Estate gets more time to elect alternate valuation after its preparer never mentioned the option

Plain-English summary

When someone dies, their estate may value the assets either as of the date of
death or six months later. That six-month option, the alternate valuation
election under section 2032, can cut the estate tax if asset values dropped after
death. Here the estate's tax preparer never told the estate about the option, so
the timely filed Form 706 estate tax return did not make the election. Within a
year, the estate filed a supplemental return making the election and then asked
the IRS for more time under the section 301.9100 relief rules. The regulations
specifically treat reasonable reliance on a tax professional who failed to advise
an election as acting in good faith, and the supplemental return was filed inside
the one-year window that section 2032 allows. The IRS granted the extension, so
the election is effective as of the date the estate filed the supplemental
return.

Ruling snapshot

• Question: May an estate get an extension of time to make the section 2032 alternate valuation election after its tax professional failed to advise it?
• Outcome: Approved (extension granted to the date the supplemental Form 706 was filed)
• Key authorities: IRC § 2032; Treas. Reg. §§ 301.9100-1, 301.9100-3 (including 301.9100-3(b)(1)(v)); Treas. Reg. § 20.2032-1(b)(3)

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202329001                                             Third Party Communication: None
 Release Date: 7/21/2023                                       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:BO4
 Re: ------------------------------------------                PLR-100853-23
                                                               Date:
                                                               April 26, 2023




Legend

Decedent                  =        -------------------------------
                                   --------------------------
Tax Professional          =        -----------------
Date 1                    =        ------------------
Date 2                    =        -----------------------
Date 3                    =        -----------------------

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

This letter responds to your authorized representative's letter dated December 20, 2022,
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. Decedent's estate retained Tax Professional to prepare Form 706, United
States Estate (and Generation-Skipping Transfer) Tax Return. Decedent’s estate timely
filed Form 706 on Date 2. Tax Professional did not advise Decedent’s estate of its
option to elect alternate valuation under § 2032 on the Form 706, and, consequently,
Decedent’s estate did not elect alternate valuation under § 2032 on the Form 706.

On or about Date 3, which was within one year after the due date of the Form 706,
Decedent’s estate filed a supplemental Form 706 making the alternate valuation
election under § 2032. Subsequently, Decedent’s estate submitted this request for an
extension of time under § 301.9100-3 to make the election.
PLR-100853-23                                2

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.

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.
PLR-100853-23                                    3

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 along with a copy of the filed supplemental Form 706
should be forwarded to: Department of the Treasury, Internal Revenue Service, Stop
824G, 7940 Kentucky Drive, Florence, KY 41042-2915.

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 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.

                                                     Sincerely,

                                                     Associate Chief Counsel
                                                     Passthroughs & Special Industries


                                                     Melissa C. Liquerman
                                           By:       ___________________________
                                                     Melissa C. Liquerman
                                                     Senior Counsel, Branch 4
                                                     Office of Associate Chief Counsel
                                                     Passthroughs & Special Industries
PLR-100853-23                                    4


Enclosure (1)
      Copy for § 6110 purposes


cc: ---------------------
    ------------------------------------------
    ------------------------------
    ----------------------------

     -------------------------
     --------------------------------
     -----------------------------------------
     ------------------------------