respect to which such first payment or distribution was made. (3) Treatment after death of account beneficiary (A) In general If, by reason of the death of the account beneficiary, any person acquires the account beneficiary’s interest in a small business start-up savings account— (i) such account shall cease to be a small business start-up savings account as of the date of death, and (ii) an amount equal to the fair market value of the assets in such account on such date shall be includible— (I) in the case of a person who is not the estate of such beneficiary, in such person’s gross income for the taxable year which includes such date, or (II) in the case of a person who is the estate of such beneficiary, in such beneficiary’s gross income for the last taxable year of such beneficiary. (B) Special rules (i) Reduction of inclusion for predeath expenses The amount includible in gross income under subparagraph (A) shall be reduced by the amounts described in paragraph (2) which were incurred by the decedent before the date of the decedent’s death and paid by such person within 1 year after such date. (ii) Deduction for estate taxes An appropriate deduction shall be allowed under section 691(c) to any person (other than the decedent) with respect to amounts included in gross income under subparagraph (A)(ii)(I) by such person. (4) Treatment for failure to be treated as eligible small business If for any taxable year a taxpayer which holds a small business start-up savings account as an eligible small business ceases to be an eligible small business— (A) such account shall cease to be a small business start-up savings account, and (B) the balance of such account shall be treated as paid out for such taxable year in a distribution which is not a qualified distribution. (f) Special rules (1) Denial of double benefit Any deduction or credit otherwise allowed for the taxable year with respect to amounts described in subsection (e)(2)(A) shall be reduced by an amount equal to the qualified distributions attributable to