§ 6166. Extension of time for payment of estate tax where estate consists largely of interest in closely held business

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1976

   Pub. L. 94–455 title XX § 2004(a) · 90 Stat. 1520

   Enacted · 26 U.S.C. § 6166

   Added Pub. L. 94–455, title XX, § 2004(a), Oct. 4, 1976, 90 Stat. 1862

   Source evidence

   Code source credit
   Added Pub. L. 94–455, title XX, § 2004(a), Oct. 4, 1976, 90 Stat. 1862

   Enacted provision · exact public law section
   (a) General Rule.— Subchapter B of chapter 62 (relating to extensions of time for payment of tax) is amended by redesignating section 6166 as section 6166A and by inserting after section 6165 the following new section: “SEC. 6166. ALTERNATE EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX WHERE ESTATE CONSISTS LARGELY OF INTEREST IN CLOSELY HELD BUSINESS. “(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 65 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. “(2) Limitation.— The maximum amount of tax which may be paid in installments under this subsection shall be an amount which bears the same ratio to the tax imposed by section 2001 (reduced by the credits against such tax) as— “(A) the closely held business amount, bears to “(B) the amount of the adjusted gross estate. “(3) Date for payment of installments.— If an election is made under paragraph (1), the first installment shall be paid on or before the date selected by the executor which is not more than 5 years after the date prescribed by section 6151(a) for payment 26 USC 6151. of the tax, and each succeeding installment shall be paid on or before the date which is 1 year after the date prescribed by this paragraph for payment of the preceding installment. “(4) Eligibility for election.— No election may be made under this section by the executor of the estate of any decedent if an election under section 6166A applies with respect to the estate Ante, p. 1862. of such decedent, “(b) Definitions and Special Rules.— “(1) Interest in closely help business.— For purposes of this section, the term ‘interest in a closely held business’ means— “(A) an interest as a proprietor in a trade or business carried on as a proprietorship; “(B) an interest as a partner in a partnership carrying on a trade or business, if— “(i) 20 percent or more of the total capital interest in such partnership is included in determining the gross estate of the decedent, or “(ii) such partnership had 15 or fewer partners; or “(C) stock in a corporation carrying on a trade or business if— “(i) 20 percent or more in value of the voting stock of such corporation is included in determining the gross estate of the decedent, or “(ii) such corporation had 15 or fewer shareholder’s. “(2) Rules for applying paragraph (1).— For purposes of paragraph (1)— “(A) Time for testing.— Determinations shall be made as of the time immediately before the decedent’s death. “(B) Certain interests held by husband and wife.— Stock or a partnership interest which— “(i) is community property of a husband and wife (or the income from which is community income) under the applicable community property law of a State, or “(ii) is held by a husband and wife as joint tenants, tenants by the entirety, or tenants in common, shall be treated as owned by one shareholder or one partner, as the case may be. “(C) Indirect ownership.— Property owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. For purposes of the preceding sentence, a person shall be treated as a beneficiary of any trust only if such person has a present interest-in the trust, “(3) Farmhouses and certain other structures taken into account.— For purposes of the 65-percent requirement of subsection (a)(1), an interest in a closely held business which is the business of farming includes an interest in residential buildings and related improvements on the farm which are occupied on a regular basis by the owner or lessee of the farm or by persons employed by such owner or lessee for purposes of operating or maintaining the farm. “(4) Value.— For purposes of this section, value shall be value determined for purposes of chapter 11 (relating to estate tax). “(5) Closely held business amount.— For purposes of this section, the term ‘closely held business amount’ means the value of the interest in a closely held business which qualifies under subsection (a)(1). “(6) Adjusted gross estate.— For purposes of this section, the term, ‘adjusted gross estate’ means the value of the gross estate reduced by the sum of the amounts allowable as a deduction under section 26 USC 2053, 2054. Ante, p. 1846. 2053 or 2054. Such sum shall be determined on the basis of the facts and circumstances in existence on the date (including extensions) for filing the return of tax imposed by section 2001 (or, if earlier, the date, on which such return is filed). “(c) Special Rule for Interests in 2 or More Closely Held Businesses.— For purposes of this section, interests 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 more than 20 percent 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. “(d) Election.— Any election under subsection (a) shall be made not later than the time prescribed by section 6075(a) for filing the return of tax imposed by section 2001 (including extensions thereof), and shall be made in such manner as the Secretary shall by regulations prescribe. If an election under subsection (a) is made, the provisions of this subtitle shall apply as though the Secretary were extending the time for payment of the tax. “(e) Proration of Deficiency to Installments.— If an election is made under subsection (a) to pay any part of the tax imposed by section 2001 in installments and a deficiency has been assessed, the deficiency shall (subject to the limitation provided by subsection (a)(2)) be prorated to the installments payable under subsection (a). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax. “(f) Time for Payment of Interest.— If the time for payment of any amount of tax has been extended under this section— “(1) Interest for first 5 years.— Interest payable under section 6601 of any unpaid portion of such amount attributable to the first 5 years after the date prescribed by section 6151(a) for payment of the tax shall be paid annually. “(2) Interest for periods after first a tears.— Interest payable under section 6601 on any unpaid portion of such amount attributable to any period after the 5-year period referred to in paragraph (1) shall be paid annually at the same time as, and as a part of, each installment payment of the tax. “(3) Interest in the case of certain deficiencies.— In the case of a deficiency to which subsection (e) applies which is assessed after the close of the 5-year period referred to in paragraph (1), interest attributable to such 5-year period, and interest assigned under paragraph (2) to any installment the date for payment of which has arrived on or before the date of the assessment of the deficiency, shall be paid upon notice and demand from the Secretary. “(4) Selection of shorter period.— If the executor has selected a period shorter than 5 years under subsection (a)(3), such shorter period shall be substituted for 5 years in paragraphs (1), (2), and (3) of this subsection. “(g) Acceleration of Payment.— “(1) Disposition of interest; withdrawal of funds from business.— “(A) If— “(i) one-third or more in value of an interest in a closely held business which qualifies under subsection (a)(1) is distributed, sold, exchanged, or otherwise disposed of, or “(ii) aggregate withdrawals of money and other property from the trade or business, an interest in which qualifies under subsection (a)(1), made with respect to such interest, equal or exceed one-third of the value of such trade or business, then the extension of time for payment of tax provided in subsection (a) shall cease to apply, and any unpaid portion of the tax payable in installments shall be paid upon notice and demand from the Secretary. “(B) in the case of a distribution in redemption of stock to which section 303 (or so much of section 304 as relates to 26 USC 303. section 303) applies— “(i) subparagraph (A)(i) does not apply with respect to the stock redeemed; and for purposes of such subparagraph the interest in the closely held business shall be considered to be such interest reduced by the value of the stock redeemed, and “(ii) subparagraph (A)(ii) does not apply with respect to withdrawals of money and other property distributed; and for purposes of such subparagraph the value of the trade or business shall be considered to be such value reduced by the amount of money and other property distributed. This subparagraph shall apply only if, on or before the date prescribed by subsection (a)(3) for the payment of the first, installment which becomes due after the date of the distribution (or, if earlier, on or before the day which is 1 year after the date of the distribution), there is paid an amount of the tax imposed by section 2001 not less than the amount of money and other property distributed. “(C) Subparagraph (A)(i) does not apply to an exchange of stock pursuant to a plan of reorganization described in subparagraph (D), (E), or (F) of section 368(a)(1) nor to an exchange to which section 355 (or so much of section 356 as relates to section 355) applies: but. any stock received in such an exchange shall be treated for purposes of subparagraph (A)(i) as an interest qualifying under subsection (a)(1). “(D) Subparagraph (A)(i) does not apply to a transfer of property of the decedent to a person entitled by reason of the decedent’s death to receive such property under the decedent’s will, the applicable law of descent and distribution, or a trust created by the decedent. “(2) Undistributed income of estate.— “(A) If an election is made under this section and the estate has undistributed net income for any taxable year ending on or after the due date for the first installment, the executor shall, on or before the date prescribed by law for filing the income tax return for such taxable year (including extensions thereof), pay an amount equal to such undistributed net income in liquidation of the unpaid portion of the tax payable in installments. “(B) For purposes of subparagraph (A), the undistributed net income of the estate for any taxable year is the amount by which the distributable net income of the estate for such taxable year (as defined in section 643) exceeds the sum of— “(i) the amounts for such taxable year specified in paragraphs (1) and (2) of section 661(a) (relating to deductions for distributions, etc.); “(ii) the amount of tax imposed for the taxable year on the estate under chapter 1; and “(iii) the amount of the tax imposed by section 2001 (including interest) paid by the executor during the taxable year (other than any amount paid pursuant to this paragraph). “(3) Failure to pay installment.— If any installment under this section is not paid on or before the date fixed for its payment by this section (including any extension of time, for the payment of such installment), the unpaid portion of the tax payable in installments shall be paid upon notice and demand from the. Secretary. “(h) Election in Case of Certain Deficiencies.— “(1) In general.— If— “(A) a deficiency in the tax imposed by section 2001 is assessed, “(B) the estate qualifies under subsection (a)(1), and “(C) the executor has not made an election under subsection (a), the executor may elect to pay the deficiency in installments. This subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax. “(2) Time of election.— An election under this subsection shall be made not later than 60 days after issuance of notice and demand by the Secretary for the payment of the deficiency, and shall he made in such manner as the Secretary shall by regulations prescribe. “(3) Effect of election on payment.— If an election is made under this subsection, the deficiency shall (subject to the limitation provided by subsection (a)(2)) be prorated to the installments which would have been due i f an election had been timely made under subsection (a) at the time, the estate tax return was filed. The part of the deficiency so prorated to any installment the date for payment, of which would have arrived shall be paid at the time of the making of the election under this subsection. The portion of the deficiency so prorated to installments the date for payment of which would not have so arrived shall be paid at the time such installments would have been due if such an election had been made. “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary to the application of this section. “(j) Cross References.— “(1) Security.— “For authority of the Secretary to require security in the case of an extension under this section, see section 6165. “(2) Lien.— “For special lien (in lieu of bond) in the case of an extension under this section, see section 6324A. “(3) Period of limitation.— “For extension of the period of limitation in the case of an extension under this section, see section 6503(d). “(4) Interest.— “For provisions relating to interest on tax payable in installments under this section, see subsection (j) of section 6601.”

2. 1978

   Pub. L. 95–600 § 512(a) · 92 Stat. 2763

   Added · 26 U.S.C. § 6166(b)(2)(D)

   Pub. L. 95–600, § 512(a), added subpar. (D)

   Source evidence

   Code amendment note
   Subsec. (b)(2)(D). Pub. L. 95–600, § 512(a), added subpar. (D).

   Enacted provision · exact public law section
   (a) Interest Held by Member of Decedent’s Family Treated as Held by Decedent.— Paragraph (2) of section 6166(b) (relating to definitions and special rules) is amended by adding at the end thereof the following new subparagraph: “(D) Certain interests held by members of decedent’s family.— All stock and all partnership interests held by the decedent or by any member of his family (within the mean-ing of section 267(c)(4)) shall be treated as owned by the 26 USC 267. decedent.”

3. 1978

   Pub. L. 95–600 § 512(b) · 92 Stat. 2763

   Added · 26 U.S.C. § 6166(b)(7)

   Pub. L. 95–600, § 512(b), added par. (7)

   Source evidence

   Code amendment note
   Subsec. (b)(7). Pub. L. 95–600, § 512(b), added par. (7).

   Enacted provision · exact public law section
   (b) Election for Purposes of the 20-Percent Requirements With Respect to Partnership Interests and Stock Which Is Not Readily Tradable.— Subsection (b) of section 6166 (relating to definitions 26 USC 6166. and special rules) is amended by adding at the end thereof the following new paragraph: “(7) Partnership interests and stock which is not readily tradable.— “(A) In general.— If the executor elects the benefits of this paragraph (at such time and in such manner as the Secretary shall by regulations prescribe), then— “(i) for purposes of paragraph (1)(B)(i) or (1)(C)(i) (whichever is appropriate) and for purposes of subsection (c), any capital interest in a partnership and any non-readily-tradable stock which (after the application of paragraph (2)) is treated as owned by the decedent shall be treated as included in determining the value of the decedent’s gross estate, “(ii) the executor shall be treated as having selected under subsection (a)(3) the date prescribed by section 6151(a), and 26 USC 6151. 26 USC 6601. “(iii) section 6601(j) (relating to 4-percent rate of interest) shall not apply. “(B) Non-readily-tradable stock defined.— For purposes of this paragraph, the term ‘non-readily-tradable stock’ means stock for which, at the time of the decedent’s death, there was no market on a stock exchange or in an over-the-counter market.”

4. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 422(e)(5)(B) · 95 Stat. 175

   Substituted · 26 U.S.C. § 6166

   Pub. L. 97–34, § 422(e)(5)(B), substituted “Extension of time” for “Alternate extension of time” in section catchline

   Source evidence

   Code amendment note
   Pub. L. 97–34, § 422(e)(5)(B), substituted “Extension of time” for “Alternate extension of time” in section catchline.

   Enacted provision · exact public law section
   (B) The section heading for section 6166 is amended by striking out “ALTERNATE”.

5. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 422(a)(1) · 95 Stat. 175

   1. Substituted · 26 U.S.C. § 6166(a)

      Pub. L. 97–34, § 422(a)(1), (e)(5)(A), substituted in par. (1) “35 percent” for “65 percent”

   2. Struck · 26 U.S.C. § 6166(a)

      Pub. L. 97–34, § 422(a)(1), (e)(5)(A), struck out par. (4) which provided that no election be made under this section by the executor of the estate of any decedent if an election under section 6166A applies with respect to the estate of such decedent

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 97–34, § 422(a)(1), (e)(5)(A), substituted in par. (1) “35 percent” for “65 percent” and struck out par. (4) which provided that no election be made under this section by the executor of the estate of any decedent if an election under section 6166A applies with respect to the estate of such decedent.

   Enacted provision · exact public law section
   (1) In general.— Paragraph (1) of section 6166(a) (relating to alternate extension of time for payment of estate tax where estate consists largely of interest in closely held business) is amended by striking out “65 percent” and inserting in lieu thereof “35 percent”.

6. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 422(a)(2) · 95 Stat. 175

   Substituted · 26 U.S.C. § 6166(c)

   Pub. L. 97–34, § 422(a)(2), substituted “20 percent or more” for “more than 20 percent”

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 97–34, § 422(a)(2), substituted “20 percent or more” for “more than 20 percent”.

   Enacted provision · exact public law section
   (2) Interests in 2 or more closely held businesses.— Subsection (c) of section 6166 (relating to interests in 2 or more closely held businesses) is amended by striking out “more than 20 percent” and inserting in lieu thereof “20 percent or more”.

7. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 422(c)(1) · 95 Stat. 175

   1. Redesignated · 26 U.S.C. § 6166(g)(1)(A)

      Pub. L. 97–34, § 422(c)(1), redesignated cl. (i) as cl. (i)(I)

   2. Substituted · 26 U.S.C. § 6166(g)(1)(A)

      Pub. L. 97–34, § 422(c)(1), substituted “any portion” for “one-third or more in value”

   3. Added · 26 U.S.C. § 6166(g)(1)(A)

      Pub. L. 97–34, § 422(c)(1), added cl. (i)(II)

   4. Substituted · 26 U.S.C. § 6166(g)(1)(A)

      Pub. L. 97–34, § 422(c)(1), substituted in cl. (ii) “the aggregate of such distributions, sales, exchanges, or other dispositions and withdrawals equals or exceeds 50 percent of the value of such interest” for “aggregate withdrawals of money and other property from the trade or business, an interest in which qualifies under subsection (a)(1), made with respect to such interest, equal or exceed one-third of the value of such trade or business”

   5. Substituted · 26 U.S.C. § 6166(g)(1)(A)

      Pub. L. 97–34, § 422(c)(1), substituted in cl. (ii) “the unpaid portion” for “any unpaid portion”

   Source evidence

   Code amendment note
   Subsec. (g)(1)(A). Pub. L. 97–34, § 422(c)(1), redesignated cl. (i) as cl. (i)(I), substituted “any portion” for “one-third or more in value”, added cl. (i)(II), substituted in cl. (ii) “the aggregate of such distributions, sales, exchanges, or other dispositions and withdrawals equals or exceeds 50 percent of the value of such interest” for “aggregate withdrawals of money and other property from the trade or business, an interest in which qualifies under subsection (a)(1), made with respect to such interest, equal or exceed one-third of the value of such trade or business” and in provision following cl. (ii) substituted “the unpaid portion” for “any unpaid portion”.

   Enacted provision · exact public law section
   (1) Amount of disposition.— Subparagraph (A) of section 6166(g)(1) (relating to acceleration of payment in the case of 26 USC 6166. disposition of interest or withdrawal of funds from business) is amended to read as follows: “(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.”

8. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 422(c)(3) · 95 Stat. 175

   Inserted · 26 U.S.C. § 6166(g)(1)(D)

   Pub. L. 97–34, § 422(c)(3), inserted provision for application of a similar rule in the case of a series of subsequent transfers of the property by reason of death so long as each transfer is to a member of the family of the transferor in such transfer

   Source evidence

   Code amendment note
   Subsec. (g)(1)(D). Pub. L. 97–34, § 422(c)(3), inserted provision for application of a similar rule in the case of a series of subsequent transfers of the property by reason of death so long as each transfer is to a member of the family of the transferor in such transfer.

   Enacted provision · exact public law section
   (3) No disqualification in case of subsequent deaths.— Subparagraph (D) of section 6166(g)(1) is amended by adding at the end thereof the following new sentence: “A similar rule shall apply in the case of a series of subsequent transfers of the property by reason of death so long as each transfer is to a member of the family (within the meaning of section 267(c)(4)) of the transferor in such transfer.”

9. 1981

   Economic Recovery Tax Act of 1981

   Pub. L. 97–34 § 422(c)(2) · 95 Stat. 175

   1. Substituted · 26 U.S.C. § 6166(g)(3)

      Pub. L. 97–34, § 422(c)(2), substituted as heading “Failure to make payment of principal or interest” for “Failure to pay installment”

   2. Amended · 26 U.S.C. § 6166(g)(3)

      Pub. L. 97–34, § 422(c)(2), designated existing provisions as subpar. (A), and in subpar. (A) as so designated

   3. Substituted · 26 U.S.C. § 6166(g)(3)

      Pub. L. 97–34, § 422(c)(2), substituted “Except as provided in subparagraph (B), if any payment of principal or interest” for “If any installment”

   4. Substituted · 26 U.S.C. § 6166(g)(3)

      Pub. L. 97–34, § 422(c)(2), substituted “extension of time” for “extension of time for the payment of such installment”

   5. Added · 26 U.S.C. § 6166(g)(3)

      Pub. L. 97–34, § 422(c)(2), added subpar. (B)

   Source evidence

   Code amendment note
   Subsec. (g)(3). Pub. L. 97–34, § 422(c)(2), substituted as heading “Failure to make payment of principal or interest” for “Failure to pay installment”, designated existing provisions as subpar. (A), and in subpar. (A) as so designated, substituted “Except as provided in subparagraph (B), if any payment of principal or interest” for “If any installment” and “extension of time” for “extension of time for the payment of such installment”, and added subpar. (B).

   Enacted provision · exact public law section
   (2) Failure to make payments.— Paragraph (3) of section 6166(g) (relating to failure to pay installments) is amended to read as follows: “(3) Failure to make payment of principal or interest.— “(A) In general.— Except as provided in subparagraph (B), if any payment of principal or interest under this section is not paid on or before the date fixed for its payment by this section (including any extension of time), the unpaid portion of the tax payable in installments shall be paid upon notice and demand from the Secretary. “(B) Payment within 6 months.— If any payment of principal or interest under this section is not paid on or before the date determined under subparagraph (A) but is paid within 6 months of such date— “(i) the provisions of subparagraph (A) shall not apply with respect to such payment, “(ii) the provisions of section 6601(j) shall not apply with respect to the determination of interest on such payment, and “(iii) there is imposed a penalty in an amount equal to the product of— “(I) 5 percent of the amount of such payment, multiplied by “(II) the number of months (or fractions thereof) after such date and before payment is made. The penalty imposed under clause (iii) shall be treated in the same manner as a penalty imposed under subchapter B of chapter 68.” 26 USC 6671.

10. 1983

    Pub. L. 97–448 § 104(c)(1) · 96 Stat. 2365

    Substituted · 26 U.S.C. § 6166(b)(3)

    Pub. L. 97–448, § 104(c)(1), substituted “35-percent requirement” for “65-percent requirement”

    Source evidence

    Code amendment note
    Subsec. (b)(3). Pub. L. 97–448, § 104(c)(1), substituted “35-percent requirement” for “65-percent requirement”.

    Enacted provision · exact public law section
    (1) 26 USC 6166. Paragraph (3) of section 6166(b) (relating to farm houses and certain other structures taken into account) is amended by striking out “65-percent requirement” and inserting in lieu thereof “35-percent requirement”.

11. 1983

    Pub. L. 97–448 § 104(c)(2) · 96 Stat. 2365

    Substituted · 26 U.S.C. § 6166(g)(1)(B)(i)

    Pub. L. 97–448, § 104(c)(2), substituted “the redemption of such stock, and the withdrawal of money or other property distributed in such redemption, shall not be treated as a distribution or withdrawal for purposes of subparagraph (A), and” for “subparagraph (A)(i) does not apply with respect to the stock redeemed; and for purposes of such subparagraph the interest in the closely held business shall be considered to be such interest reduced by the value of the stock redeemed, and”

    Source evidence

    Code amendment note
    Subsec. (g)(1)(B)(i). Pub. L. 97–448, § 104(c)(2), substituted “the redemption of such stock, and the withdrawal of money or other property distributed in such redemption, shall not be treated as a distribution or withdrawal for purposes of subparagraph (A), and” for “subparagraph (A)(i) does not apply with respect to the stock redeemed; and for purposes of such subparagraph the interest in the closely held business shall be considered to be such interest reduced by the value of the stock redeemed, and”.

    Enacted provision · exact public law section
    (2) Clauses (i) and (ii) of the first sentence of section 6166(g)(1)(B) (relating to disposition of interest; withdrawal of 26 USC 6166. funds from business) are amended to read as follows: “(i) the redemption of such stock, and the withdrawal of money and other property distributed in such redemption, shall not be treated as a distribution or withdrawal for purposes of subparagraph (A), and “(ii) for purposes of subparagraph (A), the value of the interest in the closely held business shall be considered to be such value reduced by the value of the stock redeemed.”

12. 1983

    Pub. L. 97–448 § 104(c)(2) · 96 Stat. 2365

    Substituted · 26 U.S.C. § 6166(g)(1)(B)(ii)

    Pub. L. 97–448, § 104(c)(2), substituted “for purposes of subparagraph (A), the value of the interest in the closely held business shall be considered to be such value reduced by the value of the stock redeemed” for “subparagraph (A)(ii) does not apply with respect to withdrawals of money and other property distributed; and for purposes of such subparagraph the value of the trade or business shall be considered to be such value reduced by the amount of money and other property distributed”

    Source evidence

    Code amendment note
    Subsec. (g)(1)(B)(ii). Pub. L. 97–448, § 104(c)(2), substituted “for purposes of subparagraph (A), the value of the interest in the closely held business shall be considered to be such value reduced by the value of the stock redeemed” for “subparagraph (A)(ii) does not apply with respect to withdrawals of money and other property distributed; and for purposes of such subparagraph the value of the trade or business shall be considered to be such value reduced by the amount of money and other property distributed”.

    Enacted provision · exact public law section
    (2) Clauses (i) and (ii) of the first sentence of section 6166(g)(1)(B) (relating to disposition of interest; withdrawal of 26 USC 6166. funds from business) are amended to read as follows: “(i) the redemption of such stock, and the withdrawal of money and other property distributed in such redemption, shall not be treated as a distribution or withdrawal for purposes of subparagraph (A), and “(ii) for purposes of subparagraph (A), the value of the interest in the closely held business shall be considered to be such value reduced by the value of the stock redeemed.”

13. 1983

    Pub. L. 97–448 § 104(d)(1)(B) · 96 Stat. 2365

    Added · 26 U.S.C. § 6166(j)(5)

    Pub. L. 97–448, § 104(d)(1)(B), added par. (5)

    Source evidence

    Code amendment note
    Subsec. (j)(5). Pub. L. 97–448, § 104(d)(1)(B), added par. (5).

    Enacted provision · exact public law section
    (B) Cross reference.— Subsection (j) of section 6166 26 USC 6166. (relating to extension of time for payment of estate tax where estate consists largely of interest in closely held business) is amended by adding at the end thereof the following new paragraph: “(5) Transfers within 3 years of death.— “For special rule for qualifying an estate under this section where property has been transferred within 3 years of decedent’s death, see section 2035(d)(4).”

14. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 1021(a) · 98 Stat. 494

    Added · 26 U.S.C. § 6166(b)(8)

    Pub. L. 98–369, § 1021(a), added par. (8)

    Source evidence

    Code amendment note
    Subsec. (b)(8). Pub. L. 98–369, § 1021(a), added par. (8).

    Enacted provision · exact public law section
    (a) General Rule.— Subsection (b) of section 6166 (relating to extension of time for payment of estate tax where estate consists largely of interests in closely held business) is amended by adding at the end thereof the following new paragraph: “(8) Stock in holding company treated as business company stock in certain cases.— “(A) In general.— If the executor elects the benefits of this paragraph, then— “(i) Holding company stock treated as business company stock.— For purposes of this section, the portion of the stock of any holding company which represents direct ownership (or indirect ownership through 1 or more other holding companies) by such company in a business company shall be deemed to be stock in such business company. “(ii) 5-year deferral for principal not to apply.— The executor shall be treated as having selected under subsection (a)(3) the date prescribed by section 6151(a). “(iii) 4-percent interest rate not to apply.— Section 6601(j) (relating to 4-percent rate of interest) shall not apply. “(B) All stock must be non-readilytradable stock.— No stock shall be taken into account for purposes of applying this paragraph unless it is non-readilytradable stock (within the meaning of paragraph (7)(B)). “(C) Application of voting stock requirement of paragraph (1)(C)(i).— For purposes of clause (i) of paragraph (1)(C), the deemed stock resulting from the application of subparagraph (A) shall be treated as voting stock to the extent that voting stock in the holding company owns directly (or through the voting stock of 1 or more other holding companies) voting stock in the business company. “(D) Definitions.— For purposes of this paragraph— “(i) Holding company.— The term ‘holding company’ means any corporation holding stock in another corporation. “(ii) Business company.— The term ‘business company’ means any corporation carrying on a trade or business.”

15. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 1021(b) · 98 Stat. 494

    Added · 26 U.S.C. § 6166(b)(9)

    Pub. L. 98–369, § 1021(b), added par. (9)

    Source evidence

    Code amendment note
    Subsec. (b)(9). Pub. L. 98–369, § 1021(b), added par. (9).

    Enacted provision · exact public law section
    (b) Deferral of Estate Taxes Not Available for Passive Assets.— Subsection (b) of section 6166 is amended by adding at the 26 USC 6166. end thereof the following new paragraph: “(9) Deferral not available for passive assets.— “(A) In general.— For purposes of subsection (a)(1) and determining the closely held business amount (but not for purposes of subsection (g)), the value of any interest in a closely held business shall not include the value of that portion of such interest which is attributable to passive assets held by the business. “(B) Passive asset defined.— For purposes of this paragraph— “(i) In general.— The term ‘passive asset’ means any asset other than an asset used in carrying on a trade or business. “(ii) Stock treated as passive asset.— The term ‘passive asset’ includes any stock in another corporation unless— “(I) such stock is treated as held by the decedent by reason of an election under paragraph (8), and “(II) such stock qualified under subsection (a)(1). “(ii) Exception for active corporations.— If— “(I) a corporation owns 20 percent or more in value of the voting stock of another corporation, or such other corporation has 15 or fewer shareholders, and “(II) 80 percent or more of the value of the assets of each such corporation is attributable to assets used in carrying on a trade or business, then such corporations shall be treated as 1 corporation for purposes of clause (ii). For purposes of applying subclause (II) to the corporation holding the stock of the other corporation, such stock shall not be taken into account.”

16. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 1021(c) · 98 Stat. 494

    Added · 26 U.S.C. § 6166(g)(1)(E); 26 U.S.C. § 6166(g)(1)(F)

    Pub. L. 98–369, § 1021(c), added subpars. (E) and (F)

    Source evidence

    Code amendment note
    Subsec. (g)(1)(E), (F). Pub. L. 98–369, § 1021(c), added subpars. (E) and (F).

    Enacted provision · exact public law section
    (c) Acceleration of Payment.— Paragraph (1) of section 6166(g) (relating to disposition of interest; withdrawal of funds from business) is amended by adding at the end thereof the following new subparagraphs: “(E) Changes in interest in holding company.— If any stock in a holding company is treated as stock in a business company by reason of subsection (b)(8)(A)— “(i) any disposition of any interest in such stock in such holding company which was included in determining the gross estate of the decedent, or ‘(ii) any withdrawal of any money or other property from such holding company attributable to any interest included in determining the gross estate of the decedent, shall be treated for purposes of subparagraph (A) as a disposition of (or a withdrawal with respect to) the stock qualifying under subsection (a)(1)- “(F) Changes in interest in business company.— If any stock in a holding company is treated as stock in a business company by reason of subsection (b)(8)(A)— “(i) any disposition of any interest in such stock in the business company by such holding company, or “(ii) any withdrawal of any money or other property from such business company attributable to such stock by such holding company owning such stock, shall be treated for purposes of subparagraph (A) as a disposition of (or a withdrawal with respect to) the stock qualifying under subsection (a)(1).”

17. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 1021(d) · 98 Stat. 494

    Added · 26 U.S.C. § 6166(g)(2)(C)

    Pub. L. 98–369, § 1021(d), added subpar. (C)

    Source evidence

    Code amendment note
    Subsec. (g)(2)(C). Pub. L. 98–369, § 1021(d), added subpar. (C).

    Enacted provision · exact public law section
    (d) Undistributed Income of Est ate.— Paragraph (2) of section 6166(g) (relating to undistributed income of estate) is amended by adding at the end thereof the following new subparagraph: “(C) For purposes of this paragraph, if any stock in a corporation is treated as stock in another corporation by reason of subsection (b)(8)(A), any dividends paid by such other corporation to the corporation shall be treated as paid to the estate of the decedent to the extent attributable to the stock qualifying under subsection (a)(1).”

18. 1984

    Tax Reform Act of 1984

    Pub. L. 98–369 § 544(b)(4) · 98 Stat. 494

    Added · 26 U.S.C. § 6166(j)(6)

    Pub. L. 98–369, § 544(b)(4), added par. (6)

    Source evidence

    Code amendment note
    Subsec. (j)(6). Pub. L. 98–369, § 544(b)(4), added par. (6).

    Enacted provision · exact public law section
    (4) Subsection (j) of section 6166 (relating to cross references) is amended by adding at the end thereof the following new paragraph: “(6) Payment of estate tax by employee stock ownership plan or eligible worker-owned cooperative.— For provision allowing plan administrator or eligible worker-owned cooperative to elect to pay a certain portion of the estate tax in installments under the provisions of this section, see section Ante, p. 892. 26 USC 2210 note. 26 USC 4978. 2210(c).”

19. 1986

    Tax Reform Act of 1986

    Pub. L. 99–514 title XIV § 1432(e) · 100 Stat. 2085

    1. Added · 26 U.S.C. § 6166(i)(k)

       Pub. L. 99–514 added subsec. (i)

    2. Redesignated · 26 U.S.C. § 6166(i)(k)

       Pub. L. 99–514 redesignated former subsecs. (i) and (j) as (j) and (k), respectively

    Source evidence

    Code amendment note
    Subsecs. (i) to (k). Pub. L. 99–514 added subsec. (i) and redesignated former subsecs. (i) and (j) as (j) and (k), respectively.

    Enacted provision · exact public law section
    (e) Extension of Time for Payment of Tax on Certain Direct Skips.— Section 6166 is amended by redesignating subsections (i) and (j) as subsections (j) and (k), respectively, and by inserting after subsection (h) the following new subsection: “(i) Special Rule for Certain Direct Skips.— To the extent that an interest in a closely held business is the subject of a direct skip (within the meaning of section 2612(c)) occurring at the same time as and as a result of the decedent’s death, then for purposes of this section any tax imposed by section 2601 on the transfer of such interest shall be treated as if it were additional tax imposed by section 2001.”

20. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 title I § 1704(t)(15) · 110 Stat. 1755

    Struck · 26 U.S.C. § 6166(k)(6)

    Pub. L. 104–188 struck out par. (6) which provided cross reference to former section 2210(c) of this title authorizing payment of certain portion of estate tax in installments under provisions of this section

    Source evidence

    Code amendment note
    Subsec. (k)(6). Pub. L. 104–188 struck out par. (6) which provided cross reference to former section 2210(c) of this title authorizing payment of certain portion of estate tax in installments under provisions of this section.

    Enacted provision · exact public law section
    (15) Subsection (k) of section 6166 is amended by striking paragraph (6).

21. 1997

    Pub. L. 105–34 title V § 503(c)(1) · 111 Stat. 788

    Substituted · 26 U.S.C. § 6166(b)(7)(A)(iii)

    Pub. L. 105–34 substituted “2-percent” for “4-percent”

    Source evidence

    Code amendment note
    Subsec. (b)(7)(A)(iii). Pub. L. 105–34 substituted “2-percent” for “4-percent”.

    Enacted provision · exact public law section
    (1) Paragraphs (7)(A)(iii) and (8)(A)(iii) of section 6166(b) are amended by striking “4-percent” each place it appears (including the heading) and inserting “2-percent”.

22. 1997

    Pub. L. 105–34 title V § 503(c)(1) · 111 Stat. 788

    Substituted · 26 U.S.C. § 6166(b)(8)(A)(iii)

    Pub. L. 105–34 substituted “2-percent” for “4-percent” in heading and text

    Source evidence

    Code amendment note
    Subsec. (b)(8)(A)(iii). Pub. L. 105–34 substituted “2-percent” for “4-percent” in heading and text.

    Enacted provision · exact public law section
    (1) Paragraphs (7)(A)(iii) and (8)(A)(iii) of section 6166(b) are amended by striking “4-percent” each place it appears (including the heading) and inserting “2-percent”.

23. 1998

    Internal Revenue Service Restructuring and Reform Act of 1998

    Pub. L. 105–206 § 6007(c)(1) · 112 Stat. 685

    Amended · 26 U.S.C. § 6166(b)(7)(A)(iii)

    Pub. L. 105–206, § 6007(c)(1), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “section 6601(j) (relating to 2-percent rate of interest) shall not apply.”

    Source evidence

    Code amendment note
    Subsec. (b)(7)(A)(iii). Pub. L. 105–206, § 6007(c)(1), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “section 6601(j) (relating to 2-percent rate of interest) shall not apply.”

    Enacted provision · exact public law section
    (1) Clause (iii) of section 6166(b)(7)(A) of the 1986 Code is amended to read as follows: “(iii) for purposes of applying section 6601(j), the 2-percent portion (as defined in such section) shall be treated as being zero.”.

24. 1998

    Internal Revenue Service Restructuring and Reform Act of 1998

    Pub. L. 105–206 § 6007(c)(2) · 112 Stat. 685

    Amended · 26 U.S.C. § 6166(b)(8)(A)(iii)

    Pub. L. 105–206, § 6007(c)(2), reenacted heading without change and amended text of cl. (iii) generally. Prior to amendment, text read as follows: “Section 6601(j) (relating to 2-percent rate of interest) shall not apply.”

    Source evidence

    Code amendment note
    Subsec. (b)(8)(A)(iii). Pub. L. 105–206, § 6007(c)(2), reenacted heading without change and amended text of cl. (iii) generally. Prior to amendment, text read as follows: “Section 6601(j) (relating to 2-percent rate of interest) shall not apply.”

    Enacted provision · exact public law section
    (2) Clause (iii) of section 6166(b)(8)(A) of the 1986 Code is amended to read as follows: “(iii) 2-percent interest rate not to apply.— For purposes of applying section 660l(j), the 2-percent portion (as defined in such section) shall be treated as being zero.”.

25. 2000

    Consolidated Appropriations Act, 2001

    Pub. L. 106–554 § 1(a)(7)(tIII)(s319)(18) · 114 Stat. 2763

    Substituted · 26 U.S.C. § 6166(k)(5)

    Pub. L. 106–554 substituted “2035(c)(2)” for “2035(d)(4)”

    Source evidence

    Code amendment note
    Subsec. (k)(5). Pub. L. 106–554 substituted “2035(c)(2)” for “2035(d)(4)”.

    Enacted provision · exact public law section
    (7) H.R. 5662, as introduced on December 14, 2000.

26. 2001

    Pub. L. 107–16 § 571(a) · 115 Stat. 38

    Substituted · 26 U.S.C. § 6166(b)(1)(B)(ii); 26 U.S.C. § 6166(b)(1)(C)(ii)

    Pub. L. 107–16, § 571(a), substituted “45” for “15”

    Source evidence

    Code amendment note
    Subsec. (b)(1)(B)(ii), (C)(ii). Pub. L. 107–16, § 571(a), substituted “45” for “15”.

    Enacted provision · exact public law section
    (a) In General.— Paragraphs (1)(B)(ii), (1)(C)(ii), and 26 USC 6166. (9)(B)(iii)(1) of section 6166(b) (relating to definitions and special rules) are each amended by striking “15” and inserting “45”.

