Extra time granted to make an alternate valuation election after a CEO supplied false values

Plain-English summary

An estate normally values a deceased person's property as of the date of death, but Section 2032 lets the executor instead elect "alternate valuation," using values six months after death, when that would lower both the taxable estate and the resulting estate and generation-skipping taxes. This can help when asset values fall after death. Here the decedent owned a large stake in a closely held company. The company's CEO gave false valuation information to the accounting firm preparing the estate tax return, so the firm never advised the executor to consider the alternate valuation election, and the return was filed without it. The executor asked the IRS for more time under the "9100 relief" rules (Treas. Reg. § 301.9100-3), which allow a late election when the taxpayer acted reasonably and in good faith and relief would not harm the government. The IRS found the executor reasonably relied on the professionals and granted 120 days from the date of the letter to make the election on an amended Form 706. The IRS did not decide whether the estate actually qualifies to use the alternate date or what the alternate-date values are.

Ruling snapshot

• Question: May the estate get an extension of time to make the § 2032 alternate valuation election?
• Outcome: approved
• 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: 202425012                                             Third Party Communication: None
 Release Date: 6/21/2024                                       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-121711-23
                                                               Date:
                                                               March 22, 2024




Legend

Decedent                  =        -----------------------------------------------
Son                       =        --------------------------------------------------------
Accounting Firm           =        --------------------------
Date 1                    =        --------------------
Date 2                    =        -----------------------
Corporation               =        -----------------------------------------

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

       This letter responds to the November 1, 2023 letter from your authorized
representative, and subsequent correspondence, requesting an extension of time under
§ 301.9100 of the Procedure and Administration Regulations 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. Decedent's son (Son) served as the executor of
Decedent's estate. At his death, Decedent held a significant interest in Corporation, a
closely-held corporation.

        Son hired Accounting Firm to prepare Decedent's Form 706. Corporation's Chief
Executive Officer (CEO) provided false information to Accounting Firm regarding the
value of Corporation. Based upon the false information, Accounting Firm failed to
advise Son to make an alternate valuation election under § 2032. On Date 2, a date
prior to the due date of the return (including extensions actually granted), Son filed
Decedent's Form 706 (United States Estate (and Generation-Skipping Transfer) Tax
Return) without making an alternate valuation election under § 2032.
PLR-121711-23                                2

You have requested the following ruling:

       The estate of Decedent will be granted an extension of time under § 301.9100-3
       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 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-121711-23                                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.

       Section 301.9100-3(b)(1)(ii) provides that a taxpayer is deemed to have acted
reasonably and in good faith if the taxpayer failed to make the election because of
intervening events beyond the taxpayer's control.

       Section 301.9100-3(b)(1)(iii) provides that a taxpayer is deemed to have acted
reasonably and in good faith if the taxpayer failed to make the election because, after
exercising reasonable diligence (taking into account the taxpayer's experience and the
complexity of the return or issue), the taxpayer was unaware of the necessity for the
election.

      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. Therefore, 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 an amended
Form 706 and a copy of this letter, within 120 days from the date of this letter, with the
Internal Revenue Service Center, at the following address: Department of the Treasury,
Internal Revenue Service Center, ATTN: E & G, 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. Specifically, we express no opinion concerning whether
Decedent's estate is entitled to value Decedent's assets on the alternate valuation date
(such conclusion depending, in part, on those factors listed in § 2032(c)). Similarly, we
express no opinion concerning the value of Decedent's assets on the alternate valuation
date (such conclusion depending upon those factors listed in § 2032(a)).

       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.

       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
PLR-121711-23                                       4

         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 and Special Industries



                                                  Melissa C. Liquerman
                                                 ______________________________
                                           By:   [Melissa C. Liquerman]
                                                 Senior Counsel, Branch 4
                                                 Office of the Associate Chief Counsel
                                                 (Passthroughs and Special Industries)




 -----------------
 ------Enclosure:
 ---------Copy for § 6110 purposes



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



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