IRC Sec 6166

IRC Sec 6166 allows an executor to defer payment of that portion of the estate taxes which represent a farm or closely held business if the farm or business consists of more than 35% of the adjusted gross estate. For purposes of the 35% test, if two or more businesses are involved and 20% or more of the value of each business is included in the gross estate, the businesses can be aggregated.

Payment can be deferred for up to five years, at which time the first of a maximum of ten annual payments becomes due. During the five years of deferral, the interest on the unpaid tax balance is due annually. Starting in year five, the tax and interest installments are due annually. Interest paid on the deferred tax is no longer deductible for either income or estate tax purposes.