Discharge Federal Estate Tax Liens Prior to Sale of Property
Generally, before the estate of a decease person can sell real estate, the individual(s) named as executor in the will must probate and be formally appointed as executor. If there is no will, then the closest heir at law must apply to the surrogate’s court to be appointed as administrator of the estate. An administrator would follow the same steps as an executor in order to sell real estate.
Estates with a value in excess of $5,450,000 are subject to federal estate tax pursuant to IRC Section 6324. IRS estate tax liens automatically attach to real property (“real estate”) which was owned by a decedent on her date of death. In order to have this tax lien discharged, the seller must follow these steps in order to close on the sale of the property and have the federal estate tax lien discharged:
The executor of the estate must complete and file IRS Form 4422 and provide the required supporting documents. In order to compete this form you must know the value of all estate assets and expenses. And you must have the required supporting documentation including: the last will and testament, the contract for sale of the real estate, the closing statement or proposed closing statement for the sale (which shows all payments, credits, expenses and offsets), the federal estate tax form 706 and documentation reflecting the value of all the estate’s assets. With Form 4422 the executor must also submit for 8821, a tax information authorization form. Additionally, IRS Form 4422 must be filed at least 45 days prior to the closing of the sale of the real estate.