Excerpt from Description of Tax Bills and Other Estate Tax Matters Relating to the Section 6166 Technical Revision Act of 1982 (S. 2479); The Tax Treatment of Certain Disclaimers (S. 1983); And the Estate Tax Valuation of Certain Mineral Property: Scheduled for a Hearing Before the Subcommittee on Estate and Gift Taxation of the Senate Committee on Finance on May 27, 1982
In general, estate tax must be paid within 9 months after a decedent's death. However, if certain requirements are satisfied and the executor makes an election, payment of estate tax attributable to certain interests in closely held businesses can be extended and paid in install ments over 14 years (interest for 4 years followed by from 2 to 10 payments of principal and interest) (sec. A special 4-percent interest rate is provided for tax attributable to the first $1 million in value of the closely held business interest (sec. 6601(j) Tax in excess of this amount of tax less the amount of decedent's unified credit) accrues interest at the regular rate charged on deficiencies (sec. 6601 (a) The regular deficiency rate currently is 20 percent.
The bill would expand the types of interests in partnerships and corporations that are eligible for special treatment under the Install ment payment provision and would also permit the installment pay ment of estate tax attributable to certain combinations of assets that do not comprise an active business operation.
Under the bill, heirs would be permitted to dispose of interests in closely held businesses and to withdraw funds from the businesses for more purposes than is permitted under present law without losing the benefit of the 14-year extension of time for payment of tax.
The bill would also permit an estate tax deduction, in advance of payment, for interest that it is estimated will accrue on deferred tax during the 14-year extension period, and would provide a new interest rate applicable to the portion of deferred tax not subject to the special 4-percent rate of present law.
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