PURPOSE: This rule establishes the manner of computing interest due on estate tax deficiencies.

1. (1) Interest shall be imposed on all estate tax deficiencies at the rate established pursuant to section 32.065, RSMo, except that—

   1. (A) Where part of a deficiency results from a federal extension of time to pay, interest shall be imposed on that part of the deficiency at the adjusted rate established by Internal Revenue Code section 6621, which rate is subject to periodic change, as it is incorporated into Internal Revenue Code section 6601;
   2. (B) Where all of the deficiency on the federal return resulting from extension of time to pay is eligible for the four percent (4%) interest rate set out in Internal Revenue Code section 6601, (estate consisting largely of interest in closely held corporation), the interest on all of the deficiency on the Missouri return resulting from the federal extension of time to pay shall be computed at the four percent (4%) rate; and
   3. (C) Where part of the deficiency on the federal return resulting from extension of time to pay is eligible for the four percent (4%) interest rate set out in Internal Revenue Code section 6601 (estate consisting largely of interest in closely held corporation), and part must be computed pursuant to the adjusted rate established by Internal Revenue Code section 6621, those rates shall be applied to the deficiency on the Missouri return resulting from the federal extension of time to pay in the same ratio that the portion of the federal deficiency from Missouri sources which is subject to each rate bears to the total federal deficiency from Missouri sources resulting from extension of time to pay.
2. (2) The rates applicable to the federal extension shall only be applied for the period of the federal extension. The rate established pursuant to section 32.065, RSMo shall be used for all other periods.

3. (3) To claim the benefit of subsections (1)(A)–(C), the taxpayer must provide a copy of the federal billing notice and a statement for each year claimed, setting forth—

   1. (A) The percentage of the federal deficiency attributable to the extension of time to pay;
   2. (B) The percentage of the federal deficiency subject to each rate; and
   3. (C) The percentage of subsections (3)(A) and (B) attributable to Missouri sources.
4. (4) Partial payments made on an estate tax deficiency shall be applied first to interest, then to penalty and then to tax. Payment shall be applied among the portions of the deficiency subject to the rates established by section 32.065, RSMo, Internal Revenue Code section 6601 and Internal Revenue Code section 6621 in such proportion as the principal portion of the federal deficiency from Missouri sources subject to each rate shall bear to the total principal amount of the federal deficiency from Missouri sources.
5. (5) When a taxpayer waives restrictions on collection of a deficiency pursuant to Internal Revenue Code section 6213(d) as it is incorporated into Internal Revenue Code section 6601(c), the department shall make notice and demand for payment within thirty (30) days after filing a copy of the waiver with the estate tax section of the Department of Revenue or interest shall not be imposed on the deficiency for the period beginning immediately after thirty (30) days and ending with the date of notice and demand.
6. (6) Where part of a deficiency is not subject to an extension, that amount shall be due on the original due date.
7. (7) The rates established by subsections (1)(A)–(C) shall be the rate for interest accrued after September 27, 1985.

AUTHORITY: sections 32.065, 145.551 and 145.961, RSMo 1986.* Original rule filed Oct. 15, 1985, effective Jan. 26, 1986. Amended: Filed March 31, 1988, effective Sept. 29, 1988. *Original authority: 32.065 RSMo 1982, amended 1986, 1995; 145.551, RSMo 1980, amended 1985, 1986, 1987; and 145.961, RSMo 1980.