PLR 1033023: IRS denied late-election relief for an estate's alternate valuation election

Plain-English summary

The IRS denied an estate's request for additional time to make an alternate valuation election under IRC § 2032. The estate's representatives filed the estate tax return on time, but the preparer did not consider the election and the error was discovered more than 18 months after the return's due date. The law barred the election because it was not made within one year after the due date, including extensions. The IRS therefore could not grant relief under the extension provisions.

Ruling snapshot

• Question: Could the estate receive extra time to make an alternate valuation election under IRC § 2032?
• Outcome: Denied
• Key authorities: IRC §§ 2032 and 301.9100-1 through 301.9100-3; Treas. Reg. § 20.2032-1

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201033023
Release Date: 8/20/2010
Index Number: 2032.00-00; 9100.00-00 Person To Contact:
-------------------, ID No. -------------
Telephone Number:
---------------------
------------------------------- Refer Reply To:
------------------------------------- CC:PSI:B04 – PLR-151976-09
------------------------- Date: MAY 19, 2010

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

Legend
Decedent = ------------------------------------------------
Personal Representatives = ----------------------------------------
CPA = ----------------------------------------------------------------------------
Date 1 = -------------------------
Date 2 = --------------------------
Date 3 = -------------------------

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

    This responds to a letter from your authorized representative, dated September

21, 2009, 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 Personal Representatives of Decedent’s estate timely filed
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return on Date

2. The Personal Representatives hired CPA to prepare Form 706. The CPA prepared
   the Form 706 without considering the alternate valuation election under § 2032. The
   error was discovered on Date 3, more than 18 months after the due date (including
   extensions) of the Form 706.

   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:

     (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 by chapter 11 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 chapter 11. 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 to make the § 2032 election 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 to time actually granted).

   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 an 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
   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 estate does not satisfy the requirements of § 2032(d)(2) because the election was
   not filed within 1 year of the due date of the return. Accordingly, we cannot grant an
   extension of time to make the alternate valuation election under § 2032.

   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.

   The ruling in this letter pertaining to the federal estate and/or generation-skipping
   transfer tax apply only to the extent that the relevant sections of the Internal Revenue
   Code are in effect during the period at issue.

   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,
   
                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)
   
                                 By: _________________
                                     Lorraine Gardner
                                     Senior Counsel, Branch 4
                                     Office of Associate Chief Counsel
                                     (Passthroughs & Special Industries)
   

Enclosures
Copy for section 6110 purposes
Copy of this letter