IRC Section 6166 RevisitedIRC Section 6166 Revisited

Closely held businesses comprise a substantial percentage of the U.S. economy. One study estimated that only 30 percent of closely held businesses survive the first generation, 22 percent survive the second and only 3 percent survive beyond the third.¹ Considering the economic importance of maintaining family businesses, Congress enacted Internal Revenue Code Section 6166 in 1958 to help prevent the forced sale of a closely held business to pay estate taxes. Let’s focus on some of the advantages and disadvantages of IRC Section 6166, the economics of deferral and the role of life insurance in avoiding or enhancing Section 6166.

Background 

Section 6166 allows the estate of a decedent who was a U.S. citizen or resident at the time of death ...