Estate receives relief for late alternate valuation election

Plain-English summary

An estate timely filed Form 706, but its attorney did not advise the co-personal representatives to elect alternate valuation under IRC § 2032. A later accounting firm identified the omission, and the estate filed a supplemental Form 706 making the election within one year after the original return's due date. Alternate valuation generally values disposed property on its disposition date and other property six months after death, and it is available only if it reduces both the gross estate and the relevant transfer taxes. Because the estate reasonably relied on a qualified tax professional and met the regulatory timing limit, the IRS granted an extension through the date the supplemental return was filed.

Ruling snapshot

• Question: May the estate make a late alternate valuation election after its original preparer failed to advise it about the election?
• Outcome: Approved. The filing deadline was extended through the date of the supplemental Form 706.
• Key authorities: IRC § 2032; Treas. Reg. §§ 20.2032-1(b)(3), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201719014 Third Party Communication: None
Release Date: 5/12/2017 Date of Communication: Not Applicable
Index Number: 9100.00-00, 2032.00-00
Person To Contact:
--------------------------------------------------------- -------------------------------------------
----------------------------- Telephone Number:
------------------------------------ --------------------
Refer Reply To:
---------- CC:PSI:B04
------------------------------------------------------------ PLR-127985-16
-------- Date:
January 23, 2017

Legend

Decedent = ------------------------------------------------
Date 1 = ------------------------
Child 1 = ------------------
Child 2 = -----------------------
Attorney = ------------------------
Date 2 = --------------------------
Accounting Firm = ---------------------------------
Date 3 = --------------------------

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

   This responds to your authorized representative’s letter dated

September 1, 2016, requesting an extension of time under §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations to make an 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-personal representatives of Decedent’s estate are Child 1 and
Child 2. The co-personal representatives retained Attorney to prepare Form 706,
United States Estate (and Generation-Skipping Transfer) Tax Return. The co-personal
representatives timely filed Form 706 on Date 2. Attorney did not advise the
co-personal representatives to make the election for alternate valuation under § 2032
on the Form 706. Accordingly, the election for alternate valuation under § 2032 was not
made. Co-personal representatives retained Accounting Firm to advise and prepare
Decedent’s final income tax return. Accounting Firm advised the co-personal
representatives of the election for alternate valuation under § 2032. On or about
Date 3, which was within one year after the due date of the Form 706 (including
extensions), the co-personal representatives filed a supplemental Form 706 making the
election under § 2032.
PLR-127985-16 2

   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 (estate tax)
and the tax imposed by chapter 13 (generation-skipping transfer tax) 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 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.

   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.

  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.
PLR-127985-16 3

   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-personal representatives are granted an extension of time to Date 3, the date the
supplemental Form 706 was filed, 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.

     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,


                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)


                                By: Karlene M. Lesho
                                   Karlene M. Lesho
                                   Senior Technician Reviewer, Branch 4
                                   (Passthroughs & Special Industries)

Enclosure:
Copy of letter for section 6110 purposes

cc: