Estate may make late farmland special-use valuation election

Plain-English summary

An estate included farmland and timely filed Form 706, but its accountant did not advise the personal representative to elect special-use valuation under IRC § 2032A. After discovering the omission, the accountant filed a supplemental return making the election. The IRS found that the estate reasonably relied on a qualified tax professional and granted an extension through the supplemental-return date. The ruling did not decide whether the farmland or estate otherwise qualified for special-use valuation.

Ruling snapshot

• Question: May the estate make a late § 2032A election to specially value the farmland?
• Outcome: Approved, with an extension through the supplemental-return date
• Key authorities: IRC §§ 2001 and 2032A; Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201633001 Third Party Communication: None
Release Date: 8/12/2016 Date of Communication: Not Applicable
Index Number: 9100.00-00, 2032A.00-00
Person To Contact:
------------------------------------------------------------ ----------------, ID No. ------------------
--------------------- Telephone Number:
-------------------------------- ----------------------
----------------------------- Refer Reply To:
------------------------ CC:PSI:04
PLR-102524-16
Date:
RE: April 25, 2016
----------------------------------------

Legend

Decedent = ---------------------------
Date 1 = ----------------------
X = ------------------------------
Accountant = -----------------------
Date 2 = ---------------------
Date 3 = -------------------

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

This letter responds to your authorized representative’s letter of January 19, 2016 and
subsequent correspondence, 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 as follows. Decedent died on Date 1.
Decedent’s estate included farmland. X was appointed as personal representative of
Decedent’s estate. X retained Accountant to prepare and timely file Decedent’s
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.
Accountant did not advise X to make an election to specially value the farmland under
§ 2032A. On Date 2, X timely filed Form 706, however, X failed to make the § 2032A
election.

After filing Decedent’s Form 706, Accountant discovered the failure to advise X of the
§ 2032A election and to make the election on Decedent’s Form 706. On Date 3,
Accountant filed a Supplemental Form 706 and elected to specially value the farmland
PLR-102524-16 2

under § 2032A. The estate now requests an extension of time to Date 3 to make the
§ 2032A election.

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.

Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time to
make a regulatory election, or a 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.

Section 301.9100-3 provides the standards used 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). 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 the grant of
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
standards of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, an
extension of time to Date 3 is granted to elect to specially value the farmland under
§ 2032A.

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. Specifically, we express or imply no opinion on whether the estate qualifies
for special use valuation under § 2032A.
PLR-102524-16 3

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)


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

Enclosures (2)
Copy for section 6110 purposes
Copy of this letter