    Effective date note
    Pub. L. 107–16, title V, § 571(b), June 7, 2001, 115 Stat. 92, provided that: “The amendments made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 572(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 573(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.”

27. 2001

    Pub. L. 107–16 § 573(a) · 115 Stat. 38

    Amended · 26 U.S.C. § 6166(b)(8)(B)

    Pub. L. 107–16, § 573(a), reenacted heading without change and amended text of subpar. (B) generally. Prior to amendment, text read as follows: “No stock shall be taken into account for purposes of applying this paragraph unless it is non-readily-tradable stock (within the meaning of paragraph (7)(B)).”

    Source evidence

    Code amendment note
    Subsec. (b)(8)(B). Pub. L. 107–16, § 573(a), reenacted heading without change and amended text of subpar. (B) generally. Prior to amendment, text read as follows: “No stock shall be taken into account for purposes of applying this paragraph unless it is non-readily-tradable stock (within the meaning of paragraph (7)(B)).”

    Enacted provision · exact public law section
    (a) In General.— Subparagraph (B) of section 6166(b)(8) 26 USC 6166. (relating to all stock must be non-readily-tradable stock) is amended to read as follows: “(B) All stock must be non-readily-tradable stock.— “(i) In general.— No stock shall be taken into account for purposes of applying this paragraph unless it is non-readily-tradable stock (within the meaning of paragraph (7)(B)). “(ii) Special application where only holding company stock is non-readily-tradable stock.— If the requirements of clause (i) are not met, but all of the stock of each holding company taken into account is non-readily-tradable, then this paragraph shall apply, but subsection (a)(1) shall be applied by substituting ‘5’ for ‘10’.”.

    Effective date note
    Pub. L. 107–16, title V, § 571(b), June 7, 2001, 115 Stat. 92, provided that: “The amendments made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 572(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 573(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.”

28. 2001

    Pub. L. 107–16 § 571(a) · 115 Stat. 38

    Substituted · 26 U.S.C. § 6166(b)(9)(B)(iii)(I)

    Pub. L. 107–16, § 571(a), substituted “45” for “15”

    Source evidence

    Code amendment note
    Subsec. (b)(9)(B)(iii)(I). Pub. L. 107–16, § 571(a), substituted “45” for “15”.

    Enacted provision · exact public law section
    (a) In General.— Paragraphs (1)(B)(ii), (1)(C)(ii), and 26 USC 6166. (9)(B)(iii)(1) of section 6166(b) (relating to definitions and special rules) are each amended by striking “15” and inserting “45”.

    Effective date note
    Pub. L. 107–16, title V, § 571(b), June 7, 2001, 115 Stat. 92, provided that: “The amendments made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 572(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 573(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.”

29. 2001

    Pub. L. 107–16 § 572(a) · 115 Stat. 38

    Added · 26 U.S.C. § 6166(b)(10)

    Pub. L. 107–16, § 572(a), added par. (10)

    Source evidence

    Code amendment note
    Subsec. (b)(10). Pub. L. 107–16, § 572(a), added par. (10).

    Enacted provision · exact public law section
    (a) In General.— Section 6166(b) (relating to definitions and special rules) is amended by adding at the end the following new paragraph: “(10) Stock in qualifying lending and finance business treated as stock in an active trade or business company.— “(A) In general.— If the executor elects the benefits of this paragraph, then— “(i) Stock in qualifying lending and finance business treated as stock in an active trade or business company.— For purposes of this section, any asset used in a qualifying lending and finance business shall be treated as an asset which is used in carrying on a trade or business. “(ii) 5-year deferral for principal not to apply.— The executor shall be treated as having selected under subsection (a)(3) the date prescribed by section 6151(a). “(iii) 5 equal installments allowed.— For purposes of applying subsection (a)(1), ‘5’ shall be substituted for ‘10’. “(B) Definitions.— For purposes of this paragraph— “(i) Qualifying lending and finance business.— The term ‘qualifying lending and finance business’ means a lending and finance business, if— “(I) based on all the facts and circumstances immediately before the date of the decedent’s death, there was substantial activity with respect to the lending and finance business, or “(II) during at least 3 of the 5 taxable years ending before the date of the decedent’s death, such business had at least 1 full-time employee substantially all of whose services were the active management of such business, 10 full-time, non-owner employees substantially all of whose services were directly related to such business, and $5,000,000 in gross receipts from activities described in clause (ii). “(ii) Lending and finance business.— The term lending and finance business’ means a trade or business of— “(I) making loans, “(II) purchasing or discounting accounts receivable, notes, or installment obligations, “(III) engaging in rental and leasing of real and tangible personal property, including entering into leases and purchasing, servicing, and disposing of leases and leased assets, “(IV) rendering services or making facilities available in the ordinary course of a lending or finance business, and “(V) rendering services or making facilities available in connection with activities described in subclauses (I) through (IV) carried on by the corporation rendering services or making facilities available, or another corporation which is a member of the same affiliated group (as defined in section 1504 without regard to section 1504(b)(3)). “(iii) Limitation.— The term ‘qualifying lending and finance business’ shall not include any interest in an entity, if the stock or debt of such entity or a controlled group (as defined in section 267(f)(1)) of which such entity was a member was readily tradable on an established securities market or secondary market (as defined by the Secretary) at any time within 3 years before the date of the decedent’s death.”.

    Effective date note
    Pub. L. 107–16, title V, § 571(b), June 7, 2001, 115 Stat. 92, provided that: “The amendments made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 572(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.” Pub. L. 107–16, title V, § 573(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.”

39 of 39 references resolved to an enrolled provision