Estate receives relief for late alternate valuation election

Plain-English summary

An estate's personal representative intended to elect the alternate valuation method under section 2032 after receiving advice about its potential benefits. The necessary alternate-date appraisals were not finished by the extended Form 706 due date, so the estate timely filed its return without the election. It later filed a supplemental Form 706 with the appraisals, paid the reported tax, and made the election. The IRS concluded that the estate satisfied the discretionary relief standards in Treas. Reg. §§ 301.9100-1 and 301.9100-3. It extended the election deadline to the date the supplemental return had been filed. The ruling remained subject to the estate proving on examination that it met all substantive section 2032 requirements, including the requirement that alternate valuation reduce both the gross estate and the relevant tax.

Ruling snapshot

• Question: May the estate treat its alternate valuation election on a supplemental Form 706 as timely?
• Outcome: approved (the election deadline was extended to the supplemental return's filing date)
• 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: 202019015 Third Party Communication: None
Release Date: 5/8/2020 Date of Communication: Not Applicable
Index Number: 9100.00-00, 2032.00-00
Person To Contact:
----------------------------------- ---------------, ID No. -----------------
----------------------------------------- Telephone Number:
----------------------------------- --------------------
Refer Reply To:
CC:PSI:04
Re: ------------------------------ PLR-117966-19
Date:
January 21, 2020

LEGEND

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

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

This letter responds to your authorized representative’s letter dated July 30, 2019, and
subsequent correspondence, 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. Child is the personal representative of Decedent’s estate. The personal
representative retained Attorney to prepare Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. Attorney advised the personal
representative of the potential benefits of making an alternate valuation election and the
personal representative intended to make such election on Form 706. However, the
alternate valuation date appraisals were not completed by the extended due date of the
Form 706. On Date 2, Decedent’s estate timely filed Form 706 without making the
election for alternate valuation under § 2032.

PLR-117966-19 2

On Date 3, Decedent’s estate filed a supplemental Form 706, attached all appraisals
required, paid the reported tax due, and elected alternate valuation under § 2032.

Decedent’s estate requests an extension of time to Date 3, the date the supplemental
Form 706 was filed, to make an alternate valuation election under § 2032.

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 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 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.

PLR-117966-19 3

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 301.9100-2 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. Consequently, the
personal representative is 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 Internal Revenue Service
Center at the following address: Department of the Treasury, Internal Revenue Service,
Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915.

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. In
particular, the burden is on the estate to establish to the Service’s satisfaction that all of
the requirements of § 2032 are met.

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.

PLR-117966-19 4

Section 6110(k)(3) of 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,

                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)

                               By: Karlene M. Lesho
                                  Karlene M. Lesho
                                  Senior Technician Reviewer, Branch 4
                                  Office of Associate Chief Counsel
                                  (Passthroughs & Special Industries)

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

cc: