2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART III - Decedent’s Estate and Gifts (§§ 31001 — 31176) › Chapter 1025 - Tax Returns, Payment of Taxes, Procedure and Administration (§§ 31121 — 31176) › Subchapter A - Tax Returns and Payment of Taxes (§§ 31121 — 31131) › § 31129 - Time extension on payment for controlled businesses

(a) Allowable time extension. — If the value of the interest in a controlled business that is included in determining the gross estate of a decedent who was (at the time of his/her death) a Puerto Rico resident, exceeds:
(1) Thirty-five percent (35%) of the value of the gross estate of such decedent, or
(2) fifty percent (50%) of the taxable estate of said decedent, the executor may elect to pay all or part of the taxes imposed by § 31011 of this title in two (2) or more (but not in excess of ten (10)) equal installments. Such election shall be made not later than the date provided in § 31121(a) of this title to file the return on such taxes (including any time extension granted to that effect) pursuant to such regulations as the Secretary may promulgate. If the election provided in this section is made, the provisions of this part shall be applied as if it were the Secretary who was granting a time extension at the time of payment of such taxes. For purposes of this section, the value shall be the value determined for purposes of the decedent’s estate tax.
(b) Limitation. — The maximum amount of the tax that may be paid in installments as provided in this section shall be that amount which is in a proportion equal to the taxes imposed by § 31011 of this title (minus the credits against such taxes and the deductions), as the proportion between the value of the interest in the controlled business that qualifies under subsection (a) and the total value of the gross decedent’s estate.
(c) Controlled business. — For purposes of this section, the term “interest in a controlled business” means:
(1) An interest as owner of a trade or business operated in Puerto Rico as an individual business;
(2) An interest as partner of a partnership engaged in a trade or business in Puerto Rico, if:
(A) Twenty percent (20%) or more of the total interest in the capital of such partnership is included in determining the gross estate of the decedent, or
(B) such partnership had eleven (11) partners or less.
(3) Stock in a corporation engaged in a trade or business in Puerto Rico, if:
(A) Twenty percent (20%) or more of the value of voting stock in such corporation is included in determining the gross estate of the decedent, or
(B) Such corporation had eleven (11) stockholders or less. For purposes of this subsection, such determinations shall be made immediately before the time of death of the decedent.
(d) Special rule for interest in two or more controlled businesses. — For purposes of subsections (a), (b), and (h)(1), interest in two (2) or more controlled businesses, each of which is included in determining the value of the gross estate of the decedent, over fifty percent (50%) of the total value of each business shall be treated as interest in a single controlled business. For purposes of the fifty percent (50%) requirement set forth in the preceding sentence, interest in a controlled business that represents the surviving spouse’s interest in marital community property shall be deemed to be included in determining the gross estate of the decedent.
(e) Time to pay installments. — If the election provided in subsection (a) is made, the first installment shall be paid not later than the time selected by the executor, executor or trustee, which shall not be after five (5) years following the date established in § 31126(a) of this title, for the payment of taxes, and each subsequent installment shall be paid not later than such time in which one (1) year has elapsed from the time established in this subsection for the payment of the preceding installment.
(f) Prorating the deficiency over the installments. — If the election set forth in subsection (a) is made to pay in installments the taxes imposed by § 31011 of this title, and if a deficiency has been assessed, the same shall be (subject to the limitations established in subsection (b)) prorated over the installments. The portion of any deficiency thus prorated over any installment not due shall be collected at the same time and as part of such installment. The portion of any deficiency thus prorated or any installment paid or whose time of payment has become due, shall be paid by notice and demand by the Secretary. This subsection shall not apply if the deficiency is caused by negligence, intentional omission of rules and regulations or fraud with the intent to evade taxes.
