Estate received 120 days for a late alternate valuation election

Plain-English summary

An estate's co-executors hired an attorney to prepare a timely Form 706, but the attorney failed to make the Section 2032 alternate valuation election. The executors later filed a supplemental return making the election, and the IRS advised that the election needed discretionary filing relief. Section 2032 allows alternate valuation only when it reduces both the gross estate and the combined estate and generation-skipping transfer taxes, and no election can be made more than one year after the return's due date. The IRS found that the estate satisfied the reasonable-cause and good-faith standards. It granted 120 days to file a complete Form 706 making the election and attach the ruling.

Ruling snapshot

• Question: Could the estate receive extra time to make the alternate valuation election omitted from its timely Form 706?
• Outcome: Approved, with 120 days to file a complete election return.
• Key authorities: IRC § 2032; Treas. Reg. §§ 20.2032-1(b)(3), 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201825013                                             Third Party Communication: None
Release Date: 6/22/2018                                       Date of Communication: Not Applicable
Index Number: 2032.00-00, 9100.00-00
                                                              Person To Contact:
--------------------------------                              --------------------------- ID No. ----------------
-------------------------------------                         -----------------
------------------------                                      Telephone Number:
---------------------------                                   ----------------------
                                                              Refer Reply To:
                                                              CC:PSI:B04
         --------------------------------------               PLR-130358-17
         ----------------------------                         Date:
                                                              March 19, 2018

Legend

Decedent                      ----------------------------------------------
Individual 1                  ------------------------
Individual 2                  --------------------
Attorney                      ----------------------------
Date 1                        -------------------
Date 2                        --------------------------
Date 3                        -------------------
Date 4                        ----------------------------


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

       This letter responds to your personal representative’s letter of
September 25, 2017, requesting an extension of time pursuant to § 301.9100-3 of the
Procedure and Administration Regulations to elect to make an alternate valuation
election under § 2032 of the Internal Revenue Code.

         The facts and representations submitted are summarized as follows:

      Decedent died on Date 1. Individual 1 and Individual 2 served as co-executors of
Decedent’s estate. The co-executors hired Attorney to prepare the estate’s Form 706,
United States Estate (and Generation-Skipping Transfer) Tax Return. Attorney
prepared Form 706, but did not make the alternate valuation date election under
§ 2032. The co-executors timely filed the Form 706 on Date 2.

       On Date 3, after the due date of Form 706, the co-executors filed a supplemental
Form 706 making the § 2032 election. On Date 4, the Service issued a letter to the
estate that said that since the § 2032 election was not made timely, the assets cannot
be valued under § 2032 unless an extension of time is granted under the relief
PLR-130358-17                                2

provisions of §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration
Regulations.

LAW AND ANALYSIS

       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 the election will decrease: (1) the value of the gross estate;
and (2) the sum of the federal estate tax and the generation-skipping transfer tax
imposed on the estate 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. Under § 2032(d)(2), no election may
be made under § 2032 if the return is filed more than 1 year after the time prescribed by
law (including extensions) for filing the 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 1 year after the due date of the return
(including extensions actually granted).

        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.

       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.
PLR-130358-17                                3


       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.

      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 standards 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 make the alternate
valuation election under § 2032. 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.

      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 rulings, it is subject to verification on
examination.
PLR-130358-17                               4


      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


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