Iowa Admin. Code r. 701-901.3
Therefore, the Iowa estate tax due and payable is the amount which the maximum credit allowable under 26 U.S.C. Section 2011 exceeds the Iowa inheritance tax paid.
If there is a change in the amount of inheritance tax paid or in the amount of the maximum federal credit allowable for state death taxes paid (such as the result of a federal audit or an audit of the inheritance tax return) which results in an estate tax, or additional estate tax due, the taxpayer has the duty to promptly report the change to the department on an amended return, and pay the tax, or additional tax due, together with any penalty and interest. See Iowa Code section 451.8.
Effective July 1, 1998, there is no longer a requirement for safe deposit boxes to be inventoried and reported to the department prior to the delivery of the assets to the personal representative, transferee, joint owner or beneficiary.
Effective for estates with decedents dying on or after July 1, 1999, all the provisions of Iowa Code chapter 450 regarding liens, determination, imposition, payment, collection of inheritance tax, computation and imposition of penalty and interest upon delinquent taxes and the confidential aspects of the tax return also apply to the administration of estate tax imposed under this chapter, except to the extent that such rules may conflict with Iowa Code chapter 451 and the rules set forth in this chapter. The exceptions of the lien provisions found in Iowa Code section 450.7 do not apply to this chapter.
EXAMPLE 1.
Decedent dies July 3, 1997, a resident of Iowa. The estate was bequeathed in full to inheritance tax-exempt children, except for a $10,000 bequest to one niece.
Total gross assets = | $1,200,000 |
Less debts and expenses (except federal estate tax) | (300,000) |
Federal adjusted gross estate = | $900,000 |
Federal tax computation: | |
gross federal estate tax = | 306,800 |
less 1997 unified credit | (192,800) |
less credit for state death tax paid | (27,600) |
Net federal estate tax due = | $86,400 |
Iowa tax computation: | |
Inheritance tax on niece's bequest | 1,000 |
Iowa estate tax equals the federal credit for state death taxes paid | 27,600 |
Less inheritance tax due | (1,000) |
Estate tax due | 26,600 |
Total Iowa tax due (1,000 + 26,600) = | $27,600 |
All of the decedent's assets have a situs in Iowa; therefore, the full amount of the credit allowable for state death taxes, less the Iowa inheritance tax, is the Iowa estate tax.
For simplicity in Example 2, the values used are the same for federal and state purposes and the debts and expenses are charged to the Iowa estate, even though under Iowa Code section 450.12, certain Minnesota expenses are not deductible in computing the Iowa inheritance tax. All liabilities, except mortgages, are prorated.
EXAMPLE 2.
Decedent dies July 3, 1997, a resident of Iowa, owning a vacation home in Minnesota. The estate was bequeathed in full to inheritance tax-exempt children, except for a $10,000 bequest to one niece.
Total gross assets: | |
Iowa | $950,000 |
Minnesota | 250,000 |
Total | 1,200,000 |
Less debts and expenses (except for federal estate taxes) | (300,000) |
Federal adjusted gross estate = | 900,000 |
Federal tax computation: | |
gross federal estate tax = | 306,800 |
less 1997 unified credit | (192,800) |
less credit for state death tax paid | (27,600) |
Net federal estate tax due = | 86,400 |
Iowa tax computation: | |
Inheritance tax on niece's bequest | 1,000 |
Iowa estate tax Proration: Iowa $950,000 Total $1,200,000 = 79.17% | |
Iowa portion of federal credit for state death taxes paid: $27,600 x 79.17% = | $21,850.92 |
Less inheritance tax due | ($1,000.00) |
Iowa estate tax = | $20,850.92 |
Total Iowa tax due (1,000 + 20,850.92) = | $21,850.92 |
EXAMPLE 1.
Decedent died a resident of Arizona on July 3, 1997. The estate was bequeathed in full to tax-exempt children.
Total gross estate: | |
Iowa real estate | $750,000 |
Other property | 450,000 |
Total gross estate: | 1,200,000 |
Less debts and expenses (except federal estate tax) | (300,000) |
Net adjusted gross estate = | |
Federal tax computation: | 900,000 |
Gross federal estate tax = | 306,800 |
Less 1997 unified credit | (192,800) |
Less credit for state death tax paid | (27,600) |
Net federal estate tax due = | 86,400 |
Iowa estate tax computation: | |
Inheritance tax = | -0- |
Iowa estate tax proration: | |
Iowa gross $750,000 Total gross $1,200,000 = 62.50% | |
Iowa portion of federal credit for state death tax paid: 27,600 x 62.50% Iowa estate tax = | $17,250 |
EXAMPLE 2.
Decedent died a resident of Arizona on July 3, 1997, with the same property as set forth in Example 1. The estate consisted of four separate $100,000 bequests to non-exempt individuals with the rest of the estate going to charity.
Iowa portion of each bequest: $100,000 x 62.50% = | $62,500 |
Tax on each bequest = | $6,500 |
Total Iowa inheritance tax due: $6,500 x 4 = | $26,000 |
Total estate tax due | -0- |
Iowa tax due = | $26,000 |
The Iowa real property is part of the residual estate from which bequests are paid. See Estate of Dennis M. Billingsley, Emmet County District Court, Case No. 13394 (July 15, 1982).
This rule is intended to implement Iowa Code sections 421.27, 450.63, 451.2, 451.5, 451.6, 451.8, 451.12, and 1997 Iowa Acts, chapter 60, sections 1 and 2.
Iowa Admin. Code r. 701-901.3