PLR 201216013: IRS grants more time to make an alternate valuation election

Plain-English summary

The co-executors of an estate timely filed Form 706 but did not make the alternate valuation election under IRC § 2032. They later determined that the election should have been made and filed a supplemental Form 706. The IRS found that the estate met the standards for relief, including reasonable reliance on a qualified tax professional, and granted an extension through the redacted date to make the election. The ruling did not address other tax consequences of the estate's transactions.

Ruling snapshot

• Question: May the estate make a late alternate valuation election under IRC § 2032?
• Outcome: Approved, with an extension through the stated date
• Key authorities: IRC §§ 2001 and 2032; Treas. Reg. §§ 20.2032-1 and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201216013
Third Party Communication: None
Release Date: 4/20/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.00-00, 2032.00-00
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Telephone Number:
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Refer Reply To:
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CC:PSI:B04
In Re: PLR-131361-11
----------------------------------------------------- Date:
------------------------------------------------------- January 05, 2012

Legend

Decedent = ---------------------
Date 1 = -----------------------
Son = -----------------------
Individual = ------------------
CPA = ------------------------------
Date 2 = -----------------------
Date 3 = ------------------

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

This letter responds to your authorized representative's letter of July 25, 2011, requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to make the alternate valuation election under § 2032 of the Internal Revenue Code (Code).

The facts and representations submitted are summarized as follows: Decedent died on Date 1. The co-executors of Decedent’s estate are Son, Individual, and CPA. The co-executors timely filed Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, on or about Date 2. The co-executors engaged CPA to prepare Form 706. CPA did not make the alternate valuation election under § 2032 on Form 706. It is represented that CPA advised Son and Individual that, according to the CPA’s calculation, the alternate valuation election would not be made.

Subsequently, the co-executors determined that the estate should have made the alternate valuation election. On or about Date 3, Son, as co-executor, filed the supplemental Form 706 making the election under § 2032.
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Law and Analysis

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. 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. 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. Under § 2032(d)(2), no election may be made under § 2032 if such return is filed more than one 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 one 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 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
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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. Consequently, the co-executors are 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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.

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.

The rulings contained in this letter are 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.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of provides that it may not be used or cited as precedent.

Sincerely,

________
Lorraine E. Gardner
Senior Counsel, Branch 4
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosure:
Copy of letter for section 6110 purposes

cc: