PLR 200841032: Estate receives extra time to elect alternate valuation

Plain-English summary

An estate's executor hired a CPA to prepare the federal estate tax return, but the CPA did not consider the alternate valuation election under Section 2032. The executor filed the return within one year after its due date and later submitted supplemental information making the election. The IRS found that the executor reasonably relied on a qualified tax professional and satisfied the regulatory standards for relief. It granted an extension through the redacted date on which the supplemental filing was made. The ruling did not decide whether the estate otherwise qualified to use alternate valuation.

Ruling snapshot

• Question: May the executor receive additional time to elect alternate valuation for the estate under Section 2032?
• Outcome: Approved. The IRS extended the election deadline through the date of the executor's supplemental filing.
• Key authorities: IRC §§ 2001, 2032; Treas. Reg. §§ 20.2032-1(b)(3), 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200841032
Release Date: 10/10/2008
Index Number: 2032.00-00; 9100.00-00
Person To Contact:
------------------, ID No. ------------- Telephone Number:
--------------------
-------------------------------------
Refer Reply To:
-----------------------------
CC:PSI:B04 – PLR-150523-07
--------------------------
Date:
April 21, 2008

Re: --------------------------------------------------------

Legend
Decedent = -----------------------
---------------------------------------
Executor = ------------------------
CPA = --------------------------------------------
Date 1 = ----------------
Date 2 = -----------------------
Date 3 = ------------------------

Dear -----------------:

This is in response to a letter from your authorized representative dated November 2, 2007, requesting an extension of time under § 301.9100 of the Procedure and Administration Regulations to make an alternate valuation election under § 2032 of the Internal Revenue Code.

The facts and representations submitted are summarized as follows: Decedent died on Date 1 and the Executor of Decedent’s estate filed Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return on Date 2, within one year of the due date of the return. The Executor hired CPA to prepare Form 706. Form 706 was prepared by CPA without consideration of the alternate valuation election under section 2032. On Date 3, Executor filed supplemental information on Form 706 making that election.

Section 2032(a) provides, in part, 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:
2
PLR-150523-07

(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.

Section 2032(c) provides that no election may be made under § 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 under chapter 11 of the Code 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 § 2032 shall be made by the executor on the return of tax imposed by § 2001. Under § 2032(d)(2), no election may be made under § 2032 if such return is filed more than 1 year after the time prescribed by law (including extensions) for filing such return.

Section 20.2032-1(b)(3) of the Estate Tax Regulations provides that a request for an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 will not be granted unless the estate tax return is filed no later than 1 year after the due date of the return, including extensions.

Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time to make a regulatory election, or 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, if the taxpayer demonstrates to the satisfaction of the Commissioner that the taxpayer has acted reasonably and in good faith, and granting relief will not prejudice the interests of the government.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-1(a).

Section 301.9100-2 provides automatic extension of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the Commissioner that the 3
PLR-150523-07

taxpayer acted reasonably and in good faith, and that granting 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.

Based on the facts submitted and the representations made, we conclude that the standards of §§ 301.9100-1 and 301.9100-3 have been satisfied. In addition, the Form 706 was filed within 1 year of the due date of the return. Consequently, the Executor is granted an extension of time to Date 3 for making the alternate valuation election under § 2032. A copy of this letter should be forwarded to the Cincinnati Service Center at the following address: Internal Revenue Service, Cincinnati Service Center – Stop 82, Cincinnati, OH 45999.

Except as specifically ruled herein, we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the Code.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to your authorized representative.

Sincerely,

William P. O’Shea
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures
Copy for section 6110 purposes
Copy of this letter

cc: