Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 61-91

1961-1 C.B. 714

IRS Headnote

The community interest of a surviving spouse in closely held businesses can not be combined with the deceased spouse's interest therein in order to ascertain whether the percentage requirements of section 6166(a) of the Internal Revenue Code of 1954 are met, so as to entitle the executor to elect to pay part or all of the estate tax in two or more installments.

Full Text

Rev. Rul. 61-91

Advice has been requested whether the community interest of a surviving spouse in closely held businesses may be combined with that of the deceased spouse for determining the percentage requirements of section 6166(a) of the Internal Revenue Code of 1954 so as to entitle the executor to elect to pay all or a part of the estate tax in installments.

Subsection (a) of section 6166 of the Code provides, in part, that if the value of an interest in a closely held business which is included in determining the gross estate of a decedent exceeds either (1) 35 percent of the value of the gross estate of such decedent or (2) 50 percent of the taxable estate of such decedent, the executor may elect to pay part or all of the tax imposed by section 2001 in two or more, but not more than ten, equal installments.

Subsection (d) of section 6166 of the Code provides, in part, that for purposes of subsection (a), interests in two or more closely held businesses, with respect to each of which there is included in determining the value of the decedent's gross estate more than 50 percent of the total value of each such business, shall be treated as an interest in a single closely held business. For purposes of the 50 percent requirement of the preceding sentence, an interest in a closely held business which represents the interest of a surviving spouse in property held by the decedent and the surviving spouse as community property shall be treated as having been included in determining the value of the gross estate of the decedent.

Although the Code provides that the community interest of the surviving spouse will be considered as having been included in the gross estate under section 6166(d) of the Code, such inclusion applies only for determining whether two or more closely held businesses may be treated as an interest in a single closely held business. There is no similar provision for treating the community interest of the surviving spouse as having been included in the gross estate under section 6166(a) of the Code for determining the percentage requirements thereof.

Accordingly, it is held that the community interest of the surviving spouse in closely held businesses can not be combined with the deceased spouse's interest therein in order to ascertain whether the percentage requirements of section 6166(a) of the Code are met, so as to entitle the executor to elect to pay part or all of the estate tax in two or more installments.