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(with a complete section 2032A property of the estate. In addition, all of in a qualifying lending and financing election) within 60 days after the date the persons having an interest in the business is treated as an asset used in of this determination. Complete the designated property must consent to carrying on a trade or business; see amended return using special-use the creation of this lien on the property section 6166(b)(10) for details. Stock in values under the rules of section pledged. another corporation is a passive asset 2032A, and complete Schedule A-1 unless the stock is treated as held by Percentage requirements. To qualify and attach all of the required the decedent because of the election to for installment payments, the value of statements. treat holding company stock as the interest in the closely held business business company stock; see Holding that is included in the gross estate must Additional information company stock, below. be more than 35% of the adjusted For definitions and additional gross estate (the gross estate less If a corporation owns at least 20% in information, see section 2032A and the expenses, indebtedness, taxes, and value of the voting stock of another related regulations. losses—Schedules J, K, and L of Form corporation, or the other corporation 706 (do not include any portion of the had no more than 45 shareholders and Line 3. Section 6166 state death tax deduction)). at least 80% of the value of the assets Installment Payments of each corporation is attributable to Interests in two or more closely held If the gross estate includes an interest assets used in carrying on a trade or businesses are treated as an interest in in a closely held business, you may be business, then these corporations will a single business if at least 20% of the able to elect to pay part of the estate be treated as a single corporation, and total value of each business is included tax in installments under section 6166. the stock will not be treated as a in the gross estate. For this purpose, passive asset. Stock held in the other include any interest held by the The maximum amount that can be corporation is not taken into account in surviving spouse that represents the paid in installments is that part of the determining the 80% requirement. surviving spouse’s interest in a estate tax that is attributable to the business held jointly with the decedent closely held business; see Determine Interest in closely held business. as community property or as joint how much of the estate tax may be For purposes of the installment tenants, tenants by the entirety, or paid in installments under section 6166, payment election, an “interest in a tenants in common. below. In general, that amount is the closely held business” means: amount of tax that bears the same ratio • Ownership of a trade or business Value. The value used for meeting to the total estate tax that the value of carried on as a proprietorship, the percentage requirements is the the closely held business included in • An interest as a partner in a same value used for determining the the gross estate bears to the adjusted partnership carrying on a trade or gross estate. Therefore, if the estate is gross estate. business if 20% or more of the total valued under alternate valuation or capital interest was included in the special-use valuation, you must use Bond or lien. The IRS may require gross estate of the decedent or the those values to meet the percentage that an estate furnish a surety bond partnership had no more than 45 requirements. when granting the installment payment partners, or election. In the alternative, the executor Transfers before death. Generally, • Stock in a corporation carrying on a may consent to elect the special lien gifts made before death are not trade or business if 20% or more in provisions of section 6324A, in lieu of included in the gross estate. However, value of the voting stock of the the bond. The IRS will contact you the estate must meet the 35% corporation is included in the gross regarding the specifics of furnishing the requirement by both including in and estate of the decedent or the bond or electing the special lien. The excluding from the gross estate any corporation had no more than 45 IRS will make this determination on a gifts made by the decedent in the shareholders. case-by-case basis, and you may be 3-year period ending on the date of asked to provide additional information. The partnership or corporation must death. be carrying on a trade or business at If you elect the lien provisions, Passive assets. In determining the the time of the decedent’s death. For section 6324A requires that the lien be value of a closely held business and further information on whether certain placed on property having a value whether the 35% requirement is met, partnerships or corporations owning equal to the total deferred tax plus 4 do not include the value of any passive real property interests constitute a years of interest. The property must be assets held by the business. A passive closely held business, see Revenue expected to survive the deferral period, asset is any asset not used in carrying Ruling 2006-34, 2006-26 I.R.B. 1171, and does not necessarily have to be on a trade or business. Any asset used available at www.irs.gov/pub/irs-irbs/ irb06-26.pdf. Line 3 Worksheet—Adjusted Gross Estate In determining the number of partners or shareholders, a partnership or stock interest is treated as owned by 1 What is the value of the decedent’s interest in closely held one partner or shareholder if it is business(es) included in the gross estate (less value of passive community property or held by a assets, as mentioned in section 6166(b)(9))? . . . . . . . . . . . . . . . . . husband and wife as joint tenants, 2 What is the value of the gross estate (Form 706, page 3, Part 5, tenants in common, or as tenants by line 12)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the entirety. 3 Add lines 17, 18, and 19 from Form 706, page 3, Part 5. . . . . . . . . . 4 Subtract line 3 from line 2 to calculate the adjusted gross estate. . . . Property owned directly or indirectly 5 Divide line 1 by line 4 to calculate the value the business interest by or for a corporation, partnership, bears to the value of the adjusted gross estate. For purposes of this estate, or trust is treated as owned calculation, carry the decimal to the sixth place; the IRS will make this proportionately by or for its adjustment for purposes of determining the correct amount. If this shareholders, partners, or beneficiaries. amount is less than 0.350000, the estate does not qualify to make the For trusts, only beneficiaries with election under section 6166. . . . . . . . . . . . . . . . . . . . . . . . . . . . . present interests are considered. 6 Multiply line 5 by the amount on line 16 of Form 706, page 1, Part 2. The interest in a closely held farm This is the maximum amount of estate tax that may be paid in installments under section 6166. (Certain GST taxes may be deferred business includes the interest in the as well; see section 6166(i) for more information.) . . . . . . . . . . . . . residential buildings and related improvements occupied regularly by the -11- Part Instructions