| Section 6166(b)(1)(C) - Example 3 |
| Decedent owned 19% of the voting stock of Corporation A. There are more than 45 shareholders. The gross value of Decedent's 19% interest is discounted 28% to arrive at its §6166(b)(4) estate tax value, which is more than 35% of the adjusted gross estate. This is the only business interest for which a §6166 election is contemplated. Three of the other shareholders are family members described in §267(c)(4) who own a total of 15% of the voting stock (5% each). After their ownership interests are automatically attributed to Decedent under §6166(b)(2)(D), there are 45 or fewer shareholders. |
| Result: The discounted estate tax value of Decedent's 19% portion of the voting stock qualifies for a 14-year §6166 election under §6166(b)(1)(C)(ii). |
Section 6166(b)(1)(C) - Example 3 Corporation A - More Than 45 Shareholders Some Shareholders are §267(c)(4) Family Members | |
| Full value of Corporation A | 50,000,000.00 |
| Outstanding shares of voting common stock | 10,000 |
| Per-share value of voting common stock | 5,000.00 |
| Corporation A Shareholders | |
| Total number of shareholders including Decedent | 48 |
| Brother - §6166(b)(2)(D) attribution to Decedent | 1 |
| Sister A - §6166(b)(2)(D) attribution to Decedent | 1 |
| Sister B - §6166(b)(2)(D) attribution to Decedent | 1 |
| Number of shareholders after §6166(b)(2)(D) attribution to Decedent | 45 |
| Corporation Value Included in Decedent's Gross Estate | |
| Per-share value of voting common stock | 5,000.00 |
| Valuation discounts | 28% |
| Discounted estate tax value per share | 3,600.00 |
| Shares of voting common owned by Decedent at date of death - 19% of the total | 1,900 |
| §6166(b)(4) estate tax value of Decedent's interest in Corporation A | 6,840,000.00 |
| §6166(b)(6) Adjusted Gross Estate Computation | |
| Gross estate | 20,840,000.00 |
| Sections J, K, and L deductions - §2053 and §2054 | 5,250,000.00 |
| §6166(b)(6) adjusted gross estate | 15,590,000.00 |
| §6166(a)(2) Ratio Computation | |
| Section 6166 closely held business amount | 6,840,000.00 |
| Section 6166(b)(6) adjusted gross estate | 15,590,000.00 |
| Section 6166(a)(2) ratio - maximum amount of tax which may be paid in installments - Qualifies for a §6166(a) 14-year Extension - ratio is greater than 0.350000. | 0.438743 |
There are more than 45 shareholders in Corporation A and the estate tax value of Decedent's interest in Corporation A exceeds 35% of the adjusted gross estate. Less than 20% in value of the voting stock in Corporation A is included in Decedent's gross estate. Three of the other shareholders are family members described in §267(c)(4). After the automatic attributions of §6166(b)(2)(D), there are 45 shareholders. The Decedent's interest in Corporation A qualifies for a §6166 extension. When there are 45 or fewer shareholders, §6166(b)(1)(C)(ii) provides an exception to the requirement that Decedent's gross estate must include 20% or more in value of the voting stock in Corporation A.
The §6166(b)(2)(D) attributions to Decedent are only for purposes of determining the number of partners or shareholders in the Corporation, as the case may be. The estate tax value of Decedent's interest in the Corporation is not augmented by the family members' interests.