Section 6166(b)(1)(C)

Decedent owned 19% of the voting stock of Corporation A. There are 45 or fewer 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. 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).

Same facts as in Example 10 except that the estate tax value of Decedent's interest in Corporation C also exceeds 35% of the adjusted gross estate. The estate tax value of Decedent's interest in Corporation C is still less than 20% of the total value of Corporation C.
Result: The estate could elect to bifurcate the tax extended under §6166, in which case §6166(c) would not be applicable. With bifurcation, it is enough that the estate tax value of each closely held business interest satisfies the requirement of §6166(b)(1)(C)(i) and exceeds 35% of the adjusted gross estate. The estate tax attributable to both closely held business would independently qualify for separate 14-year §6166(a) extensions.

When both bifurcated elections are regular 14-year §6166(a) extensions, the IRS may limit the amount of tax that is extended at the special 2% interest rate. For dates of death in 2016, the first $592,000 of deferred tax draws interest at the 2% rate; the balance of deferred tax, if any, draws interest at 45% of R% rates. The 2% portion in a bifurcation election would probably be apportioned between the two elections so that the total of both 2% portions equals $592,000. IRS clarification is needed.

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. None of the other shareholders are family members described in §267(c)(4).

Same facts as in Example 2, except three of the other shareholders are family members described in §267(c)(4) who own a total of 15% of the voting stock in Corporation A. When 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).

Same facts as in Example 3, except that even after the automatic attribution of §6166(b)(2)(D) there are still more than 45 shareholders. Result: The discounted estate tax value of Decedent's 19% portion of the voting stock does not qualify for a §6166 election. It does not meet the 20% test of §6166(b)(1)(C)(i).

Same facts as in Example 4, except that Decedent's estate makes a §6166(b)(7) election to attribute the 3 family members' interests to Decedent for purposes of §6166(b)(1)(C)(i). Result: The discounted estate tax value of Decedent's 19% portion of the voting stock qualifies for a §6166 election under §6166(b)(1)(C)(i). However, the maximum deferral period is 9 years, no part of the deferred tax draws interest at the special 2% rate, and the first installment is due on the return due date determined without regard to any extensions of time to file.

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. 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).

Same facts as in Example 7 except that there are more than 45 shareholders in Corporation A after the §6166(b)(2)(B) automatic attribution of the surviving spouse's interest therein to the Decedent. The surviving spouse's interest is also automatically attributed to Decedent for purposes of the 20% test of §6166(c). However, the estate must nevertheless make a §6166(b)(7) election in order to attribute the surviving spouse's interest to Decedent for purposes of meeting the 20% test of §6166(b)(1)(C)(i).

Same facts as in Example 8 except that Decedent's brother, not his surviving spouse, owns 19% of the voting stock in Corporation A.