---
kind: "section"
citation: "26 U.S.C. § 6166"
title: "26"
title_heading: "Internal Revenue Code"
number: "6166"
heading: "Extension of time for payment of estate tax where estate consists largely of interest in closely held business"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/6166"
units:
  - "Subtitle F — Procedure and Administration"
  - "Chapter 62 — Time and Place for Paying Tax"
  - "Subchapter B — Extensions of Time for Payment"
---

# §6166. Extension of time for payment of estate tax where estate consists largely of interest in closely held business

- (a) **5-year deferral; 10-year installment payment—**
  - (1) **In general—** If the value of an interest in a closely held business which is included in determining the gross estate of a decedent who was (at the date of his death) a citizen or resident of the [United States](/usc/26/7701.md?p=a-9) exceeds 35 percent of the adjusted gross estate, the executor may elect to pay part or all of the tax imposed by [section 2001](/usc/26/2001.md) in 2 or more (but not exceeding 10) equal installments.
  - (2) **Limitation—** The maximum amount of tax which may be paid in installments under this subsection shall be an amount which bears the same ratio to the tax imposed by [section 2001](/usc/26/2001.md) (reduced by the credits against such tax) as—
    - (A) the closely held business amount, bears to
    - (B) the amount of the adjusted gross estate.
  - (3) **Date for payment of installments—** If an election is made under [paragraph (1)](#a-1), the first installment shall be paid on or before the date selected by the executor which is not more than 5 years after the date prescribed by [section 6151(a)](/usc/26/6151.md?p=a) for payment of the tax, and each succeeding installment shall be paid on or before the date which is 1 year after the date prescribed by this paragraph for payment of the preceding installment.
- (b) **Definitions and special rules—**
  - (1) **Interest in closely held business—** For purposes of this section, the term “interest in a closely held business” means—
    - (A) an interest as a proprietor in a [trade or business](/usc/26/7701.md?p=a-26) carried on as a proprietorship;
    - (B) an interest as a [partner](/usc/26/7701.md?p=a-2) in a [partnership](/usc/26/7701.md?p=a-2) carrying on a [trade or business](/usc/26/7701.md?p=a-26), if—
      - (i) 20 percent or more of the total capital interest in such [partnership](/usc/26/7701.md?p=a-2) is included in determining the gross estate of the decedent, or
      - (ii) such [partnership](/usc/26/7701.md?p=a-2) had 45 or fewer [partners](/usc/26/7701.md?p=a-2); or
    - (C) [stock](/usc/26/7701.md?p=a-7) in a [corporation](/usc/26/7701.md?p=a-3) carrying on a [trade or business](/usc/26/7701.md?p=a-26) if—
      - (i) 20 percent or more in value of the voting [stock](/usc/26/7701.md?p=a-7) of such [corporation](/usc/26/7701.md?p=a-3) is included in determining the gross estate of the decedent, or
      - (ii) such [corporation](/usc/26/7701.md?p=a-3) had 45 or fewer [shareholders](/usc/26/7701.md?p=a-8).
  - (2) **Rules for applying paragraph (1)—** For purposes of [paragraph (1)](#b-1)—
    - (A) **Time for testing—** Determinations shall be made as of the time immediately before the decedent’s death.
    - (B) **Certain interests held by husband and wife—** [Stock](/usc/26/7701.md?p=a-7) or a [partnership](/usc/26/7701.md?p=a-2) interest which—
      - (i) is community property of a [husband](/usc/26/7701.md?p=a-17) and [wife](/usc/26/7701.md?p=a-17) (or the income from which is community income) under the applicable community property law of a [State](/usc/26/7701.md?p=a-10), or
      - (ii) is held by a [husband](/usc/26/7701.md?p=a-17) and [wife](/usc/26/7701.md?p=a-17) as joint tenants, tenants by the entirety, or tenants in common,

      shall be treated as owned by one [shareholder](/usc/26/7701.md?p=a-8) or one [partner](/usc/26/7701.md?p=a-2), as the case may be.

