6166(b)(2)(C) Example 1

Decedent owned 100% of land with a building that was leased to a Corporation in the automotive supply business, of which he also owned 100%. Both the land with building and all the stock in the Corporation were transferred to a revocable grantor trust. The trust owned 100% of the land with building and 100% of the corporation at the date of death. Under the indirect ownership rules of § 6166(b)(2)(C), the Decedent owned a 100% interest in the land with building as a sole proprietor under § 6166(b)(1)(A) and 100% of the Corporation under § 6166(b)(1)(C). Because the land and building were such an integral and essential part of the automotive supply business, the Decedent's ownership of the land with building was considered an asset used in an active trade or business as a sole proprietor for purposes of § 6166. The Decedent's interest in the Corporation qualified as an interest in a closely held business pursuant to § 6166(b)(1)(C), and the aggregate value of both businesses was treated as an interest in a single closely held business.

6166(b)(2)(C) Example 2

Decedent's revocable grantor trust owned 100% of each of two S Corporations - Corporation 1 and Corporation 2. Corporation 1 owned 100% of each of 5 parcels of commercial real estate (Parcels B, C, D, E, and F), and Corporation 2 owned 100% of Parcel A, a commercial shopping center and office building complex. Decedent's gross estate consisted of his interest in the revocable grantor trust and other assets not relevant to the ruling request. The figures in this computation example are hypothetical and are based on a 2016 date of death.

Section 6166(b)(2)(B) Example 1

Decedent and his wife each owned a 25% interest in Closely Held Business A. The estate tax value of Decedent's 25% interest is less than 35% of the §6166(b)(6) adjusted gross estate. While the wife's 25% interest is automatically attributed to Decedent by §6166(b)(2)(B) for purposes of determining the number of shareholders or partners, as the case may be, the wife's 25% interest cannot be added to Decedent's interest for purposes of satisfying the 35% threshold requirement of §6166(a)(1), and the estate tax value of Decedent's interest in A does not qualify for a §6166 extension.
6166(b)(2)(B) Example 2 Facts in Example 1 are brought forward. At date of Death, Decedent also owned a 50% interest in Closely Held Business B. The combined value of both business interests exceeds 35% of the adjusted gross estate. However, §6166(c) requires that Decedent must have owned 20% or more of the total value of each business before their values can be combined to be treated as an interest in a single closely held business for purposes of §6166. Section 6166(b)(2)(B) does not address this problem (it is limited to determining the number of shareholders or partners).

Section 6166(b)(2)(B) Example 2

§6166(c) provides: "For purposes of this section, interest in 2 or more closely held businesses, with respect to each of which there is included in determining the value of the decedent's gross estate 20 percent or more of the total value of each such business, shall be treated as an interest in a single closely held business. For purposes of the 20-percent requirement of the preceding sentence, an interest in a closely held business which represents the surviving spouse's interest in property held by the decedent and the surviving spouse as community property or as joint tenants, tenants by the entirety, or tenants in common shall be treated as having been included in determining the value of the decedent's gross estate." The surviving spouse's percentage ownership interest in Business A is automatically attributed to Decedent for purposes of satisfying this 20% test. The combined business value qualifies under §6166(c) for a §6166 extension without the requirement of making a §6166(b)(7) election.
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