Extension of time for payment of tax

(a) Extension of time (1) In general Subchapter B of chapter 62 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 6168. Extension of time for payment of capital gains on certain assets realized by reason of death (a) 5-Year installment payment (1) In general In the case of any gain with respect to eligible property that is recognized under section 1261 by reason of the death of the taxpayer, the taxpayer may elect to pay part or all of tax imposed on such gain in 2 or more (but not exceeding 5) equal installments. (2) Date for payment of installments If an election is made under paragraph (1), the first installment shall be paid not later than the date on which the tax for the taxable year in which the gain described in paragraph (1) occurs is due, and each succeeding installment shall be paid on or before the date which is 1 year after the date prescribed by this paragraph for payment of the preceding installment. (b) Eligible capital asset For purposes of this section, the term eligible property means any property other than personal property of a type which is actively traded (within the meaning of section 1092(d)(1)). (c) Portion of tax eligible The amount of tax to which this section applies shall not exceed the excess of— (1) the tax computed under chapter 1 (determined after application of section 1261), over (2) the tax computed under chapter 1 (determined without regard to section 1261). (d) Election Any election under subsection (a) shall be made not later than the time prescribed by section 6072 for filing the return of tax imposed under chapter 1 (including extensions thereof), and shall be made in such manner as the Secretary shall by regulations prescribe. If an election under subsection (a) is made, the provisions of this subtitle shall apply as though the Secretary were extending the time for payment of the tax. (e) Proration of deficiency to installments If an election is made under subsection (a) to pay any part of the tax imposed under chapter 1 in installments and a deficiency has been assessed, the deficiency shall (subject to the limitation provided by subsection (a)(2)) be prorated to the installments payable under subsection (a). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax. (f) Time for payment of interest If the time for payment of any amount of tax has been extended under this section, interest payable under section 6601 on any unpaid portion shall be paid annually at the same time as, and as part of, each installment payment of the tax. (g) Regulations The Secretary shall prescribe such regulations as may be necessary to the application of this section. (h) Cross-References (1) Security For authority of the Secretary to require security in the case of an extension under this section, see section 6165. (2) Interest For provisions relating to interest on tax payable in installments under this section, see subsection (k) of section 6601.. (2) Coordination with transferee liability Section 6109 of such Code is amended by redesignating subsections (g), (h), and (i) as subsections (h), (i), and (j), respectively, and by inserting after subsection (f) the following new subsection: (g) Period of assessment in case of extension of time for payment of tax under section 1261 For purposes of subsection (c), the period of limitation for assessment against the transferor of any tax imposed under section 1261 the payment of which is extended under section 6168 shall not be treated as expiring earlier than the due date for the last payment under (a)(2) of such section.. (3) Clerical amendment The table of sections for subpart B of chapter 62 of such Code is amended by adding at the end the following new item: Sec. 6168. Extension of time for payment of capital gains on certain assets realized by reason of death.. (b) Interest Section 6601 of such Code is amended by redesignating subsection (k) as subsection (l) and by inserting after subsection (j) the following new subsection: (k) Special rate for tax extended under section 6168 If the time for payment of an amount of tax imposed by section 1261 is extended as provided in section 6168, in lieu of the annual rate provided by subsection (a), interest shall be paid at a rate equal to 45 percent of the annual rate provided by subsection (a). For purposes of this subsection, the amount of any deficiency which is prorated to installments payable under section 6168 shall be treated as an amount of tax payable in installments under such section.. (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.