    - (C) **Indirect ownership—** Property owned, directly or [indirectly](/usc/26/101.md?p=a-3-B), by or for a [corporation](/usc/26/7701.md?p=a-3), [partnership](/usc/26/7701.md?p=a-2), estate, or trust shall be considered as being owned proportionately by or for its [shareholders](/usc/26/7701.md?p=a-8), [partners](/usc/26/7701.md?p=a-2), or beneficiaries. For purposes of the preceding sentence, a [person](/usc/26/7701.md?p=a-1) shall be treated as a beneficiary of any trust only if such [person](/usc/26/7701.md?p=a-1) has a present interest in the trust.
    - (D) **Certain interests held by members of decedent’s family—** All [stock](/usc/26/7701.md?p=a-7) and all [partnership](/usc/26/7701.md?p=a-2) interests held by the decedent or by any [member](/usc/26/7701.md?p=j-4) of his family (within the meaning of [section 267(c)(4)](/usc/26/267.md?p=c-4)) shall be treated as owned by the decedent.
  - (3) **Farmhouses and certain other structures taken into account—** For purposes of the 35-percent requirement of [subsection (a)(1)](#a-1), an interest in a closely held business which is the business of farming [includes](/usc/26/7701.md?p=c) an interest in residential buildings and [related](/usc/26/7701.md?p=a-51-I-vi) improvements on the farm which are occupied on a regular basis by the owner or lessee of the farm or by [persons](/usc/26/7701.md?p=a-1) employed by such owner or lessee for purposes of operating or maintaining the farm.
  - (4) **Value—** For purposes of this section, value shall be value determined for purposes of [chapter 11](/usc/26/chstB/ch11.md) (relating to estate tax).
  - (5) **Closely held business amount—** For purposes of this section, the term “closely held business amount” means the value of the interest in a closely held business which qualifies under [subsection (a)(1)](#a-1).
  - (6) **Adjusted gross estate—** For purposes of this section, the term, “adjusted gross estate” means the value of the gross estate reduced by the sum of the amounts allowable as a deduction under section [2053](/usc/26/2053.md) or 2054. Such sum shall be determined on the basis of the facts and circumstances in existence on the date ([including](/usc/26/7701.md?p=c) extensions) for filing the return of tax imposed by [section 2001](/usc/26/2001.md) (or, if earlier, the date on which such return is filed).
  - (7) **Partnership interests and stock which is not readily tradable—**
    - (A) **In general—** If the executor elects the benefits of this paragraph (at such time and in such manner as the [Secretary](/usc/26/7701.md?p=a-11-B) shall by regulations prescribe), then—
      - (i) for purposes of paragraph [(1)(B)(i)](#b-1-B-i) or [(1)(C)(i)](#b-1-C-i) (whichever is appropriate) and for purposes of [subsection (c)](#c), any capital interest in a [partnership](/usc/26/7701.md?p=a-2) and any non-readily-tradable [stock](/usc/26/7701.md?p=a-7) which (after the application of [paragraph (2)](#b-2)) is treated as owned by the decedent shall be treated as included in determining the value of the decedent’s gross estate,
      - (ii) the executor shall be treated as having selected under [subsection (a)(3)](#a-3) the date prescribed by [section 6151(a)](/usc/26/6151.md?p=a), and
      - (iii) for purposes of applying [section 6601(j)](/usc/26/6601.md?p=j), the 2-percent portion (as defined in such section) shall be treated as being zero.
    - (B) **Non-readily-tradable stock defined—** For purposes of this paragraph, the term “non-readily-tradable [stock](/usc/26/7701.md?p=a-7)” means [stock](/usc/26/7701.md?p=a-7) for which, at the time of the decedent’s death, there was no market on a [stock](/usc/26/7701.md?p=a-7) exchange or in an over-the-counter market.
  - (8) **Stock in holding company treated as business company stock in certain cases—**
    - (A) **In general—** If the executor elects the benefits of this paragraph, then—
      - (i) **Holding company stock treated as business company stock—** For purposes of this section, the portion of the [stock](/usc/26/7701.md?p=a-7) of any holding company which represents direct ownership (or indirect ownership through 1 or more other holding companies) by such company in a business company shall be deemed to be [stock](/usc/26/7701.md?p=a-7) in such business company.
      - (ii) **5-year deferral for principal not to apply—** The executor shall be treated as having selected under [subsection (a)(3)](#a-3) the date prescribed by [section 6151(a)](/usc/26/6151.md?p=a).
      - (iii) **2-percent interest rate not to apply—** For purposes of applying [section 6601(j)](/usc/26/6601.md?p=j), the 2-percent portion (as defined in such section) shall be treated as being zero.
    - (B) **All stock must be non-readily-tradable stock—**
      - (i) **In general—** No [stock](/usc/26/7701.md?p=a-7) shall be taken into account for purposes of applying this paragraph unless it is non-readily-tradable [stock](/usc/26/7701.md?p=a-7) (within the meaning of [paragraph (7)(B)](#b-7-B)).
      - (ii) **Special application where only holding company stock is non-readily-tradable stock—** If the requirements of [clause (i)](#b-8-B-i) are not met, but all of the [stock](/usc/26/7701.md?p=a-7) of each holding company taken into account is non-readily-tradable, then this paragraph shall apply, but [subsection (a)(1)](#a-1) shall be applied by substituting “5” for “10”.
    - (C) **Application of voting stock requirement of paragraph (1)(C)(i)—** For purposes of [clause (i)](#b-1-C-i) of paragraph (1)(C), the deemed [stock](/usc/26/7701.md?p=a-7) resulting from the application of [subparagraph (A)](#b-8-A) shall be treated as voting [stock](/usc/26/7701.md?p=a-7) to the extent that voting [stock](/usc/26/7701.md?p=a-7) in the holding company owns directly (or through the voting [stock](/usc/26/7701.md?p=a-7) of 1 or more other holding companies) voting [stock](/usc/26/7701.md?p=a-7) in the business company.
    - (D) **Definitions—** For purposes of this paragraph—
      - (i) **Holding company—** The term “holding company” means any [corporation](/usc/26/7701.md?p=a-3) holding [stock](/usc/26/7701.md?p=a-7) in another [corporation](/usc/26/7701.md?p=a-3).
      - (ii) **Business company—** The term “business company” means any [corporation](/usc/26/7701.md?p=a-3) carrying on a [trade or business](/usc/26/7701.md?p=a-26).
  - (9) **Deferral not available for passive assets—**
    - (A) **In general—** For purposes of [subsection (a)(1)](#a-1) and determining the closely held business amount (but not for purposes of [subsection (g)](#g)), the value of any interest in a closely held business shall not include the value of that portion of such interest which is attributable to passive assets held by the business.
    - (B) **Passive asset defined—** For purposes of this paragraph—
      - (i) **In general—** The term “passive asset” means any asset other than an asset used in carrying on a [trade or business](/usc/26/7701.md?p=a-26).
      - (ii) **Stock treated as passive asset—** The term “passive asset” [includes](/usc/26/7701.md?p=c) any [stock](/usc/26/7701.md?p=a-7) in another [corporation](/usc/26/7701.md?p=a-3) unless—
        - (I) such [stock](/usc/26/7701.md?p=a-7) is treated as held by the decedent by reason of an election under [paragraph (8)](#b-8), and
        - (II) such [stock](/usc/26/7701.md?p=a-7) qualified under [subsection (a)(1)](#a-1).
      - (iii) **Exception for active corporations—** If—
        - (I) a [corporation](/usc/26/7701.md?p=a-3) owns 20 percent or more in value of the voting [stock](/usc/26/7701.md?p=a-7) of another [corporation](/usc/26/7701.md?p=a-3), or such other [corporation](/usc/26/7701.md?p=a-3) has 45 or fewer [shareholders](/usc/26/7701.md?p=a-8), and
        - (II) 80 percent or more of the value of the assets of each such [corporation](/usc/26/7701.md?p=a-3) is attributable to assets used in carrying on a [trade or business](/usc/26/7701.md?p=a-26),

