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Section 6166(b)(2)(C) - Example 1 (Based on PLR 200006034)
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| This example is based on PLR 200006034. The only mathematical information given in the PLR is that the value of the real estate with building was "approximately 44% of the value of the automotive parts business." The automotive parts business was a single business entity composed of the real estate with building and the operating Corporation. The figures in this example are hypothetical and are based on a 2016 date of death. |
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Section 6166(b)(2)(C) - Example 1 (Based on PLR 200006034)
Closely Held Business Assets Owned by the Grantor Trust on Date of Death
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| Land and building - value is "approximately 44%" of the total business value (43.95% here) | 6,680,000.00 | |||
| 100% of the Corporate stock value | 8,520,000.00 | |||
| Total closely held business value owned by the Grantor Trust | 15,200,000.00 | |||
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Section 6166(b)(2)(C) - Example 1 (Based on PLR 200006034)
Closely Held Business Assets Indirectly Owned by Decedent on Date of Death
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| Land and building - assets used in Decedent's active trade or business as a sole proprietor under § 6166(b)(1)(A) | 6,680,000.00 | |||
| Decedent's stock in a corporation carrying on a trade or business under § 6166(b)(1)(C) | 8,520,000.00 | |||
| Total closely held business value included in Decedent's gross estate | 15,200,000.00 | |||
| §6166(b)(6) Adjusted Gross Estate Computation | ||||
| Gross estate | 40,000,000.00 | |||
| Allowable §2053 and §2054 deductions | 3,180,000.00 | |||
| Section 6166(b)(6) adjusted gross estate | 36,820,000.00 | |||
| §6166(a)(2) Ratio Computation | ||||
| Section 6166 business value | 15,200,000.00 | |||
| Section 6166(b)(6) adjusted gross estate | 36,820,000.00 | |||
| Section 6166(a)(2) ratio - maximum amount of tax which may be paid in installments | 0.412819 | |||
| 6166(b)(2)(C) Example 1, Comment 1: In the PLR, § 6166(b)(2)(C) treats Decedent as having owned outright 100% of the real estate with building as a sole proproietorship and 100% of the stock in Corporation that was carrying on an active trade or business. Both assets were aggregated for purposes of § 6166 in the PLR. The PLR does not specifically mention § 6166(c), which applies when the estate tax values of 2 or more qualifying businesses are to be aggregated for treatment as an interest in a single closely held business, although it does state that "we conclude that these assets are interests in a single closely held business for purposes of section 6166", which is the language used in § 6166(c).) The PLR states that the real estate and building "were clearly essential" to Decedent's automotive supply business and "constituted a fundamental part of the overall operation" of the business. See PLR 8419002, where IRS ruled that a number of fractional interests in oil well drilling partnerships owned by the Decedent, whose estate tax values were each less than 20% of the total partnership value, were assets used in the Decedent's oil production business as a sole proprietor and were not to be treated as separate partnership interests subject to the 20% of total value requirement of § 6166(c). Had § 6166(c) been required in order to aggregate their estate tax values, none of the fractional interests in the oil well drilling partnerships would have constituted an interest in a single closely held business and that decedent's estate would not have been able to defer payment of estate tax under § 6166. Also see Rev. Rul. 2006-34, Example 5 (real estate owned by decedent and leased to decedent's auto dealership both qualified as assets used in an active trade or business for purposes of § 6166). |
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Section 6166(b)(2)(C) - Example 1 (Based on PLR 200006034)
Hypothetical Estate Tax Computation
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| 1 | Gross estate | 40,000,000.00 | ||||
| Schedules J, K, and L deductions | 3,180,000.00 | |||||
| Marital deduction | 0.00 | |||||
| Charitable deduction | 2,500,000.00 | |||||
| 2 | Total allowable deductions | 5,680,000.00 | ||||
| 3a | Tentative taxable estate | 34,320,000.00 | ||||
| 3b | State death tax deduction | 4,958,000.00 | ||||
| 3c | Taxable estate | 29,362,000.00 | ||||
| 4 | Adjusted taxable gifts | 0.00 | ||||
| 5 | Add lines 3c and 4 | 29,362,000.00 | ||||
| 6 | Tentative tax on the line 5 amount | 11,690,600.00 | ||||
| 7 | Total gift tax paid or payable | 0.00 | ||||
| 8 | Gross estate tax | 11,690,600.00 | ||||
| 9a | Basic exclusion amount | 5,450,000.00 | ||||
| 9b | DSUE amount | 0.00 | ||||
| 9c | Applicable exclusion amount | 5,450,000.00 | ||||
| 9d | Applicable credit amount | 2,125,800.00 | ||||
| 10 | Adjustment to applicable credit amount | 0.00 | ||||
| 11 | Allowable applicable credit amount | 2,125,800.00 | ||||
| 12 | Subtract line 11 from line 8 | 9,564,800.00 | ||||
| 13 | Credit for foreign death taxes | 0.00 | ||||
| 14 | Credit for tax on prior transfers | 0.00 | ||||
| 15 | Total credits | 0.00 | ||||
| 16 | Net estate tax | 9,564,800.00 | ||||
| 17 | Generation-Skipping taxes payable | 0.00 | ||||
| 18 | Total transfer taxes | 9,564,800.00 | ||||
| Maximum Amount of Tax Which May be Paid in Installments | ||||||
| Net estate tax | 9,564,800.00 | |||||
| Section 6166(a)(2) ratio - maximum amount of tax which may be paid in installments | 0.412819 | |||||
| Maximum amount of tax which may be paid in installments | 3,948,531.17 | |||||
| Tax not deferred under § 6166 and payable on the return due date | 5,616,268.83 | |||||