Nebraska Probate Form 808 - Eligibility For Federal Estate Tax Deferral Under Irc § 6166 Worksheet

FULL NAME OF FORM: Eligibility For Federal Estate Tax Deferral Under Irc § 6166 Worksheet

WHEN TO USE THE FORM: This worksheet was designed as a tool for the practitioner. It should not be followed indiscriminately, but instead its use should be based upon a reasonable familiarity with the several provisions of IRC § 6166. It was not designed for unusual circumstances, and in such cases may not produce the correct result.

Eligibility For Federal Estate Tax Deferral Under Irc § 6166 Worksheet The purpose of this worksheet is to determine whether or not a Decedent's estate is entitled to (a) defer for not more than five years; with annual interest payments, the portion of the federal estate tax attributable to certain trade or business interests owned by the Decedent, and (b) to pay the deferred taxes in from two (2) to ten (10) equal, annual installments, with interest. The worksheet also determines, where there is eligibility for deferral, the amount of tax deferred and the portion of deferred tax eligible for an interest rate of 4%.

INSTRUCTIONS FOR PARTICULAR LINES:

Line 1 - The "gross estate" as used in line 1 is that amount shown on line 1, page 1 of the U.S. Estate Tax Return, IRS Form 706.

Line 2 - The sum of the amounts allowable under IRC §§ 2053 and 2054 is determined on the basis of the facts and circumstances in existence on the date (including extensions) for filing the estate tax return (or the date on which such return is filed, if earlier). IRC § 6166(b)(6). The use of the word "allowable" would seem to indicate that such amounts should be taken into account regardless of whether actually deducted on the estate tax return.

Line 4 - The rules for determining the amount which must be entered on line 4 are as follows:

1. The closely held business is required to be an "active business."
2. If the business is a partnership, the Decedent must have owned 20% or more of the total capital interest therein, or there must have been 15 or fewer partners. IRC § 6166(b)(1)(B).
3. If the business is a corporation, the Decedent must have owned 20% or more in value of the voting stock, or there must have been 15 or fewer shareholders. IRC § 6166(b)(1)(C).
4. In making the necessary determinations of the percentage of total capital interest in a partnership or percentage in value of voting stock of a corporation, and the number of partners or shareholders respectively, such determinations must be made as of the time immediately before the Decedent's death. IRC § 6166(b)(2)(A).
5. For purposes of determining the number of partners or shareholders under IRC § 6166(b)(1)(B)(ii) and (C)(ii), the following rules apply:
   1. Certain interests held by husband and wife. Stock or a partnership interest which:
      1. is community property of a husband and wife (or the income from which is community property) under the applicable community property laws of a state, or
      2. 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. IRC § 6166(b)(2)(A).
   2. Indirect ownership. Property which is 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. IRC § 6166(b)(2)(C). See also General Explanation of the Tax Reform Act of 1976, Joint Committee on Taxation, page 548.
   3. Certain interests held by members of Decedent's family. All stock and all partnerships interests held by the Decedent or by any member of Decedent's family shall be treated as owned by the Decedent. The family of an individual shall include only his or her brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. IRC § 6166(b)(2)(D); IRC § 267(c)(4).
6. For purposes of determining the percentage of capital interest in a partnership or the percentage in value of voting stock of a corporation, and for purposes of IRC § 6166(c) relating to interests in two or more closely held businesses, if the executor or administrator elects to treat partnership capital interests and non-readily-tradable stock owned by family members as being owned by the Decedent under IRC § 6166(b)(2), such business interests are treated as being included in determining the value of the Decedent's gross estate. IRC § 6166(b)(7)(A)(i). "Non-readily-tradable stock," as used in the preceding sentence, 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. IRC § 6166(b)(7)(B). If the election herein described is made, then the 5-year deferral of tax at interest, and the 4% interest rate, are not available. IRC § 6166(b)(7)(ii) and (iii).

Line 5 - Two or more closely held businesses may be treated as a single business for purposes of IRC § 6166 if more than 20% in value of each such business is included in the Decedent's gross estate. For purposes of the 20% 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, 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. IRC § 6166(c).

Line 7 - See IRC § 6166(a)(2).

Line 11 - See Instructions for line 4, paragraph (f), last sentence.