Estate received more time to elect alternate valuation

Plain-English summary

An estate's executors relied on accountants to prepare a timely Form 706, but the accountants neither made the section 2032 alternate valuation election nor advised the executors that it was available. After the accountants disclosed the error, legal counsel determined that the election should have been made. Because the return had been filed within one year after its due date and the executors reasonably relied on qualified tax professionals, the IRS found the requirements of Treas. Reg. § 301.9100-3 satisfied. It granted the executors 120 days from the ruling date to make the election.

Ruling snapshot

• Question: Could the estate receive more time to elect alternate valuation after its accountants omitted the election?
• Outcome: Approved, with 120 days from the ruling date to make the election.
• Key authorities: IRC § 2032; Treas. Reg. §§ 20.2032-1 and 301.9100-3

Full text (IRS public release)

                                                           Department of the Treasury
                                                           Washington, DC 20224

Internal Revenue Service
Number: 201431017 Third Party Communication: None
Release Date: 8/1/2014 Date of Communication: Not Applicable
Index Number: 9100.00-00, 2032.00-00
Person To Contact:
----------------------------- ---------------------, ID No. --------------
----------------- Telephone Number:
-------------------------------- ----------------------
Refer Reply To:
In Re: ----------------------------------------- CC:PSI:4
PLR-145126-13
Date: APRIL 15, 2014

LEGEND:
Decedent = ----------------------------
Executors = ------------------------------------------------------------------------

Accountants = -----------------------------------------------------------------------
-----------

Attorney = --------------------------------
Date 1 = --------------------------
Date 2 = ----------------------
Date 3 = ---------------------------------------
Date 4 = ------------------------

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

This letter responds to your authorized representative’s letter dated March 20, 2014,
and other correspondence 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 are as follows. Decedent died on Date 1. The Executors
of Decedent’s estate consulted with Accountants to prepare Form 706, United Sates
Estate (and Generation-Skipping Transfer) Tax Return. A Form 706 was filed on Date
2, a date within one year after the due date. Accountants failed to make the election for
alternate valuation under § 2032 on the Form 706, and they did not advise the
Executors of the availability of the election for alternate valuation. On Date 3,
Accountants told the Executors that the Form 706 had been improperly completed and
that the Executors should retain legal counsel to represent the estate. When the
Executors consulted Attorney, it was determined that the election for alternate valuation
should have been made. Accordingly, this request for an extension of time to make the
election was submitted on or around Date 4.

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 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. 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.

Section 301.9100-1(c) provides that 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 six months
except in the case of a taxpayer who is abroad), under all subtitles of the Internal
Revenue Code except in subtitles E, G, H, and I.

Section 301.9100-3 sets forth the standards that the Commissioner uses 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. These standards indicate that
the Commissioner should grant relief when the taxpayer provides evidence proving 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 to advise the taxpayer to make, the election.

Based on the facts submitted and the representations made, we conclude that the
requirements of § 301.9100-3 are satisfied. Therefore, Executors are granted an
extension of time of 120 days from the date of this letter 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.

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.

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.

                                       Sincerely,
                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



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

Enclosure:
Copy of this letter