Section 6166 provides for the installment payment of estate tax attributable to the value of a closely held business included in a dedecent's gross estate. The provisions for qualifying that closely held business interest for an extension of time to pay estate tax under section 6166 are complex. The rules for maintaining an estate's qualification to pay the estate tax in installments are strictly interpreted by the IRS, as are the rules for accelerating and terminating an extension of time to pay which was previously granted.
By definition, the following taxes cannot be deferred under section 6166:
- Gift tax (imposed by section 2501);
- Generation-Skipping Transfer tax (imposed by section 2601 – but see the NOTE below);
- The section 2032A special use valuation recapture tax (imposed by section 2032A(c));
- The section 2057 QFOBI recapture tax (imposed by section 2057(f));
- The section 4980A additional estate tax on excess retirement accumulations (imposed by section 4981A), which was repealed for estates of decedents dying after December 31, 1996;
- The section 641 income tax on estates; or
- The section 1 personal income tax on beneficiaries of estates.
NOTE: Section 6166(i) provides that the Generation-Skipping Transfer tax generated by direct skips of assets qualifying for section 6166 deferral occurring at the same time and as a result of the decedent’s death will “be treated as though imposed by section 2001.” Thus, while the Generation-Skipping Transfer tax imposed by section 2601 is not deferrable per se, that portion of the GST tax attributable to direct skips of section 6166 assets described above will qualify for deferral because of section 6166(i), which brings this type of GST tax within the deferral provisions of section 6166(a). See PLR 200939003.