or defeat payment of tax.

EXTENSION OF TIME TO FILE RETURN

If it is impossible or impracticable to file a reasonably complete return within 9 months from date of death, the Internal Revenue Service Center where the return is to be filed may, upon request and upon a showing of good and sufficient cause, grant a reasonable extension of time for filing the return. No extension can be granted for more than 6 months from the due date of the return unless the person liable for filing the return is abroad. The application to the Service Center for an extension of time should, if possible, be made before the due date for filing and must contain a full explanation of the causes of the delay. An extension of time to file the return does not extend

PAYMENT OF THE TAX

The tax shown on the estate tax return is to be paid at the time and place designated for filing the return. The time for payment is not extended by the granting of an extension of time to file the return. The time for payment may, however, be extended under conditions discussed below.

Treasury bonds of certain issues, owned by the decedent at the time of his death, may be redeemed, at par value plus accrued interest, to pay the estate tax. Certain other obligations of the United States may also be used for the payment of the tax if their acceptability is expressly provided by the terms of their issue.

EXTENSION OF TIME TO PAY THE TAX

An executor or administrator may request an extension of time for paying the estate tax for a period not to exceed 12 months from the date fixed for the payment and such a request will be granted whenever there is reasonable cause. An extension of time to pay does not extend the time for filing the return. Reasonable cause is not limited to a showing of "undue hardship." It includes cases in which the executor or administrator is unable to readily marshal liquid assets because they are located in several jurisdictions; or the estate is largely made up of assets in the form of payments to be received in the future, such as annuities, copyright royalties, contingent fees, or accounts receivable; or the assets that must be liquidated to pay the estate tax must be sold at a sacrifice or in a depressed market. Any such reasonable justification generally will be honored by the Internal Revenue Service Center where the return is to be filed. The estate may be granted an extension of up to 12 months to pay the estate tax.

If the Service Center finds that payment, on the due date, of any part of the tax shown on the return would impose undue hardship upon the estate, it may extend the time for payment for a period or periods not. to exceed 1 year for any one period, up to a total of not more than 10 years from the due date. The term "undue hardship" means more than just an inconvenience to the estate. Therefore, an extension will not be granted on the basis of a general statement alleging hardship. However, the necessity for selling an interest in a family business that is included in the gross estate, to people not related to the family, would be an undue hardship even though a price equal to the current fair market value could be realized.

If the gross estate includes a reversionary or remainder interest in property, the payment of the part of the tax attributable to that interest may, at the election of the executor, be postponed until 6 months after that interest falls into possession. Notice of the exercise of the election to postpone the payment of the tax attributable to a reversionary or remainder interest should be filed with the Service Center before the date fixed for the payment of the tax. If it is found that payment of the tax on future interests at the expiration of a period of postponement would result in undue hardship to the estate, the time for payment may be postponed for a further reasonable period or periods not to exceed 3 years.

Payment of the tax attributable to the inclusion in the gross estate of an interest in a closely held business, under certain conditions, and

at the election of the executor, may be made in not more than 10 yearly installments, the first to be paid on or before the date otherwise fixed for the payment of the entire tax. The election by the executor may not be made later than the date fixed for the filing of the return (including extensions). This provision of the law is available only if the value of the interest in the closely held business exceeds 35 percent of the value of the gross estate or 50 percent of the taxable estate of the decedent. For purposes of this provision, the term "interest in a closely held business" means an interest as sole proprietor in a trade or business; an interest as a partner in a partnership having not more than 10 partners, or in which the decedent owned 20 percent or more of the capital; or ownership of stock in a corporation having not more than 10 shareholders, or in which the decedent owned 20 percent or more of the voting stock. The benefit of this provision of the law is available only to estates of decedents who, at time of death, were citizens or residents of the United States.

If an extension of time to pay the tax is granted by the Service Center because payment on the due date would cause undue hardship to the estate, or the executor elects to pay in installments the portion of the tax attributable to an interest in a closely held business, the Service Center may, if it deems necessary, require the executor to furnish a bond for the payment of the tax in an amount not more than double the tax for which the extension is granted. If payment of the tax attributable to a reversionary or remainder interest is postponed, a bond must be furnished.

INTEREST ON TAX UNDERPAID OR POSTPONED

Interest at the rate of 7 percent per annum must be paid on any amount of tax that is not paid on or before the last date prescribed for the payment of the tax. The "last date prescribed" means 9 months from the date of death. The interest rate on underpaid or postponed taxes will be adjusted to the prime interest rate charged by banks during September of any year if the prime rate, rounded to the nearest full percent, is at least a full percentage point more or less than the interest rate then in effect. This adjusted rate will be established by October 15 of that year and become effective on February 1 of the succeeding year. However, an adjustment may not be made earlier than 23 months following the date of any preceding adjustment.

An additional penalty tax of one-half percent a month on the unpaid balance up to a maximum of 25 percent will be imposed if no reasonable cause is shown for the delay.

In cases where:

(1) An extension of time to pay tax is granted to relieve undue hardship;

(2) An election is made to extend payment of tax attributable to a reversionary or remainder interest; or

(3) An election is made to extend payment of the tax attributable to an interest in a closely held business-the rate of interest on the unpaid amount of tax is 7 percent per annum from the expiration of 9 months after the date of death to the period of extension or postponement expires, or the date on which payment is received, whichever is earlier. However, if the full amount of the tax to which the extension

extension or postponement expires, the unpaid amount shall bear interest at the rate of 7 percent per annum from the date of expiration to the date on which payment is received.

The one-half percent a month penalty will also be imposed if no reasonable cause is shown for the delay. No exception to the 7 percent rate is provided in the case of an extension granted for "reasonable cause" not involving "undue hardship."