Section 6166(g)(1)(A)

Section 6166(g)(1)(A) provides:

(g) Acceleration of payment

(1) Disposition of interest; withdrawal of funds from business

(A) If-

(i)(I) any portion of an interest in a closely held business which qualifies under subsection (a)(1) is distributed, sold, exchanged, or otherwise disposed of, or

(II) money and other property attributable to such an interest is withdrawn from such trade or business, and

(ii) the aggregate of such distributions, sales, exchanges, or other dispositions and withdrawals equals or exceeds 50 percent of the value of such interest,

then the extension of time for payment of tax provided in subsection (a) shall cease to apply, and the unpaid portion of the tax payable in installments shall be paid upon notice and demand from the Secretary.

Section 6166(a)(1) provides:

(a) 5-year deferral; 10-year installment payment

(1) In general

If the value of an interest in a closely held business which is included in determining the gross estate of a decedent who was (at the date of his death) a citizen or resident of the United States exceeds 35 percent of the adjusted gross estate, the executor may elect to pay part or all of the tax imposed by section 2001 in 2 or more (but not exceeding 10) equal installments.

Section 6166(g)(1)(A), Comment 1:  The 50% threshold amount relates only to the closely held business interest included in the gross estate. It does not relate to the value of the entire business, which might include a portion in which the decedent had no interest at all (e.g., at the time immediately before death the decedent owned less than 100% of a closely held business).


Section 6166(g)(1)(A), Comment 2:  Also see our discussion about why the passive asset rules of subsection 6166(b)(9) do not apply for purposres of the 35% test when qualifying section 6166 business interests are sold shortly after date of death..


Section 6166(g)(1)(A), Comment 3:  Further, if passive assets have properly been excluded from the value of the section 6166 business interest included in the Decedent's gross estate determined immediately before death pursuant to 6166(b)(9), then the post-death sale of those passive assets are not to be included in determining whether the aggregate dispositions or withdrawals from the 6166 business equal or exceed the 50% acceleration threshold amount of subsection 6166(g)(1)(A).