      then such [corporations](/usc/26/7701.md?p=a-3) shall be treated as 1 [corporation](/usc/26/7701.md?p=a-3) for purposes of [clause (ii)](#b-9-B-ii). For purposes of applying [subclause (II)](#b-9-B-ii-II) to the [corporation](/usc/26/7701.md?p=a-3) holding the [stock](/usc/26/7701.md?p=a-7) of the other [corporation](/usc/26/7701.md?p=a-3), such [stock](/usc/26/7701.md?p=a-7) shall not be taken into account.

  - (10) **Stock in qualifying lending and finance business treated as stock in an active trade or business company—**
    - (A) **In general—** If the executor elects the benefits of this paragraph, then—
      - (i) **Stock in qualifying lending and finance business treated as stock in an active trade or business company—** For purposes of this section, any asset used in a qualifying lending and finance business shall be treated as an asset which is used in carrying on a [trade or business](/usc/26/7701.md?p=a-26).
      - (ii) **5-year deferral for principal not to apply—** The executor shall be treated as having selected under [subsection (a)(3)](#a-3) the date prescribed by [section 6151(a)](/usc/26/6151.md?p=a).
      - (iii) **5 equal installments allowed—** For purposes of applying [subsection (a)(1)](#a-1), “5” shall be substituted for “10”.
    - (B) **Definitions—** For purposes of this paragraph—
      - (i) **Qualifying lending and finance business—** The term “qualifying lending and finance business” means a lending and finance business, if—
        - (I) based on all the facts and circumstances immediately before the date of the decedent’s death, there was substantial activity with respect to the lending and finance business, or
        - (II) during at least 3 of the 5 [taxable years](/usc/26/7701.md?p=a-23) ending before the date of the decedent’s death, such business had at least 1 full-time [employee](/usc/26/7701.md?p=a-20) substantially all of whose services were the active management of such business, 10 full-time, nonowner [employees](/usc/26/7701.md?p=a-20) substantially all of whose services were directly [related](/usc/26/7701.md?p=a-51-I-vi) to such business, and $5,000,000 in gross receipts from activities described in [clause (ii)](#b-10-B-ii).
      - (ii) **Lending and finance business—** The term “lending and finance business” means a [trade or business](/usc/26/7701.md?p=a-26) of—
        - (I) making loans,
        - (II) purchasing or discounting accounts receivable, notes, or installment obligations,
        - (III) engaging in rental and leasing of real and tangible personal property, [including](/usc/26/7701.md?p=c) entering into leases and purchasing, servicing, and disposing of leases and leased assets,
        - (IV) rendering services or making facilities available in the ordinary course of a lending or finance business, and
        - (V) rendering services or making facilities available in connection with activities described in subclauses [(I)](#b-10-B-ii-I) through [(IV)](#b-10-B-ii-IV) carried on by the [corporation](/usc/26/7701.md?p=a-3) rendering services or making facilities available, or another [corporation](/usc/26/7701.md?p=a-3) which is a [member](/usc/26/7701.md?p=j-4) of the same affiliated group (as defined in [section 1504](/usc/26/1504.md) without regard to [section 1504(b)(3)](/usc/26/1504.md?p=b-3)).
      - (iii) **Limitation—** The term “qualifying lending and finance business” shall not include any interest in an entity, if the [stock](/usc/26/7701.md?p=a-7) or debt of such entity or a controlled group (as defined in [section 267(f)(1)](/usc/26/267.md?p=f-1)) of which such entity was a [member](/usc/26/7701.md?p=j-4) was readily tradable on an established securities market or secondary market (as defined by the [Secretary](/usc/26/7701.md?p=a-11-B)) at any time within 3 years before the date of the decedent’s death.
- (c) **Special rule for interest in 2 or more closely held businesses—** For purposes of this section, interest in 2 or more closely held businesses, with respect to each of which there is included in determining the value of the decedent’s gross estate 20 percent or more of the total value of each such business, shall be treated as an interest in a single closely held business. For purposes of the 20-percent 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 or as 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.
- (d) **Election—** Any election under [subsection (a)](#a) shall be made not later than the time prescribed by [section 6075(a)](/usc/26/6075.md?p=a) for filing the return of tax imposed by [section 2001](/usc/26/2001.md) ([including](/usc/26/7701.md?p=c) extensions thereof), and shall be made in such manner as the [Secretary](/usc/26/7701.md?p=a-11-B) shall by regulations prescribe. If an election under [subsection (a)](#a) is made, the provisions of this subtitle shall apply as though the [Secretary](/usc/26/7701.md?p=a-11-B) were extending the time for payment of the tax.
- (e) **Proration of deficiency to installments—** If an election is made under [subsection (a)](#a) to pay any part of the tax imposed by [section 2001](/usc/26/2001.md) in installments and a [deficiency](/usc/26/6211.md?p=a) has been assessed, the [deficiency](/usc/26/6211.md?p=a) shall (subject to the limitation provided by [subsection (a)(2)](#a-2)) be prorated to the installments payable under [subsection (a)](#a). The part of the [deficiency](/usc/26/6211.md?p=a) so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the [deficiency](/usc/26/6211.md?p=a) so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the [Secretary](/usc/26/7701.md?p=a-11-B). This subsection shall not apply if the [deficiency](/usc/26/6211.md?p=a) is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax.
- (f) **Time for payment of interest—** If the time for payment of any amount of tax has been extended under this section—
  - (1) **Interest for first 5 years—** Interest payable under [section 6601](/usc/26/6601.md) of any unpaid portion of such amount attributable to the first 5 years after the date prescribed by [section 6151(a)](/usc/26/6151.md?p=a) for payment of the tax shall be paid annually.
  - (2) **Interest for periods after first 5 years—** Interest payable under [section 6601](/usc/26/6601.md) on any unpaid portion of such amount attributable to any period after the 5-year period referred to in [paragraph (1)](#f-1) shall be paid annually at the same time as, and as a part of, each installment payment of the tax.
  - (3) **Interest in the case of certain deficiencies—** In the case of a [deficiency](/usc/26/6211.md?p=a) to which [subsection (e)](#e) applies which is assessed after the close of the 5-year period referred to in [paragraph (1)](#f-1), interest attributable to such 5-year period, and interest assigned under [paragraph (2)](#f-2) to any installment the date for payment of which has arrived on or before the date of the assessment of the [deficiency](/usc/26/6211.md?p=a), shall be paid upon notice and demand from the [Secretary](/usc/26/7701.md?p=a-11-B).
  - (4) **Selection of shorter period—** If the executor has selected a period shorter than 5 years under [subsection (a)(3)](#a-3), such shorter period shall be substituted for 5 years in paragraphs (1), (2), and (3) of this subsection.
- (g) **Acceleration of payment—**
  - (1) **Disposition of interest; withdrawal of funds from business—**
    - (A) If—
      - (i)
        - (I) any portion of an interest in a closely held business which qualifies under [subsection (a)(1)](#a-1) is distributed, sold, exchanged, or otherwise disposed of, or
        - (II) money and other property attributable to such an interest is withdrawn from such [trade or business](/usc/26/7701.md?p=a-26), and
      - (ii) the aggregate of such distributions, sales, exchanges, or other dispositions and withdrawals equals or exceeds 50 percent of the value of such interest,

      then the extension of time for payment of tax provided in [subsection (a)](#a) shall cease to apply, and the unpaid portion of the tax payable in installments shall be paid upon notice and demand from the [Secretary](/usc/26/7701.md?p=a-11-B).

    - (B) In the case of a distribution in redemption of [stock](/usc/26/7701.md?p=a-7) to which [section 303](/usc/26/303.md) (or so much of [section 304](/usc/26/304.md) as relates to [section 303](/usc/26/303.md)) applies—
      - (i) the redemption of such [stock](/usc/26/7701.md?p=a-7), and the withdrawal of money and other property distributed in such redemption, shall not be treated as a distribution or withdrawal for purposes of [subparagraph (A)](#g-1-A), and
      - (ii) for purposes of [subparagraph (A)](#g-1-A), the value of the interest in the closely held business shall be considered to be such value reduced by the value of the [stock](/usc/26/7701.md?p=a-7) redeemed.

