American College HS330 Exam - Topic 1 Question 48 Discussion

Question

When the owner of a closely held business dies, the payment of a portion of the federal estate tax may be deferred for a period of several years if the estate otherwise qualities under the provisions of IRC Section 6166. Which of the following statements concerning this deferral of federal estate tax is correct?

Van · Accepted Answer

D) Under certain circumstances, the estate will forfeit its right to tax deferral, and all the remaining unpaid estate tax will become due and payable immediately.

Van · Answer

A) The interest rate on the deferred tax is determined by the prime rate in effect on the date of death.

Van · Answer

B) The interest on the unpaid estate tax is payable over the first 10 years, after which the tax plus interest on the balance is payable in equal installments for the last 5 years.

Van · Answer

C) To qualify for the tax deferral, the closely held business must represent more than 50 percent of the value of the decedents adjusted gross estate.