The following table briefly describes the characteristics of Federal tax liens associated with federal estate tax liabilities.

When the executor elects the special valuation under IRC §2032A or IRC §2057, and secures an agreement to the election signed by all parties having an interest in the specially valued property, Estate & Gift Tax (E&G) will complete and forward Form 6111 , Notice of Election Under IRC §2032A and/or IRC §2057, to Advisory with copies of the following documents:

Verify that each Form 6111 includes a copy of the agreement signed by all ″qualified heirs″ and all other parties having an interest in the property covered by the election. The agreement must designate:

Contact the E&G group manager to resolve any inconsistencies.

Prepare and file Form 668-H , Notice of Federal Estate Lien Under Internal Revenue Laws See Exhibit 5.5.8-1., in the name of the estate and all qualified heirs as shown on Form 6111. Only one Form 668-H will be used unless a local jurisdiction requires separate forms. Recording a copy of the agreement to Form 668-H is not necessary. If the qualifying property consists of the decedent's interest in a closely held corporation, partnership, LLC, etc., consult with Area Counsel to determine if evidence of ownership, such as a stock certificate, must be held as collateral in order for the lien to be effective under local law.

If elections were made under both IRC §2032A and IRC §2057, one Form 668-H reflecting the combined maximum tax subject to recapture may be used.

Form 668-H must be prepared manually. However, a PDF version of the form is available on the intranet at http://publish.no.irs.gov/catlg.html

Mail the completed Form 668-H to the Centralized Case Processing Lien Unit (CCP-LU ) for recording on a Form 3210.

All documents sent with the lien to the recording office will be returned to CCP-LU. The CCP-LU will be responsible for inputting lien indicators; applicable lien fees and forwarding the recorded lien document back to the originating advisor on Form 3210, Document Transmittal, to maintain with the lien file.If a lien is returned to the Advisor due to insufficient funds, return it to the CCP-LU for corrective action. All liens will be sent to:

This team has responsibility for logging in receipt of the estate tax liens; monitoring the recording process and forwarding the recorded liens to the advisor on a Form 3210. CCP-LU will send acknowledgement of receipt of the lien by returning the Form 3210.

Within 7 business days of receipt, the CCP-LU will mail the lien to the recording office for filing. See IRM 5.19.12.2.4 , for Campus processing procedures and lost lien research procedures.

Advisory is responsible for sending the lien to the lien unit on Form 3210, including the estate name, complete SSN, lien type and request for input of TC 582, TC 583 and TC 360 as applicable. Advisory is also responsible for determining if there is an open module on IDRS and will instruct CCP-LU to input applicable lien indicator/fees. In the case of Form 668-H liens, if there is no open module on IDRS, do not request input of lien indicator/fees on the Form 3210.

Advisors are responsible for ensuring receipt of recorded lien from CCP-LU and that lien fees have been input, if applicable. CCP-LU procedures for researching lost liens are outlined in IRM 5.19.12.2.4(14).

At local option, after coordinating payment of recording fees with the CCP-LU , advisors may mail liens for recording directly to recording offices. However, except for exigent circumstances, advisors may not issue OIs requesting that a revenue officer deliver an estate tax lien to a recording agency for filing.

Advisory will maintain an ICS case in the name of the estate until the lien is released. Advisory will also maintain a file of retained lien copies with Form 6111 and associated documentation.

Requests for release of Forms 668-H will be processed by Advisory.

If the qualified heir(s) is requesting a release of lien because the 10 year special use period has elapsed, and assuming no recapture tax is due, instruct the designated agent to submit a written request that the lien be released, including a statement that during the 10 year period no events occurred that would cause recapture of any portion of the tax. The letter should be signed under penalty of perjury. Advisory will consult with the Estate & Gift Tax group manager to determine if any further verification should be secured prior to releasing the lien.

The qualified heir(s) may also request a release of lien because all of the property described on the lien is being sold or removed from special use. In order to receive a release of the lien, the qualified heir(s) must report the recapture event by filing Form 706-A , United States Additional Estate Tax Return (if the section 2032A election was made), or Form 706-D , United States Estate Tax Return Under Code Section 2057, and all tax and interest due must be paid in full. Interest on the Form 706-A begins to accrue at the regular underpayment rate on the date the return is due. Interest on the Form 706-D at the regular underpayment rate is computed from the original due date of the Form 706, not taking into account any extensions of time to file that may have been granted, until the date the recapture tax is paid. Each qualified heir must file a Form 706-A or Form 706-D reporting and paying the tax and interest due that is attributable to their share of the inherited property.

Secured Forms 706-A or 706-D, with any payments and or approved extensions, are forwarded via Form 3210 , overnight mail, to: IRS, Cincinnati Submission Processing Center, 201 W. Rivercenter Blvd., Covington, KY, 41011, Attn: Mail Stop 31. Preparation of a posting voucher is not necessary unless penalties are applicable and being paid. Ensure that the return and check are identified as belonging to the heir and indicate NMF by placing "N" behind the heir's SSN on the return and the check. Enter the tax period in YYYYMM format at the top of the return. The period ended is the earliest date shown on schedule A, column C. For example, if the property disposition date is 3/10/2005, the tax period would be 200503.

Releases of estate tax liens are prepared by advisors and the procedures for recording described in See IRM 5.5.8.4.1. taken to accomplish recording. However, follow up to obtain a copy of a recorded release is not necessary.

Requests for discharge of property described on Form 668-H will be processed by Advisory.

A discharge is necessary if part of the property described on the lien is being sold or removed from special use.

