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FEATURE STORY
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InterEst
An inter-esting solution to estate and
gift tax deficiency interest calculations
By Donald H. Kelley
Kelley Rating (one asterisk = lowest, five asterisks = highest):
• Ease of navigation, design of interface and learning curve ***
• Instructional documentation and help system ***
• Carries out the goal of the product as advertised ****
• Overall usefulness ****
Inter-Est, a free product is,
according to the publisher, Cecil Cammack, “specifically designed to
compute the federal estate tax for the purpose of IRS audit situations,
etc. It will compute a high percentage of your interrelated federal
estate tax problems…Versions of Inter-Est have been used in IRS audit
situations since 1979. All IRS service centers and many IRS offices
currently use it.” Inter-Est also computes interest on state estate
and inheritance tax deficiencies.
This product is no longer sold or fully supported, but its tables are
still updated. Inter-Est was last upgraded on March 8, 2005, and may be
downloaded from the publisher’s website. Updated tables as of Aug. 2,
2008, including deficiency interest quarterly amounts, also are
available for download. And with the updated tables the program
continues to perform current, appropriate and accurate computations.
Competitive Products
Other programs perform the same basic tax, interest and penalty
calculations as Inter-Est, including deficiency interest for state
taxes, but not the interrelated or Internal Revenue Code Section 6166
calculations Inter-Est provides.
TaxInterest is an
Internal Revenue Service interest and penalties calculator from
TimeValue Software. TaxInterest computes federal (and selected state)
tax deficiency interest calculations and penalties. This service is
available for $149 from: TimeValue Software, 4 Jenner St., Suite 100,
Irvine, Calif. 92618. Telephone: 1-800-426-4741 or 949-727-1800. Fax:
949-727-3268.
IRS/State Interest
and Penalty Calculator calculates state and federal deficiency
interest and penalties. This service is available for $99 from: Denver
Tax Software, P.O. Box 5308, Denver, Colo. 80217-5308. Telephone:
1-800-326-6686, Fax: 1-888-326-6686.
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What’s It All About?
Inter-Est computes federal and state estate tax and interest on
deficiencies. It computes federal interest factors per Revenue
Procedure 83-7 or Rev. Proc. 95-17 (in addition to four other methods)
and applies a number of specialized state interest factors. It computes
the interest-free period after a waiver; restricted interest (supports
TAM 8947005); suspense account for excess interest payments per TAM
9130001; concurrent interest for federal, state, and foreign
jurisdictions and it supports a number of Section 6166 options related
to the nature of the election and allocation of payments.
This program does the interrelated computations for estate tax charged
to the marital deduction (including complex computations of expenses)
and to the charitable deduction. It supports the interrelated
computation of interest on contingent attorney fees. Inter-Est includes
provisions for tax apportionment and expense allocation with numerous
categories of expenses that can be used for allocation purposes to
assist you in completing difficult interrelated computations of marital,
charitable or residue amounts.
It includes calculation of the gift tax credit, the foreign death tax
credit and the interrelated calculation on the second limitation of the
credit for tax on prior transfers (including some states). It does
state deficiency interest computations including the specific methods of
computation for Connecticut, Indiana, Iowa, Kansas, Kentucky, Maryland,
Massachusetts, North Carolina, Nebraksa, New Jersey, New York, Ohio,
Oklahoma, Pennsylvania, Tennessee, Washington and Wisconsin.
The basic format used by the program (referred to as the “case
file”) is familiar to the IRS; it generates an output that may be used
as an exhibit to an estate or gift tax form or a refund claim. In
addition to the basic case file type, Inter-Est generates reports on the
forms used by federal estate tax attorneys for estate and gift tax
reports, including the appeals office report format.
Various tax table templates and IRS forms are available for download
from the Inter-Est home page, including an excel spreadsheet for
interrelated gift tax computations.
How Does It Work?
