Publications
Estate Tax Deferral if Estate Assets Consist Largely of Closely Held Business Interests: Internal Revenue Code §6166
The death of an owner of a closely held business may create a tax liability that can cripple the business. Generally, federal estate taxes are due nine months from the date of death. But Internal Revenue Code section 6166 allows estates that consist of a required percentage of one or more “closely held businesses” to delay paying estate tax, by permitting a four year deferral period to be followed by ten annual installment payments. However, closely held businesses that hold real estate have often been locked out of this deferral opportunity because the IRS requires the business to be an “active trade or business,” not merely a business holding investment assets. This article outlines the basic requirements for estate tax deferral when the decedent held a closely held business, reviews the previous revenue rulings on passive assets, and summarizes a new revenue ruling that provides factors the IRS will consider when evaluating whether an estate with a closely held business and real property assets qualifies for section 6166 relief.
