Section 6166(b)(2)(A) provides:
(2) Rules for applying paragraph (1)
For purposes of paragraph (1)-
(A) Time for testing
Determinations shall be made as of the time immediately before the decedent's death.
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6166(b)(2)(A) Comment 1: This is relatively straightforward. The determination of the nature of the decedent's interest in a sole proprietorship, partnership, or stock in a corporation is made at the moment immediately before the decedent's death. |
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6166(b)(2)(A) Comment 2: The estate tax value of such interest is that which is determined for estate tax purposes and is reported on the decedent's estate tax return pursuant to §6166(b)(4). |
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6166(b)(2)(A) Comment 3: While this provision for the time of testing is relatively straightforward, it has an important effect when sales or dispositions of interests in qualifying closely held business interests occur and the interplay among sections 6166(b)(2)(c), 6166(b)(9), and 6166(g)(1)(A) is considered. |
IRS Rulings
| PLR 8625005 | Decedent was a sole proprietor in the oil production business. He inherited royalty interests and fractional working interests from his sister's estate, but because they had not been distributed to him at his date of death and he had never participated in their management, they could not be included in the value of the sole proprietorship pursuant to §6166(b)(2)(A) and Reg. §20.6166A-2(c)(2). While state law (Texas) immediately vested those interests in the decedent upon his sister's death (subject to payment of her estate debts), it did not affect the Federal result under §6166(b)(2)(A) as of the moment immediately before his death. |
| PLR 9214010 | Decedent was engaged in the ranching business. He received royalty income from producing oil and gas wells on the ranch. While in the past some of the royalty income had been used in the ranching business, none was being used in the business at date of death, and that past usage did not make the royalty interest an asset being used in a trade or business at the time of death. |