      This subparagraph shall apply only if, on or before the date prescribed by [subsection (a)(3)](#a-3) for the payment of the first installment which becomes due after the date of the distribution (or, if earlier, on or before the day which is 1 year after the date of the distribution), there is paid an amount of the tax imposed by [section 2001](/usc/26/2001.md) not less than the amount of money and other property distributed.

    - (C) [Subparagraph (A)(i)](#g-1-A-i) does not apply to an exchange of [stock](/usc/26/7701.md?p=a-7) pursuant to a plan of reorganization described in subparagraph [(D)](/usc/26/368.md?p=a-1-D), [(E)](/usc/26/368.md?p=a-1-E), or [(F)](/usc/26/368.md?p=a-1-F) of section 368(a)(1) nor to an exchange to which [section 355](/usc/26/355.md) (or so much of [section 356](/usc/26/356.md) as relates to [section 355](/usc/26/355.md)) applies; but any [stock](/usc/26/7701.md?p=a-7) received in such an exchange shall be treated for purposes of [subparagraph (A)(i)](#g-1-A-i) as an interest qualifying under [subsection (a)(1)](#a-1).
    - (D) [Subparagraph (A)(i)](#g-1-A-i) does not apply to a transfer of property of the decedent to a [person](/usc/26/7701.md?p=a-1) entitled by reason of the decedent’s death to receive such property under the decedent’s will, the applicable law of descent and distribution, or a trust created by the decedent. A similar rule shall apply in the case of a series of subsequent transfers of the property by reason of death so long as each transfer is to a [member](/usc/26/7701.md?p=j-4) of the family (within the meaning of [section 267(c)(4)](/usc/26/267.md?p=c-4)) of the transferor in such transfer.
    - (E) **Changes in interest in holding company—** If any [stock](/usc/26/7701.md?p=a-7) in a holding company is treated as [stock](/usc/26/7701.md?p=a-7) in a business company by reason of [subsection (b)(8)(A)](#b-8-A)—
      - (i) any disposition of any interest in such [stock](/usc/26/7701.md?p=a-7) in such holding company which was included in determining the gross estate of the decedent, or
      - (ii) any withdrawal of any money or other property from such holding company attributable to any interest included in determining the gross estate of the decedent,

      shall be treated for purposes of [subparagraph (A)](#g-1-A) as a disposition of (or a withdrawal with respect to) the [stock](/usc/26/7701.md?p=a-7) qualifying under [subsection (a)(1)](#a-1).

    - (F) **Changes in interest in business company—** If any [stock](/usc/26/7701.md?p=a-7) in a holding company is treated as [stock](/usc/26/7701.md?p=a-7) in a business company by reason of [subsection (b)(8)(A)](#b-8-A)—
      - (i) any disposition of any interest in such [stock](/usc/26/7701.md?p=a-7) in the business company by such holding company, or
      - (ii) any withdrawal of any money or other property from such business company attributable to such [stock](/usc/26/7701.md?p=a-7) by such holding company owning such [stock](/usc/26/7701.md?p=a-7),

      shall be treated for purposes of [subparagraph (A)](#g-1-A) as a disposition of (or a withdrawal with respect to) the [stock](/usc/26/7701.md?p=a-7) qualifying under [subsection (a)(1)](#a-1).

  - (2) **Undistributed income of estate—**
    - (A) If an election is made under this section and the estate has undistributed net income for any [taxable year](/usc/26/7701.md?p=a-23) ending on or after the due date for the first installment, the executor shall, on or before the date prescribed by law for filing the income tax return for such [taxable year](/usc/26/7701.md?p=a-23) ([including](/usc/26/7701.md?p=c) extensions thereof), pay an amount equal to such undistributed net income in liquidation of the unpaid portion of the tax payable in installments.
    - (B) For purposes of [subparagraph (A)](#g-2-A), the undistributed net income of the estate for any [taxable year](/usc/26/7701.md?p=a-23) is the amount by which the distributable net income of the estate for such [taxable year](/usc/26/7701.md?p=a-23) (as defined in [section 643](/usc/26/643.md)) exceeds the sum of—
      - (i) the amounts for such [taxable year](/usc/26/7701.md?p=a-23) specified in paragraphs [(1)](/usc/26/661.md?p=a-1) and [(2)](/usc/26/661.md?p=a-2) of section 661(a) (relating to deductions for distributions, etc.);
      - (ii) the amount of tax imposed for the [taxable year](/usc/26/7701.md?p=a-23) on the estate under [chapter 1](/usc/26/chstA/ch1.md); and
      - (iii) the amount of the tax imposed by [section 2001](/usc/26/2001.md) ([including](/usc/26/7701.md?p=c) interest) paid by the executor during the [taxable year](/usc/26/7701.md?p=a-23) (other than any [amount paid](/usc/26/7702A.md?p=e-1-A) pursuant to this paragraph).
    - (C) For purposes of this paragraph, if any [stock](/usc/26/7701.md?p=a-7) in a [corporation](/usc/26/7701.md?p=a-3) is treated as [stock](/usc/26/7701.md?p=a-7) in another [corporation](/usc/26/7701.md?p=a-3) by reason of [subsection (b)(8)(A)](#b-8-A), any dividends paid by such other [corporation](/usc/26/7701.md?p=a-3) to the [corporation](/usc/26/7701.md?p=a-3) shall be treated as paid to the estate of the decedent to the extent attributable to the [stock](/usc/26/7701.md?p=a-7) qualifying under [subsection (a)(1)](#a-1).
  - (3) **Failure to make payment of principal or interest—**
    - (A) **In general—** Except as provided in [subparagraph (B)](#g-3-B), if any payment of principal or interest under this section is not paid on or before the date fixed for its payment by this section ([including](/usc/26/7701.md?p=c) any extension of time), the unpaid portion of the tax payable in installments shall be paid upon notice and demand from the [Secretary](/usc/26/7701.md?p=a-11-B).
    - (B) **Payment within 6 months—** If any payment of principal or interest under this section is not paid on or before the date determined under [subparagraph (A)](#g-3-A) but is paid within 6 months of such date—
      - (i) the provisions of [subparagraph (A)](#g-3-A) shall not apply with respect to such payment,
      - (ii) the provisions of [section 6601(j)](/usc/26/6601.md?p=j) shall not apply with respect to the determination of interest on such payment, and
      - (iii) there is imposed a penalty in an amount equal to the product of—
        - (I) 5 percent of the amount of such payment, multiplied by
        - (II) the number of months (or fractions thereof) after such date and before payment is made.