(g) Time for the payment interest. — If a time extension has been granted under this section on the time of payment of taxes, the interest established in the provisions of §§ 33001 et seq. of this title related to interest on deficiencies determined under this part, and in cases of bankruptcy and receivership, imposed on the unpaid amount of taxes attributable to the first five (5) years following the time established in § 31126(a) of this title for the payment of taxes, shall be paid annually; the interest established in the applicable §§ 33001 et seq. of this title on the unpaid amount of the taxes attributable to any period after the first five (5) years referred to in the above sentence, shall be paid annually at the same time and as part of each installment for paying taxes. The interest on any portion of a prorated deficiency before the time fixed for the payment of the last installment preceding the imposition of the deficiency, shall be paid upon notice and demand by the Secretary. In applying the provisions of §§ 33001 et seq. of this title, related to the additions to taxes imposed by this part in cases of nonpayment, the time extension to pay the taxes declared in the tax return under this part, and the time extension to pay the deficiency determined under this part (relative to the imposition of an interest rate in certain time extensions for the payment of decedent’s estate taxes), a deficiency that is entirely prorated over the installments under this section shall be deemed to be taxes for whose payment a time extension has been granted under this section.
(h) Accelerated payments. —
(1) Withdrawal of business funds; disposal of interest. —
(A) If:
(i) Any interest in a controlled business described in subsection (a) is distributed, sold, exchanged or disposed of, or
(ii) money or other property of said business, which is attributable to said interest, is withdrawn, and
(iii) the amount of such distributions, sales, exchanges, disposals, or withdrawals represents fifty percent (50%) or more of the value of the interest in the controlled business described in subsection (a), then the time extension to make the payment provided in this Section shall no longer apply, and any unpaid portion of the taxes payable in installments shall be paid as determined by the Secretary.
(B) In the case of distributions to redeem stock on which § 30149(e) of this title applies:
(i) Paragraph (A)(i) shall not apply on withdrawals of money and distributions of property; and for purposes of said paragraph, the value of the business shall be deemed to be said value, minus the amount of money and other properties thus distributed, and
(ii) paragraph (A)(ii) shall not apply on redeemed stock; and for purposes of said paragraph, the interest in the controlled business shall be deemed to be such interest, minus the value of the redeemed stock.
(iii) This paragraph shall apply only if, not later than the time set forth in subsection (e) for the payment of the first installment that becomes due after the time the distribution was made, an amount of the taxes imposed by § 31011 of this title shall be paid, which amount shall not be less than the amount of money or other properties thus distributed.
(C) Paragraph (A)(ii) shall not apply on a stock exchange conducted in compliance with a reorganization plan described in § 30144(g)(1) of this title, but stock received in said exchange shall be treated, for purposes of paragraph (A)(i), as interest that qualifies under subsection (a).
(D) Paragraph (A)(ii) shall not apply on transfers of property of the decedent made by the executor to a person entitled to receive such property under the last will and testament of the decedent or under the corresponding inheritance laws.
(2) Omission in payment of an installment. — If any installment under this section is not paid not later than the date fixed for such payment (including any time extension on the date to pay such installment), the unpaid portion of the taxes payable in installments shall be paid upon requirement by the Secretary or his/her representative.
(i) Option to defer time to pay deficiencies. —
(1) In general. — If:
(A) after the tax return required in § 31121(a) of this title has been filed, a deficiency in the taxes imposed by § 31011 of this title is imposed, and
(B) the decedent’s estate qualifies under subsection (a) the executor may opt to pay the deficiency in installments.
(2) Time of choice. — The choice provided in this subsection shall be made not later than sixty (60) days after the Secretary has required the payment of the deficiency, and the same shall be made in such manner as the Secretary may establish by regulation.
(3) Effects of choice on payment. — If a choice is made under this subsection:
(A) The deficiency shall be (subject to the limitation provided in subsection (b)) prorated over the installments that have become due as if the option had been made at the time of filing the estate tax return in § 31121(a) of this title; and
(B) The portion of the deficiency thus prorated over any installment whose time of payment has become due, shall be paid at the time of making the election under this subsection.
(C) The portion of the deficiency prorated as indicated above over installments that have not become due shall be paid on the date on which such installments would have become due and payable if the election under subsection (a) was made.
(4) This subsection shall not apply if the deficiency is caused by negligence, by an intentional omission of the terms established in the rules and regulations or by fraud with the intent to evade taxes.
History —Jan. 31, 2011, No. 1, § 2051.09, retroactive to Jan. 1, 2011.