IRS Does Not Have To Refund An Overpayment of Estate Tax When the Overpayment Is Followed by an Installment Payment Election.

The decedent's estate filed Form 4768 requesting an extension of time to file the estate tax return.  Along with Form 4768, the estate paid $2,494,088 in estimated federal estate tax.  Along with the form and payment, the estate advised IRS of its intent to make an I.R.C. Sec. 6166 election to pay the estate tax in installments.  Via a Sec. 6166 election, the estate is divided into a deferred and non-deferred portion, and the tax attributable to the non-deferred portion is due with the Form 4768.  Later, when the Form 706 was prepared and filed, it was determined that estate had overpaid the non-deferred portion by almost $500,000.  The estate sought a refund of the overpayment, which IRS denied.  The court denied the refund request but, based on I.R.C. Sec. 6402 and Sec. 6403, held that the excess amount paid could be applied to the taxes that were eligible for deferral as the installments became due.  The court rejected the estate's argument that by designating the estimated payment as being for the non-deferred portion of the estate tax liability that IRS was bound to that designation and had to refund the excess.  The court also rejected the estate's argument that Sec. 6403 did not apply because the estate had already paid before making the election, and that Sec. 6402 required a refund instead of a credit.  Estate of McNeely v. United States, No. 12-cv-1973, 2014 U.S. Dist. LEXIS 80000 (D. Minn. Jun. 12, 2014).