Small Business Capital Formation Act of 1981

Small Business Capital Formation Act of 1981 - Amends the Internal Revenue Code to reduce corporate income tax rates. Reduces the income tax rate for mutual insurance companies.

Reduces the maximum tax rate imposed on individual income to 50 percent of taxable income by calendar year 1984.

Provides that small businesses may qualify for the five year deferral of payment of estate taxes if the value of such a business exceeds one-third of the adjusted gross estate of the decedent (currently, 65 percent of the adjusted gross estate). Eliminates the limit on eligibility for the four percent interest rate applicable to unpaid estate taxes of a qualifying small business.

Eliminates the $100,000 limit for used property eligible for the investment tax credit.

Allows individual taxpayers a ten percent income tax credit for investment in small business incentive stock (issues of stock aggregating less than $25,000,000 by corporations with equity capital of less than $25,000,000). Limits the amount of such credit to $750 ($1,500 for taxpayers filing jointly). Denies such credit to individuals who dispose of incentive stock within 12 months of purchase.