When a “closely-held” business is one of the assets in a marital estate, certain challenges are presented.
 
Frequently, it is the largest asset; it is not easily liquidated and is often retained in its entirety by one spouse. This creates the dilemma of how to equalize the asset division. 
 
It is not unusual for couples to enter into an installment payment plan in exchange for one spouse releasing his or her marital interest in the company. Most of these payment plans will include interest, since one spouse “owes” the other spouse a certain sum which is to be paid out over time.
 
Since the interest paid on the loan is considered “personal” in nature, the IRS does not allow an “interest” tax deduction to the person paying it, but does tax the recipient on the interest received.
 
One way to make the interest deductible for the payor is to structure the interest portion as alimony under Internal Revenue Code Section 71 (26 U.S.C. § 71). One would need to add a “termination-at-death” clause for the interest payments so that the payments would qualify as maintenance under Section 71.