      The penalty imposed under [clause (iii)](#g-3-B-iii) shall be treated in the same manner as a penalty imposed under subchapter B of chapter 68.

- (h) **Election in case of certain deficiencies—**
  - (1) **In general—** If—
    - (A) a [deficiency](/usc/26/6211.md?p=a) in the tax imposed by [section 2001](/usc/26/2001.md) is assessed,
    - (B) the estate qualifies under [subsection (a)(1)](#a-1), and
    - (C) the executor has not made an election under [subsection (a)](#a),

    the executor may elect to pay the [deficiency](/usc/26/6211.md?p=a) in installments. This subsection shall not apply if the [deficiency](/usc/26/6211.md?p=a) is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax.

  - (2) **Time of election—** An election under this subsection shall be made not later than 60 days after issuance of notice and demand by the [Secretary](/usc/26/7701.md?p=a-11-B) for the payment of the [deficiency](/usc/26/6211.md?p=a), and shall be made in such manner as the [Secretary](/usc/26/7701.md?p=a-11-B) shall by regulations prescribe.
  - (3) **Effect of election on payment—** If an election is made under this subsection, the [deficiency](/usc/26/6211.md?p=a) shall (subject to the limitation provided by [subsection (a)(2)](#a-2)) be prorated to the installments which would have been due if an election had been timely made under [subsection (a)](#a) at the time the estate tax return was filed. The part of the [deficiency](/usc/26/6211.md?p=a) so prorated to any installment the date for payment of which would have arrived shall be paid at the time of the making of the election under this subsection. The portion of the [deficiency](/usc/26/6211.md?p=a) so prorated to installments the date for payment of which would not have so arrived shall be paid at the time such installments would have been due if such an election had been made.
- (i) **Special rule for certain direct skips—** To the extent that an interest in a closely held business is the subject of a direct skip (within the meaning of [section 2612(c)](/usc/26/2612.md?p=c)) occurring at the same time as and as a result of the decedent’s death, then for purposes of this section any tax imposed by [section 2601](/usc/26/2601.md) on the transfer of such interest shall be treated as if it were additional tax imposed by section 2001.
- (j) **Regulations—** The [Secretary](/usc/26/7701.md?p=a-11-B) shall prescribe such regulations as may be necessary to the application of this section.
- (k) **Cross references—**
  - (1) **Security—** For authority of the [Secretary](/usc/26/7701.md?p=a-11-B) to require security in the case of an extension under this section, see section 6165.
  - (2) **Lien—** For special lien (in lieu of bond) in the case of an extension under this section, see section 6324A.
  - (3) **Period of limitation—** For extension of the period of limitation in the case of an extension under this section, see [section 6503(d)](/usc/26/6503.md?p=d).
  - (4) **Interest—** For provisions relating to interest on tax payable in installments under this section, see subsection (j) of section 6601.
  - (5) **Transfers within 3 years of death—** For special rule for qualifying an estate under this section where property has been transferred within 3 years of decedent’s death, see [section 2035(c)(2)](/usc/26/2035.md?p=c-2).

