largely of interest in closely held business
. . .
(b) Definitions and special rules
(10) Stock in qualifying lending and finance business treated as stock in an active trade
or business company
(A) In general
If the executor elects the benefits of this paragraph, then—
(i) Stock in qualifying lending and finance business treated as stock in an active
trade or business company
For purposes of this section, any asset used in a qualifying lending and
finance business shall be treated as an asset which is used in carrying on a trade or
business.
(ii) 5-year deferral for principal not to apply
The executor shall be treated as having selected under subsection (a)(3) the date
prescribed by section 6151(a).
(iii) 5 equal installments allowed
For purposes of applying subsection (a)(1), ‘‘5’’ shall be substituted for ‘‘10’’.
(B) Definitions
For purposes of this paragraph—
(i) Qualifying lending and finance business
The term ‘‘qualifying lending and finance business’’ means a lending and finance
business, if—
(I) based on all the facts and circumstances immediately before the date of the
decedent’s death, there was substantial activity with respect to the lending and finance
business, or
(II) during at least 3 of the 5 taxable years ending before the date of the
decedent’s death, such business had at least 1 full-time employee substantially all
of whose services were the active management of such business, 10 full-time,
nonowner employees substantially all of whose services were directly related to such
business, and $5,000,000 in gross receipts from activities described in clause (ii).
(ii) Lending and finance business
The term ‘‘lending and finance business’’ means a trade or business of—
(I) making loans,
(II) purchasing or discounting accounts receivable, notes, or installment obligations,
(III) engaging in rental and leasing of real and tangible personal property,
including entering into leases and purchasing, servicing, and disposing of leases
and leased assets,
(IV) rendering services or making facilities available in the ordinary course of a
lending or finance business, and
(V) rendering services or making facilities available in connection with activities
described in subclauses (I) through (IV) carried on by the corporation
rendering services or making facilities available, or another corporation which is a
member of the same affiliated group (as defined in section 1504 without regard to
section 1504(b)(3)).
(iii) Limitation
The term ‘‘qualifying lending and finance business’’ shall not include any interest in an
entity, if the stock or debt of such entity or a controlled group (as defined in section
267(f)(1)) of which such entity was a member was readily tradable on an established
securities market or secondary market (as defined by the Secretary) at any time within 3
years before the date of the decedent’s death.
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6166(b)10) Comment 1: Section 6166(b)(10)(a)(i) provides: For purposes of this section, any asset used in a qualifying lending and finance business shall be treated as an asset which is used in carrying on a trade or business. Accordingly, the passive asset rules of section 6166(b)(9) will not apply to assets held in a section 6166(b)(10) qualifying lending and finance business. Campus Procedures IRM 4.25.2.1.6.10 provides: IRC section 6166(b)(10), provides that an estate may elect to treat all the assets used in a "qualifying lending and finance business" as assets used in carrying on a trade or business. Thus, none of the assets in a "qualifying lending and finance business" will be considered passive assets under IRC section 6166(b)(9). An estate that makes the section IRC section 6166(b)(10) election is required to make its first installment of tax and interest thereon on the date prescribed by IRC section 6151(a) for payment of the tax; the first installment cannot be deferred. In addition, estates that elect IRC section 6166(b)(10) are allowed a maximum of 5 installments of tax, rather than the usual 10. Similarly, Appeals IRM 8.7.4.2.2.12 provides: IRC 6166(b)(10) provides that an estate may elect to treat all the assets used in a "qualifying lending and finance business" as assets used in carrying on a trade or business. Thus, none of the assets in a "qualifying lending and finance business" will be considered passive assets under IRC 6166(b)(9). Estates that make an election under IRC 6166(b)(10) are allowed a maximum of 5 installments of tax, rather than the usual 10, and cannot defer the first installment under IRC 6166(a)(3). Section 6166(b)(10)(A)(i) does not provide a blanket rule that any asset held by a qualifying lending and finance business will qualify for the election - the asset must still be "used" in the qualifying lending and finance business. It remains to be seen how this distinction will be developed in practice.
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6166(b)10) Comment 2: Campus Procedures IRM 4.25.2.1.19 provides: 4.25.2.1.19 (09-11-2009)
IRC section 6166(b)(10) Five Year Deferral-Economic Growth and Tax Relief Reconciliation Act of 2001(EGTRRA) — Effective for Decedents Dying after 12–31–2001 for Qualifying Lending and Finance Business
1. Qualifying Lending and Finance Business follow the same procedures as in IRM 4.25.2.1.7 - IRM 4.25.2.1.17. The only differences are:
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