Estate denied alternate valuation election filed over one year late

Plain-English summary

An estate filed Form 706 more than one year after its due date, including extensions, and later asked to elect the alternate valuation method under § 2032. The statute bars the election when the estate tax return is filed more than one year late. The related regulation likewise says discretionary filing relief cannot be granted unless the return was filed within that one-year period. Because the estate missed the statutory limit, the IRS denied the requested extension regardless of the general reasonable-cause standards.

Ruling snapshot

• Question: May the estate make an alternate valuation election when Form 706 was filed more than one year after its extended due date?
• Outcome: Denied
• Key authorities: IRC § 2032(d)(2); Treas. Reg. § 20.2032-1(b)(3)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201441001
Third Party Communication: None
Release Date: 10/10/2014
Date of Communication: Not Applicable
Index Number: 2032.00-00, 9100.00-00
Person To Contact:
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------------------------, ID No. --------------
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Telephone Number:
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Refer Reply To:
In Re: ----------------------------------------- CC:PSI:04 PLR-102783-14
Date: JUNE 10, 2014

LEGEND:
Decedent = ----------------------------
Estate = -----------------------------------------
Date 1 = ----------------------
Date 2 = ----------------------
Date 3 = ------------------------

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

This responds to your authorized representative’s letter dated January 13, 2014, requesting an extension of time under § 301.9100 of the Procedure and Administration Regulations to make an election under § 2032 of the Internal Revenue Code.

The facts and representations submitted are summarized as follows. Decedent died on Date 1. The due date (including extensions) for filing the Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return for Decedent’s estate (the Estate) was Date 2. However, the return was not filed until Date 3, which was more than one year after the due date (including extensions).

The administrator of the Estate now requests an extension of time to elect under § 2032 to use the alternate valuation method in reporting the value of the gross estate on the return.

Section 2302(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
PLR-102783-14
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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.

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, 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.

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

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,

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

Enclosures
Copy for section 6110 purpose-s