## Source credit

(Added Pub. L. 94–455, title XX, § 2004(a), Oct. 4, 1976, 90 Stat. 1862; amended Pub. L. 95–600, title V, § 512(a), (b), Nov. 6, 1978, 92 Stat. 2882, 2883; Pub. L. 97–34, title IV, § 422(a), (c), (e)(5)(A), (B), Aug. 13, 1981, 95 Stat. 314–316; Pub. L. 97–448, title I, § 104(c), (d)(1)(B), Jan. 12, 1983, 96 Stat. 2382, 2383; Pub. L. 98–369, div. A, title V, § 544(b)(4), title X, § 1021(a)–(d), July 18, 1984, 98 Stat. 894, 1024–1026; Pub. L. 99–514, title XIV, § 1432(e), Oct. 22, 1986, 100 Stat. 2730; Pub. L. 104–188, title I, § 1704(t)(15), Aug. 20, 1996, 110 Stat. 1888; Pub. L. 105–34, title V, § 503(c)(1), Aug. 5, 1997, 111 Stat. 853; Pub. L. 105–206, title VI, § 6007(c), July 22, 1998, 112 Stat. 809; Pub. L. 106–554, § 1(a)(7) [title III, § 319(18)], Dec. 21, 2000, 114 Stat. 2763, 2763A–647; Pub. L. 107–16, title V, §§ 571(a), 572(a), 573(a), June 7, 2001, 115 Stat. 92, 93.)

## Notes

### Editorial Notes

### Prior Provisions

A prior section 6166 was renumbered section 6166A of this title and later repealed by Pub. L. 97–34, title IV, § 422(d), Aug. 13, 1981, 95 Stat. 315.

### Amendments

2001—Subsec. (b)(1)(B)(ii), (C)(ii). Pub. L. 107–16, § 571(a), substituted “45” for “15”.

Subsec. (b)(8)(B). Pub. L. 107–16, § 573(a), reenacted heading without change and amended text of subpar. (B) generally. Prior to amendment, text read as follows: “No stock shall be taken into account for purposes of applying this paragraph unless it is non-readily-tradable stock (within the meaning of paragraph (7)(B)).”

Subsec. (b)(9)(B)(iii)(I). Pub. L. 107–16, § 571(a), substituted “45” for “15”.

Subsec. (b)(10). Pub. L. 107–16, § 572(a), added par. (10).

2000—Subsec. (k)(5). Pub. L. 106–554 substituted “2035(c)(2)” for “2035(d)(4)”.

1998—Subsec. (b)(7)(A)(iii). Pub. L. 105–206, § 6007(c)(1), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “section 6601(j) (relating to 2-percent rate of interest) shall not apply.”

Subsec. (b)(8)(A)(iii). Pub. L. 105–206, § 6007(c)(2), reenacted heading without change and amended text of cl. (iii) generally. Prior to amendment, text read as follows: “Section 6601(j) (relating to 2-percent rate of interest) shall not apply.”

1997—Subsec. (b)(7)(A)(iii). Pub. L. 105–34 substituted “2-percent” for “4-percent”.

Subsec. (b)(8)(A)(iii). Pub. L. 105–34 substituted “2-percent” for “4-percent” in heading and text.

1996—Subsec. (k)(6). Pub. L. 104–188 struck out par. (6) which provided cross reference to former section 2210(c) of this title authorizing payment of certain portion of estate tax in installments under provisions of this section.

1986—Subsecs. (i) to (k). Pub. L. 99–514 added subsec. (i) and redesignated former subsecs. (i) and (j) as (j) and (k), respectively.

1984—Subsec. (b)(8). Pub. L. 98–369, § 1021(a), added par. (8).

Subsec. (b)(9). Pub. L. 98–369, § 1021(b), added par. (9).

Subsec. (g)(1)(E), (F). Pub. L. 98–369, § 1021(c), added subpars. (E) and (F).

Subsec. (g)(2)(C). Pub. L. 98–369, § 1021(d), added subpar. (C).

Subsec. (j)(6). Pub. L. 98–369, § 544(b)(4), added par. (6).

1983—Subsec. (b)(3). Pub. L. 97–448, § 104(c)(1), substituted “35-percent requirement” for “65-percent requirement”.

Subsec. (g)(1)(B)(i). Pub. L. 97–448, § 104(c)(2), substituted “the redemption of such stock, and the withdrawal of money or other property distributed in such redemption, shall not be treated as a distribution or withdrawal for purposes of subparagraph (A), and” for “subparagraph (A)(i) does not apply with respect to the stock redeemed; and for purposes of such subparagraph the interest in the closely held business shall be considered to be such interest reduced by the value of the stock redeemed, and”.

Subsec. (g)(1)(B)(ii). Pub. L. 97–448, § 104(c)(2), substituted “for purposes of subparagraph (A), the value of the interest in the closely held business shall be considered to be such value reduced by the value of the stock redeemed” for “subparagraph (A)(ii) does not apply with respect to withdrawals of money and other property distributed; and for purposes of such subparagraph the value of the trade or business shall be considered to be such value reduced by the amount of money and other property distributed”.

Subsec. (j)(5). Pub. L. 97–448, § 104(d)(1)(B), added par. (5).

1981—Pub. L. 97–34, § 422(e)(5)(B), substituted “Extension of time” for “Alternate extension of time” in section catchline.

Subsec. (a). Pub. L. 97–34, § 422(a)(1), (e)(5)(A), substituted in par. (1) “35 percent” for “65 percent” and struck out par. (4) which provided that no election be made under this section by the executor of the estate of any decedent if an election under section 6166A applies with respect to the estate of such decedent.

Subsec. (c). Pub. L. 97–34, § 422(a)(2), substituted “20 percent or more” for “more than 20 percent”.

Subsec. (g)(1)(A). Pub. L. 97–34, § 422(c)(1), redesignated cl. (i) as cl. (i)(I), substituted “any portion” for “one-third or more in value”, added cl. (i)(II), substituted in cl. (ii) “the aggregate of such distributions, sales, exchanges, or other dispositions and withdrawals equals or exceeds 50 percent of the value of such interest” for “aggregate withdrawals of money and other property from the trade or business, an interest in which qualifies under subsection (a)(1), made with respect to such interest, equal or exceed one-third of the value of such trade or business” and in provision following cl. (ii) substituted “the unpaid portion” for “any unpaid portion”.

Subsec. (g)(1)(D). Pub. L. 97–34, § 422(c)(3), inserted provision for application of a similar rule in the case of a series of subsequent transfers of the property by reason of death so long as each transfer is to a member of the family of the transferor in such transfer.

Subsec. (g)(3). Pub. L. 97–34, § 422(c)(2), substituted as heading “Failure to make payment of principal or interest” for “Failure to pay installment”, designated existing provisions as subpar. (A), and in subpar. (A) as so designated, substituted “Except as provided in subparagraph (B), if any payment of principal or interest” for “If any installment” and “extension of time” for “extension of time for the payment of such installment”, and added subpar. (B).

1978—Subsec. (b)(2)(D). Pub. L. 95–600, § 512(a), added subpar. (D).

Subsec. (b)(7). Pub. L. 95–600, § 512(b), added par. (7).

### Statutory Notes and Related Subsidiaries

### Effective Date of 2001 Amendment

Pub. L. 107–16, title V, § 571(b), June 7, 2001, 115 Stat. 92, provided that: “The amendments made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.”

Pub. L. 107–16, title V, § 572(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.”

Pub. L. 107–16, title V, § 573(b), June 7, 2001, 115 Stat. 93, provided that: “The amendment made by this section [amending this section] shall apply to estates of decedents dying after December 31, 2001.”

### Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

### Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable to estates of decedents dying after Dec. 31, 1997, with special rule in case of estate of any decedent dying before Jan. 1, 1998, with respect to which there is an election under section 6166 of this title, see section 503(d) of Pub. L. 105–34, set out as a note under section 163 of this title.

### Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99–514, set out as an Effective Date note under section 2601 of this title.

### Effective Date of 1984 Amendment

Amendment by section 544(b)(4) of Pub. L. 98–369 applicable to estates of decedents which are required to file returns on a date (including any extensions) after July 18, 1984, see section 544(d) of Pub. L. 98–369, set out as a note under section 2002 of this title.

Pub. L. 98–369, div. A, title X, § 1021(e), July 18, 1984, 98 Stat. 1026, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: In general.—The amendments made by this section [amending this section] shall apply with respect to estates of decedents dying after the date of the enactment of this Act [July 18, 1984].Special rule.— In general.—At the election of the executor, if— a corporation has 15 or fewer shareholders on June 22, 1984, and at all times thereafter before the date of the decedent’s death, and stock of such corporation is included in the gross estate of the decedent,then all other corporations all of the stock of which is owned directly or indirectly by the corporation described in clauses (i) and (ii) shall be treated as one corporation for purposes of section 6166 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]. Effect of election.—Any executor who elects the application of this paragraph shall be treated as having made the election under paragraph (8) of section 6166(b) of such Code.”

### Effective Date of 1983 Amendment

Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.

### Effective Date of 1981 Amendment

Pub. L. 97–34, title IV, § 422(f), Aug. 13, 1981, 95 Stat. 316, provided that: In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 303, 2011, 2204, 2621, 6161, 6324A, 6503, and 7403 of this title and repealing section 6166A of this title] shall apply to the estates of decedents dying after December 31, 1981. Acceleration by reason of subsequent death.—The amendment made by subsection (c)(3) [amending this section] shall apply to transfers after December 31, 1981.”

### Effective Date of 1978 Amendment

Pub. L. 95–600, title V, § 512(c), Nov. 6, 1978, 92 Stat. 2883, provided that: “The amendments made by this section [amending this section] shall apply with respect to the estates of decedents dying after the date of the enactment of this Act [Nov. 6, 1978].”

### Effective Date

Pub. L. 94–455, title XX, § 2004(g), Oct. 4, 1976, 90 Stat. 1872, provided that: “The amendments made by this section [enacting this section and section 6324A of this title and amending sections 303, 2011, 2204, 6136, 6161, 6503, 6601, and 7403 of this title] shall apply to the estates of decedents dying after December 31, 1976.”

### Land Diverted Under 1983 Payment-in-Kind Program

Land diverted from production of agricultural commodities under a 1983 payment-in-kind program to be treated, for purposes of this section, as used during the 1983 crop year by qualified taxpayers in the active conduct of the trade or business of farming, with qualified taxpayers who materially participate in the diversion and devotion to conservation uses under a 1983 payment-in-kind program to be treated as materially participating in the operation of such land during the 1983 crop year, see section 3 of Pub. L. 98–4, set out as a note under section 61 of this title.