PLR 201151003: IRS grants time for an alternate valuation election

Plain-English summary

The IRS granted an estate an extension through the date a supplemental Form 706 was filed to make an alternate valuation election under IRC § 2032. The executor had timely filed the original return but omitted the election, then filed a supplemental return after a second tax professional identified the omission. The IRS concluded that the estate acted reasonably and in good faith and that the relief requirements were satisfied. The election applies to the estate’s property under the alternate valuation rules, subject to the statutory requirements.

Ruling snapshot

• Question: May the estate make a late IRC § 2032 alternate valuation election on its supplemental Form 706?
• Outcome: Approved.
• Key authorities: IRC §§ 2001, 2032, 6110; Treas. Reg. §§ 20.2032-1(b)(3), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Third Party Communication: None
Number: 201151003
Date of Communication: Not Applicable
Release Date: 12/23/2011
Person To Contact:
-------------------, ID No. -------------
Index Number: 2032.00-00, 9100.00-00
Telephone Number:
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Refer Reply To:
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CC:PSI:04
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PLR-108574-11
Date: June 3, 2011

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

Legend

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

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

This letter responds to your authorized representative’s letter dated July 30, 2010, 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. CPA 1 prepared Decedent’s Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. On Date 2, the executor (Executor) of Decedent’s estate (Estate) timely filed the Form 706. Executor did not elect alternate valuation under § 2032 on the return. After Date 2, Executor was advised that the Estate should have elected alternate valuation under § 2032 for the property included in the gross estate. Executor retained CPA 2 to prepare a supplemental Form 706 for the Estate. On Date 3, Executor filed the supplemental Form 706, electing alternate valuation under § 2032.

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:
PLR-108574-11
2

(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 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. Such election, once made, shall be irrevocable. 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 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.

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).

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.

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.
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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. Consequently, Executor is granted an extension of time to Date 3, the date the supplemental Form 706 was filed, to make 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.

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 ruling, it is subject to verification on examination.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences 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) of the Code provides that it may not be used or cited as precedent.

In accordance with the 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 and Special Industries)

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

Enclosures
Copy for section 6110 purposes
Copy of this letter