Section 6166(c) Computation Examples
| Section 6166(c) Example 1 | Decedent owned a single closely held business. There were fewer than 45 partners or shareholders. The discounted estate tax value is 13% of the full value of the closely held business, which happens to be greater than 35% of the adjusted gross estate. Section 6166(c) is not involved as there is only one business. The estate can elect to defer payment of the maximum amount of tax which may be paid in installments. |
| Section 6166(c) Example 2 | Facts from Example 1 are modified. In addition to the interest owned in the first business ("Business 1") the Decedent owned an interest in a second business ("Business 2"). The estate tax value of Business 2 was greater than 20% of the full business value but was less than 35% of the adjusted gross estate. The estate tax values of both businesses cannot be aggregated under §6166(c) because the estate tax value of Business 1 is less than 20% of its full value. Only the tax attributable to Business 1 can be deferred under §6166 because its estate tax value alone is greater than 35% of the adjusted gross estate and there were fewer than 45 partners or shareholders. Neither section 6166(c) nor bifurcation of the tax deferrable under §6166 is available. |
| Section 6166(c) Example 3 | Same facts as in Example 2 except the Decedent's surviving spouse also owned a 20% interest in Business 1, which, after using the same discounts used in determining the estate tax value of the Decedent's interest, equals 13% of the full value. Pursuant to §6166(c), the surviving spouse's interest equal to 13% of the full value is attributed to the Decedent solely for purposes of the 20% of full value test, and the Decedent is treated as having owned an interest with an estate tax value equal to 26% of the full business value. The Decedent's interests in both businesses can be aggregated under §6166(c) to be treated as an interest in a single closely held business. (Only the estate tax value of Decedent's interest in Business 1 is included in the actual §6166(c) aggregation - the value of the surviving spouse's interest is ignored.) |
| Section 6166(c) Example 4 | Decedent owned fractional interests in 10 active trades or businesses, none of which had more than 45 partners or shareholders. The estate tax values of 5 of the businesses exceeded 20% of their respective full business values, while the estate tax values of the other 5 were less than 20% of their respective full values. Family members described in §267(c)(4) owned interests in the 5 businesses whose values in the decedent's estate were less than 20% of their respective full business values. This example illustrates the calculation of the §6166(c) aggregate value with and without a §6166(b)(7) election to attribute the family members' interests to the decedent for purposes of the 20% test of §6166(c). |
| Section 6166(c) Example 5 | Link to Section 6166(b)(2)(B) Example 2 - An illustration showing that, when a decedent's wife owns an interest in the same closely held business as does the decedent, the wife's interest is automatically attributed to the decedent for purposes of the 20% test of §6166(c); an election under §6166(b)(7) is not required. |