| Section 6166(b)(1)(C) - Example 6 |
| Decedent and his wife each owned 19% of the voting stock of Corporation A at his death. There are 46 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. |
| The wife's ownership interest is automatically attributed to Decedent under §6166(b)(2)(B) for purposes of determining the number of shareholders, thereby reducing the number to 45. It is therefore not necessary to attribute her percentage of the voting stock to Decedent by way of a §6166(b)(7) election since it is not necessary to satisfy the 20% test of §6166(b)(1)(C)(i). |
| 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). The value of the wife's interest does not increase the estate tax value of Decedent's interest for purposes of the §6166(a)(2) tax computation. |
Section 6166(b)(1)(C) - Example 6 Corporation A - 46 Shareholders Surviving Spouse Also Owns 19% of Voting Stock | ||||
| 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 | |||
| Shares of voting common stock owned by Decedent | 1,900 | |||
| Shares of voting common stock owned by Decedent's wife | 1,900 | |||
| Corporation A Shareholders | ||||
| Total number of shareholders including Decedent | 46 | |||
| Wife - §6166(b)(2)(B) attribution to Decedent | 1 | |||
| Number of shareholders after §6166(b)(2)(B) attribution to Decedent | 45 | |||
| Decedent's Interest in Corporation A | ||||
| Per-share value of voting common stock in Corporation A before discounts | 5,000.00 | |||
| Valuation discounts | 28% | |||
| §6166(b)(4) discounted estate tax value per share | 3,600.00 | |||
| Shares of voting common stock owned by Decedent at date of death | 1,900 | |||
| §6166(b)(4) estate tax value of Decedent's 1,900 shares of voting stock | 6,840,000.00 | |||
| Full value of voting common stock in Corporation A | 50,000,000.00 | |||
| Percentage in value of voting stock in Corporation A included in determining Decedent's gross estate | 13.68% | |||
| Wife's Interest in Corporation A | ||||
| Per-share value of voting common stock in Corporation A before discounts | 5,000.00 | |||
| Valuation discounts | 28% | |||
| §6166(b)(4) discounted estate tax value per share | 3,600.00 | |||
| Shares of voting common stock owned by Wife at date of death | 1,900 | |||
| §6166(b)(4) estate tax value of Wife's 1,900 shares of voting stock | 6,840,000.00 | |||
| Full value of voting common stock in Corporation A | 50,000,000.00 | |||
| Percentage in value of voting stock in Corporation A owned by the surviving spouse | 13.68% | |||
| §6166(b)(1)(C)(i) Percentage in Value of Voting Stock Owned by Decedent | ||||
| No. of Shares | % in Value | |||
| Decedent - 19% of the voting stock | 1,900 | 13.68% | ||
| Wife - 19% of the voting stock. However, it is not necessary to make a §6166(b)(7) election to attribute the wife's percentage in value of voting stock owned to Decedent, as the §6166(b)(2)(B) attribution of her interest to Decedent reduces the number of shareholders to 45, which brings the Decedent's interest alone within the §6166(b)(1)(C)(ii) exception to the 20% in value of voting stock requirement. | 0 | 0% | ||
| Totals | 1,900 | 13.68% | ||
| 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 exceeds 35% of the adjusted gross estate. Less than 20% in value of the voting stock is included in Decedent's gross estate. Decedent's spouse owns 19% of the voting stock in Corporation A. After the automatic attribution of §6166(b)(2)(B), there are 45 shareholders. It is not necessary for Decedent's estate to make a §6166(b)(7) election to attribute the spouse's percentage in value of the voting stock to Decedent for purposes of the 20% test in §6166(b)(1)(C)(i), since the §6166(b)(1)(C)(ii) exception applies. The Decedent's interest in Corporation A qualifies for a regular §6166(a) 14-year extension.
Section 6166(b)(4) provides: For purposes of this section, value shall be value determined for purposes of chapter 11 (relating to estate tax). In this example, the discounted estate tax value of $3,600 per share is related to the $50,000,000 full value of all 10,000 shares when determining the percentage in value of voting stock owned by Decedent and his wife.