Grants 120 days for late farmland special-use valuation election

Plain-English summary

An estate included farmland, but the accountant preparing its timely Form 706 did not advise the co-executors to elect special-use valuation under section 2032A. An attorney later discovered that the election had been omitted. The IRS found that the estate reasonably relied on a qualified tax professional and met the standards for discretionary filing relief. It granted 120 days to file a complete Form 706 making the section 2032A election, while expressing no opinion on whether the estate otherwise qualified for special-use valuation.

Ruling snapshot

• Question: Could the estate make a late section 2032A election to value farmland based on its qualified use?
• Outcome: Approved; a 120-day extension was granted.
• Key authorities: IRC §§ 2001 and 2032A; Treas. Reg. §§ 301.9100-1 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201814004 Third Party Communication: None
Release Date: 4/6/2018 Date of Communication: Not Applicable
Index Number: 2032A.00-00, 9100.00-00
Person To Contact:
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------------------------- Telephone Number:
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Refer Reply To:
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PLR-121283-17
Date:
December 11, 2017

Legend

Decedent --------------------------------------------------
Date 1 ---------------------------
Date 2 -----------------------
Son -----------------------
Daughter ------------------------
Accountant ------------------------

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

  This letter responds to your personal representative’s letter of July 3, 2017,

requesting an extension of time pursuant to § 301.9100-3 of the Procedure and
Administration Regulations to elect to specially value qualified real property under
§ 2032A of the Internal Revenue Code.

     The facts and representations submitted are summarized as follows:

   Decedent died on Date 1. Decedent died with a revocable trust. Son and

Daughter were co-trustees of the revocable trust and pursuant to § 2203 of the Internal
Revenue Code served as co-executors of Decedent’s estate. Decedent's estate
included farmland. Son and Daughter retained Accountant to prepare and timely file
Decedent's Form 706, United States Estate (and Generation-Skipping Transfer) Tax
Return. Accountant did not advise Son and Daughter to make an election to specially
value the farmland under § 2032A. On Date 2, Son and Daughter timely filed Form 706,
however, they failed to make the § 2032A election.

   After filing Decedent's Form 706, Son met with an attorney to discuss estate

planning. The attorney discovered that the § 2032A election was never made on the
Form 706. The estate requests an extension of time to make the § 2032A election.

LAW AND ANALYSIS

 Section 2001 imposes a tax on the transfer of the taxable estate of every

decedent who is a citizen or resident of the United States.

   Section 2032A(a)(1) provides, generally, that if the decedent was (at the time of

his death) a citizen or resident of the United States, and the executor elects the
application of § 2032A and files the agreement referred to in § 2032A(d)(2), then, for
purposes of chapter 11, the value of qualified real property shall be its value for the use
under which it qualifies, under § 2032A(b), as qualified real property.

   Section 2032A(d)(1) provides that the election under § 2032A shall be made on

the return of tax imposed by § 2001. Such election shall be made in such manner as
the Secretary shall by regulations prescribe. Such an election, once made, shall be
irrevocable.

   Section 301.9100-1(c) provides that the Commissioner may 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 Code, except subtitles E, G,
H, and I.

   Section 301.9100-3 provides the standards the Commissioner will use 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).

   A request for relief under § 301.9100-3 will be granted when the taxpayer

provides 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 upon the facts submitted and the representations made, we conclude that

the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly,
we grant an extension of time of 120 days from the date of this letter to elect to specially
value the farmland under § 2032A. The election should be made by filing a complete
and properly prepared Form 706 and a copy of this letter, within 120 days from the date
of this letter, 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, we have sent a

copy of this letter to your authorized representatives.

   Except as expressly provided herein, we neither express nor imply any opinion

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, we express or imply no opinion on whether the
estate qualifies for special use valuation under § 2032A.

  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.

   If it is later determined that, based on the value of the gross estate and taking

into account any taxable gifts, Decedent’s estate is required to file an estate tax return
pursuant to § 6018(a), the Commissioner is without authority under § 301.9100-3 to
grant to Decedent’s estate an extension of time to elect portability and the grant of the
extension referred to in this letter is deemed null and void.

  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.

                                      Sincerely,

                                      Associate Chief Counsel
                                      Passthroughs and Special Industries

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

Enclosures
Copy for § 6110 purposes
Copy of this letter