Suppose that three or four years down the road, Suzy and Sammy are getting along, but the business isn't. Big competitors hit, or the market has shrunk, or the kids made bad credit decisions. Finally, they have no choice. They shut down the business. Now, neither of the heirs who received business interests are active participants because there is nothing in which to participate.
Taxes fall due at the worst times.
The kids will have to pay them at the moment the company hits the wall. If they can hang on for at least six years before leaving or shutting down, there's a break. Estate tax is reduced by 20 percent after six years, and by an additional 20 percent each year after that. If they can keep the company running for 10 years before they leave it or bag it, they're home free. The new provision is similar to special-use valuation under Sec.