5ex) With respect to the IRC Section 6166 extension of time to pay estate tax, the requirement that the decedent's interest in a closely held business must exceed 35% of the adjusted gross estate
is met by an estate only if the estate meets the requirement both with and without the application of the bringback rule.
In order to qualify for the family-owned business deduction, at least 50% of the value of the adjusted gross estate
must consist of the sum of (1) family-owned business interests included in the estate and (2) certain gifts of family-owned business interests.
5) For purposes of illustration, this chart assumes there is no surviving spouse and that the adjusted gross estate
is equal to the taxable estate.
Once the gross estate is calculated, certain deductions are allowed in arriving at the adjusted gross estate
In computing the value of the business interest and the value of the adjusted gross estate
for purposes of IRC section 303's 35% test, prior gifts are not taken into account.
If the value of real property using its actual use value reduces the total value of all business property to a value of less than 35% of the adjusted gross estate
, the estate will be precluded from using the installment method.
The gross estate must include an interest classified as a "closely held" business, the value of which exceeds 35% of the adjusted gross estate
If a decedent's interest in a closely held business exceeds 35% of the decedent's adjusted gross estate
, Internal Revenue Code section 6166 allows the estate to defer taxes for up to 14 years by requiring the IRS to accept a 15-year payment schedule (5 interest-only payments, followed by 10 estate tax payments).
gross assets minus liabilities secured by or related to the assets), and at least 25% of the adjusted gross estate
must be qualified real property.
The value of all stock of the redeeming corporation, which is includable in the deceased businessowner's gross estate, must exceed 35% of the adjusted gross estate
(gross estate less allowable deductions).
If the stock interest will be more than 35 percent of the stockholder's adjusted gross estate
, then his stock will qualify under Section 303 for a partial redemption at his death.
For example, if, in 2006, the decedent's adjusted gross estate
is $2,725,000, the optimum marital deduction is $725,000 ($2,725,000 less the effective exemption of $2,000,000 = $725,000).