If issuance of a conditional commitment to discharge property from the effects of the lien is necessary, Advisory should request a draft of Form 706-A or Form 706-D from each heir who owns a share of the property being sold or removed from special use. Upon review and approval of the draft(s) by the Estate & Gift Tax (E&G) group manager, Advisory will conditionally commit to the discharge. Upon filing of the Form 706-A or Form 706-D, with full payment of any tax and interest due, the discharge certificate will be provided.

See IRM 5.5.8.4.2(4). for instructions on processing the returns and payments.
Example: A Form 668-H has been recorded in the names of an estate and 4 heirs. The property listed on the lien consists of 6 parcels of real property for which special valuation was elected under IRC §2032A. The heirs want to convert 1 of the parcels to a non-qualified use and submit an application for discharge under IRC §6325(b)(2)(A), along with draft copies of each of their required Forms 706-A showing the recapture tax that will be due. E&G reviews the returns and advises that they reflect the correct amount of recapture tax. Advisory issues a commitment to discharge conditioned upon the receipt of original Forms 706-A and payment of the tax and interest due.

Requests for subordination of property described on Form 668-H will be processed by Advisory.

Although it is possible that the qualified heir(s) may apply for a certificate of subordination under IRC § 6325(d)(2) , almost all requests for subordination will be made under IRC § 6325(d)(3) which directly addresses IRC § 6324B , and provides for the issuance of a certificate of subordination if it is determined that the lien interest of the United States will continue to be adequately secured.

Instructions for applying for a subordination under IRC § 6325(d)(3), are contained in Publication 1153 , How to Apply for a Certificate of Subordination of Federal Estate Tax Lien Under Section 6325(d)(3) of the Internal Revenue Code.

If it is determined that the lien interest of the United States will continue to be adequately secured, issue Form 669-F , Certificate of Subordination of Federal Estate Tax Lien.
Example: A Form 668-H has been recorded in the names of an estate and 2 heirs securing potential recapture tax of $200,000. The property shown on the lien is an apartment building for which special valuation was elected under IRC § 2057 . The fair market value of the property is $1.5 million, and it is unencumbered but for the Form 668-H. The heirs want to borrow $250,000 in order to make renovations to the building and use the property as security for the loan. They apply for a subordination under IRC § 6325(d)(3). Since the United States will be adequately secured after the subordination, Advisory may issue Form 669-F.

For those lien agreements negotiated by Estate & Gift Tax (E&G), Advisory will prepare and record Form 668-J (see Exhibit 5.5.8-2) upon receiving copies of the following documents from E&G:

For those agreements negotiated by Advisory (see Exhibit 5.5.8-3 for an example of the agreement), E&G will forward items B through F above, plus copies of schedules from Form 706 that list and appraise assets. At the option of local Advisory and E&G, E&G may charge out and forward the entire Form 706 rather than furnish copies of these documents. Advisory will contact the representative of the estate and negotiate the posting of a bond or the securing of an agreement to and recording of Form 668-J.

Because E&G cannot complete the survey of the return until Advisory secures a bond or lien, it is important that these cases be worked expeditiously. Advisory will notify E&G upon finalization of the bond or lien agreement and, if applicable, return the exam file. Generally, if the bond or lien agreement cannot be secured within 60 days of receipt due to lack of cooperation from the estate representative, Advisory will return the case to E&G who will then take the necessary action to revoke the IRC § 6166 election.

Form 669-J must be prepared manually. However, a PDF version of the form is available on the intranet at http://publish.no.irs.gov/catlg.html .

Actual lien fees will be manually posted by CCP-LU when the lien is received back from the recording office, see IRM 5.19.12.2.4(12). .

Follow the procedures found at IRM 5.5.8.4.1 for recording of estate tax liens.

If the estate representative chooses to post a bond rather than consent to the recording of a lien, follow the procedures for processing bonds found at IRM 5.6.1.2.1 and IRM 5.6.1.2.3.

Advisory will maintain an ICS case in the name of the estate for which the Form 668-J was recorded until such time as the lien is released. Advisory will also maintain a file of retained lien copies and associated documentation.

The Cincinnati Campus Estate & Gift Tax Department, will, upon receipt of full payment of the liability secured by Form 668-J,coordinate with the Advisory Estate Tax Group to ensure that the 668-J lien is released in a timely manner. Campus will notify the Advisory, Estate Tax Group within 10 working days after receiving notification of payment, through secure e-mail, to release any Form 668-J that may have been recorded.

Requests for release of Form 668-J, and discharge and subordination applications will be processed by Advisory..

Releases- The criteria under IRC § 6325(a) for issuance of a certificate of lien release - liability satisfied or unenforceable or bond accepted - are applicable to Form 668-J. Follow the procedures found at IRM 5.5.8.4.2 for processing estate tax lien releases.

Discharge - Requests for discharge will normally be made under IRC § 6325(c). Provided property equal to the amount of the remaining deferred balance of tax and interest will remain subject to the lien, a certificate may be issued discharging a portion of the property listed on Form 668-J from the lien. As an alternative, under IRC§ 6324A(d)(5), the estate representatives may substitute other property in order to obtain a discharge of all or part of the property listed on the lien. If the disposition of property will result in accelerated payment of all or part of the deferred tax, or if the equity in the remaining property will not equal the remaining deferred balance of tax and interest, the application should be made under IRC §6325(b)(2).

Subordination - Requests for subordination will normally be made under IRC §6325(d)(2). Provided it is determined that the amount realizable by the United States from the property will ultimately be increased, or that the ultimate collection of the tax liability will be facilitated by the subordination, a certificate may be issued.