PLR 200406039: Estate receives more time to elect alternate valuation

Plain-English summary

An estate's attorney filed its federal estate tax return without electing alternate valuation under § 2032 and had not advised the personal representative about the election. The representative sought more time after learning that the election could not simply be added to the original return. The IRS found the requirements for relief under Treas. Reg. § 301.9100-3 satisfied and granted 60 days from the letter to make the election on a supplemental Form 706. The ruling gives time to elect; the statutory conditions for using alternate valuation still apply.

Ruling snapshot

• Question: Could an estate make a late alternate valuation election after its attorney omitted it from Form 706?
• Outcome: Approved a 60-day extension to file the election.
• Key authorities: IRC § 2032; Treas. Reg. §§ 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200406039
Washington, DC 20224
Release Date: 2/06/2004
Index Number: 2032.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:4\PLR-139044-03
Date:
OCTOBER 23, 2003

Re:

Legend:

Decedent
=
Trust
=
State
=
Personal Representative =
Date 1
=
Date 2
=
Date 3
=

Dear
,

This is in response to your June 20, 2003, submission in which an extension of time was requested under § 301.9100-3 of the Procedure and Administration Regulations and § 2032 of the Internal Revenue Code to make the alternate valuation election provided for in § 2032, with respect to Decedent’s estate.

According to the facts submitted, Decedent died on Date 1. Personal Representative represents that the attorney that was hired to prepare and file Decedent’s Federal Estate Tax Return (Form 706) failed to elect alternate valuation under § 2032 on the estate tax return filed on Date 2, and failed to advise Personal Representative of the advantage of doing so.

PLR-139044-03
2

When the Internal Revenue Service (IRS) requested additional information with respect to Decedent’s estate tax return, Personal Representative was advised by the IRS that the alternate valuation date election could not be made subsequent to the initial filing of the estate tax return unless a private letter ruling was obtained permitting such election.

On Date 3, the Personal Representative of Decedent’s estate submitted a letter ruling request seeking an extension of time to make the alternate valuation date election provided for in § 2032, with respect to Decedent’s estate.

Section 2032(a) provides that the value of the gross estate may be determined, if the executor so elects, by valuing all the property included in the gross estate as follows:

(1) In the case of property distributed, sold, exchanged, or otherwise disposed of, within 6 months after the decedent’s death such property shall be valued as of the date of distribution, sale, exchange, or other disposition.

(2) In the case of property not distributed, sold, exchanged, or otherwise disposed of, within 6 months after the decedent’s death such property shall be valued as of the date 6 months after the decedent’s death.

(3) Any interest or estate which is affected by mere lapse of time shall be included at its value as of the time of death (instead of the later date) with adjustment for any difference in its value as of the later date not due to mere lapse of time.

Section 2032(c) provides that no election may be made under section 2032 with respect to an estate unless such election will decrease (1) the value of the gross estate, and (2) the sum of the tax imposed by this chapter and the tax imposed by chapter 13 with respect to property includible in the decedent’s gross estate (reduced by credits allowable against such taxes).

Section 2032(d)(1) provides that an election under section 2032 shall be made by the executor on the return of tax imposed by section 2001. Such election, once made, shall be irrevocable. Under section 2032(d)(2), no election may be made under section 2032 if such return is filed more than one year after the time prescribed by law (including extensions) for filing such return.

Section 301.9100-6T(b)(1) provides the time and manner for making an election of an alternate valuation of an estate.

Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H, and I.

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Section 301.9100-1 through 301.9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due date is prescribed by a regulation (and not expressly provided by statute). Section 301.9100(a).

Section 301.9100-2 provide automatic extensions of time for making certain elections.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections that do not meet the requirements of section 301.9100-2 must be made under the rules of section 310.9100-3.

Requests for relief under section 301.9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the government.

Section 301.9100-3(b)(1)(v) provides that a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election.

Section 301.9100-3(c)(1) provides the standards the Commissioner will use to determine when the interests of the Government are prejudiced.

Section 301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made (taking into account the time value of money).

Based on the facts submitted and the representations made, we conclude that the requirements of section 301.9100-3 have been satisfied. Therefore, an extension of time is granted until 60 days from the date of this letter to make the alternate valuation election under section 2032. The election should be made on a supplemental Form 706. The supplemental Form 706 should be filed with the Internal Revenue Service Center, Cincinnati, Ohio 45999. A copy of this letter should be attached to the supplemental Form 706. A copy is enclosed for this purpose.

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

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Except as specifically ruled herein, we express or imply no opinion on the federal tax consequences of the transaction of any aspect of any transaction or item discussed or referenced in this letter. This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Sincerely,

Heather C. Maloy
Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures
Copy for section 6110 purposes
Copies of this letter

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