Data entry for basic federal and state tax interest deficiency
computations is clear and easy to follow. But before attempting more
complex interrelated computations, you should work through the examples
provided by the tutorial. The tutorial
walks you through examples of marital and charitable deductions out of
residue, a charitable deduction with apportionment, interrelated
attorneys fees, a typical computation (with a credit for tax on prior
transfers, interest deduction, marital and charitable bequests out of
residue, and a state tax computation) and several alternate Section 6166
payment computations.
The Inter-Est interface is a single convenient screen. To operate the
program:
• Open a new case file for computation of estate tax deficiency or
Section 6166 interest by clicking on the New or File/New icon and
selecting “Case File.”
• A screen appears with a condensed tabular list of the gross estate,
debts and expenses, marital deduction, charitable deduction, adjusted
taxable gifts, foreign death tax credit, previously taxed property
credit and generation skipping tax.
• Click on a line of any of these items to bring up a dialog box with
prompts for the required data for that line. Each dialog box has a
context-sensitive help screen that explains the data entries and
choices.
• From some dialog boxes a “Complex” subscreen may be called for
data entry for more sophisticated issues
• As you fill in data, computations appear of subtotals of data and
the resultant taxes.
The program doesn’t allow item-by-item entry for the gross estate or
Schedule J and K deductions, but asks for the total amounts of each.
The totals are available from the Form 706 or 709 as filed and from
which the deficiency, and interest thereon, is based.
Press buttons on the side of the screen to select dialogs to instruct
the program as to what you want calculated. These include the
calculation of federal penalties, the type and method of federal
interest (including whether and how you want Section 6166 interest
calculated) and which state or states you want interest computed for and
the state method to apply.
Inter-Est then generates a report (appearing on the same screen as the
data entry) that lists the interest method, the amount of interest by
computational period (with Section 6166 qualified interest and
nonqualified interest separately stated), and the total interest
accumulated from the due date of the return to the date you make the
computation. You may set the view of this screen to various levels of
detail.
The program does not do the gift tax interest calculation, per se.
However, this calculation can be emulated by entry of a gross estate
amount in the year of gift tax deficiency upon which Inter-Est can
compute an estate tax amount equivalent to the gift tax deficiency.
(Article continues below ad.)
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What About Help and Support?
The publisher provides some support and is available for fee-based
computational assistance to users of the program. Inter-Est includes
both an online manual, with detailed descriptions of how to operate the
program and program help, with instructions for operation of each
program screen. The program help is context sensitive. The related
law, however, is not discussed,
Where Do You Get This Software?
This software is available for download without charge from the
publisher’s Web site:
Cecil Cammack, dba Cammack Computations Co.
P. O. Box 725
Cleburne, TX 76033
Voice Line: 1-800-594-5826
Fax Line: (817)645-8273
Website: www.inter-est.com
Bottom Line
Basic computations using Inter-Est are easy to do, although the more
complex calculations require detailed knowledge of the law and
procedures involved and have a significant learning curve. You can’t
beat the value; this program gives you a means for knowing what your
client’s final tax bill on an audit will be and for providing a check
on IRS computations.
Trusts & Estates magazine is pleased to present the monthly
Technology Review by Donald H. Kelley—a respected connoisseur of
the software and Internet resources wealth management advisors use to
further their practices.
Kelley is a lawyer living in Highlands Ranch, Colo. and is of counsel to
the law firm of Kelley, Scritsmier & Byrne, P.C. of North Platte, Neb.
He is the co-author of the Intuitive Estate Planner Software, (Thomson
– West 2004). He has served on the governing boards of the American
Bar Association Real Property Probate and Trust Section and the American
College of Tax Counsel. He is a past regent and past chair of the
Committee on Technology in the Practice of the American College of Trust
and Estate Counsel.
Trusts & Estates has asked Kelley to provide his unvarnished opinions
on the tech resources available in the practice today. His columns are
edited for readability only. Send feedback and suggestions for articles
directly to him at dhkelley@qwestoffice.net.
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