Section 6166(c) Example 1


Section 6166(c) - Example 1
Decedent died in 2016 owning an interest in a single closely held business. There were fewer than 45 partners or shareholders. After discounts, the estate tax value of the decedent's interest was 13.00% of the total value of the closely held business. The estate tax value was also 43.0820% of the adjusted gross estate. Because this was the only business interest and there were fewer than 45 partners or shareholders, the tax attributable to this closely held business interest may be paid in installments under §6166; section 6166(c) is not involved.
Total Value of Closely Held Business Percentage Owned by Decedent Gross Value of Decedent's Interest Before Discounts Valuation Discount Value Included in Decedent's Gross Estate Estate Tax Value as a Percentage of Total Value
40,000,000.00 20.00% 8,000,000.00 35% 5,200,000.00 13.00%
Gross estate 14,750,000.00
Allowable §2053 and §2054 deductions 2,680,000.00
§6166(b)(6) adjusted gross estate 12,070,000.00
Closely held business value included in the gross estate 5,200,000.00
§6166(a)(2) ratio for the maximum amount of tax which may be paid in installments .430820
Section 6166(a) is Available - Section 6166(c) 20% Test is Not Applicable
Taxable estate (which in this case happens to be the same as the adjusted gross estate) 12,070,000.00
Net estate tax 2,648,000.00
§6166(a)(2) ratio for the maximum amount of tax which may be paid in installments .430820
Maximum amount of tax which may be paid in installments 1,140,811.36
Estate tax not deferred under §6166 and due on the return due date (determined without regard to any extensions of time to file) 1,507,188.64


6166(c) Example 1, Comment 1:  There is only one closely held business interest to consider, so §6166(c) by definition is not applicable - that is a special rule for interest in 2 or more businesses. In addition, there are fewer than 45 partners or shareholders in the business, which means that 20% in value of the business's voting stock is not required to be included in the Decedent's gross estate in order for it to make a §6166 election. The tax attributable to Decedent's 13% interest in the business can be paid in installments under §6166 because its estate tax value exceeds 35% of the adjusted gross estate in satisfaction of the basic requirement of §6166(a)(1).