Daniel Akaka: “According to witnesses who have testified before Congress and tax experts, the estate tax poses a dire problem for…”

“According to witnesses who have testified before Congress and tax experts, the estate tax poses a dire problem for family-owned and closely held businesses. The owners typically have all their assets tied up in the business, and they have re-invested all their profits to make the business grow. When the owners die, the estate tax must be paid within 9 months and in many cases the families will have to sell the businesses to pay the tax. With only 9 months to pay off the estate tax, the families are often forced to settle for whatever price they can get. Now, rather than face such a fire sale, many business owners will sell their businesses while they are still alive so that their families can get a fair price. Many family-owned and closely held businesses do not show up on estate tax returns, because they have already been sold off in anticipation of having to pay the tax. Recognizing the liquidity problem that the estate tax imposes on closely held businesses, the Treasury Department has suggested that the number of owners permissible in a qualifying business should be raised from 15 to 75 so that eligibility for estate tax deferral and installment payment can be consistent with Subchapter S qualification.”