An estate owning realty must file Form 4422 (Application for Certificate Discharging Property Subject to Estate Tax Lien) with the IRS if it wishes to transfer real property before filing a federal estate tax return.

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tax lien

On April 5, 2017, the IRS issued an internal memorandum concerning the processing of requests for discharging estate tax liens. In the case of an estate wishing to transfer property before filing its federal estate tax return, IRS agents are directed to consider whether the estate has enough assets to provide for its estate tax liability, either through prior payment of estimated federal tax or through the escrow of the proceeds from the transfer of real property that are equivalent to the federal estate tax liability. No escrow is necessary if no federal estate tax is due upon the discharge of the lien. It is no longer necessary for the entire net proceeds from the sale of the property to be deposited into an escrow account or into the estate’s IRS estate tax account. It is also no longer necessary for the final determination of tax to be made before the release of the escrowed sale proceeds.


Reference: Margery J. Schneider, Tax Update, Probate and Trust Law Section Newsletter, No. 144


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