Section 6166(h) Computation Examples
| Section 6166(h) Example 1 | A very basic example. Date of death is in 2016. The return is filed on the return due date showing zero tax due. The taxable estate is $5,124,400. The closely held business value of $3,000,000 is 58.5434% of the adjusted gross estate. Neither a §6166 election nor a protective §6166 election is filed with the return. An IRS examination increases the value of the closely held business by $2,500,000 and a deficiency results. Interest on Federal estate tax is interrelated with the tax. These are the only changes to the return. |
| Section 6166(h) Example 2 | The facts in Example 1 are modified - there is also an increase of $1,400,000 in the value of non-§6166 assets. The deficiency must be apportioned between the §6166 closely held business amount and the non-§6166 amount. Interest on Federal estate tax is interrelated with the tax. The first $325,600 of an increase in taxable value does not generate any deficiency - it merely brings the value up to the applicable exclusion threshold of $5,450,000, and only after this point does it begin to generate a deficiency. |
| Section 6166(h) Example 3 | Tax was due and paid on the original return filing date. A closely held business interest value was well below the 35% adjusted gross estate threshold. IRS examination changes are made to asset values, and debts on Schedule K are decreased by $1,000,000. Interest is interrelated with the estate tax. Part of the deficiency is eligible for a §6166(h) election. A "Long Form" apportionment example shows how the portion of the deficiency attributable to the closely held business is determined. The §6166(a)(2) ratio limits the amount of tax which may be paid in installments. |
| Section 6166(h) Example 4 | This is a hypothetical based on CCA 201302037. None of the deficiency is attributable to a closely held business. The estate timely filed the estate tax return. Although a §6166 election could have been filed with the return, since the closely held business value exceeded 35% of the adjusted gross estate, neither a §6166 election nor a protective election was filed with the return and the tax was fully paid. An IRS examination resulted in a deficiency, none of which was attributable to the closely held business interest. The closely held business interest still exceeded 35% of the adjusted gross estate. However, because no part of the deficiency was attributable to the closely held businesss interest, no part of the deficiency was eligible for a §6166(h) election. Furthermore, it was too late for the estate to make a regular §6166(a) election. |
| Section 6166(h) Example 5 | Example 4 and the facts of CCA 201302037 are modified to show the consequences had a protective §6166 election been filed with the return. Section 6166(h) is therefore not applicable. A regular §6166(a) election is perfected after the IRS examination is concluded. No part of the deficiency is attributable to the closely held business. However, solely because of the protective election, 100% of the deficiency is payable in installments. |