Private Letter Rulings - Alternate Valuation Election Extension Granted
GiftLaw Note:
Decedent died on Date 1. Executor hired CPA to prepare Form 706, which was timely filed on Date 2. The CPA failed to make the alternate valuation election under Sec. 2032. The Estate then obtained appraisals for Estate assets. CPA prepared a supplemental Form 706 making that election and Executor filed the form within one year of the due date of the return, including extensions. Executor requested an extension for making the alternate valuation election under Sec. 2032.
Sec. 2032(a) provides that an executor can elect to value the gross estate (1) as of the date of disposition for assets disposed of within six months after decedent's death and (2) as of six months after decedent's death for property not disposed of within that time frame. Sec. 2032(c) provides that an executor may make the alternative valuation election if the election will decrease the value of the gross estate and the sum of the taxes imposed under chapters 11 and 13. Further, Sec. 2032(d) states the election can only be made if the estate tax return is filed within one year of the return due date, including extensions.
Reg. 1.301.9100-1(c) permits the Commissioner to grant a reasonable extension to make a regulatory or statutory election if the taxpayer demonstrates they acted reasonably, in good faith and that granting relief will not prejudice interests of the government. Reg. 1.301.9100-3(b)(1)(v) provides that taxpayers relying on a qualified tax professional that failed to make or advise taxpayer to make the election are deemed to have acted reasonably and in good faith. The Service, therefore, granted Executor an extension because Executor relied on a CPA who failed to make the election on the estate tax return and the supplemental Form 706 was filed within one year after the due date of the return, including extensions.
Sec. 2032(a) provides that an executor can elect to value the gross estate (1) as of the date of disposition for assets disposed of within six months after decedent's death and (2) as of six months after decedent's death for property not disposed of within that time frame. Sec. 2032(c) provides that an executor may make the alternative valuation election if the election will decrease the value of the gross estate and the sum of the taxes imposed under chapters 11 and 13. Further, Sec. 2032(d) states the election can only be made if the estate tax return is filed within one year of the return due date, including extensions.
Reg. 1.301.9100-1(c) permits the Commissioner to grant a reasonable extension to make a regulatory or statutory election if the taxpayer demonstrates they acted reasonably, in good faith and that granting relief will not prejudice interests of the government. Reg. 1.301.9100-3(b)(1)(v) provides that taxpayers relying on a qualified tax professional that failed to make or advise taxpayer to make the election are deemed to have acted reasonably and in good faith. The Service, therefore, granted Executor an extension because Executor relied on a CPA who failed to make the election on the estate tax return and the supplemental Form 706 was filed within one year after the due date of the return, including extensions.
This responds to a letter from your authorized representative dated May 29, 2009, 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 and the Executor of Decedent's estate timely filed Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return on Date 2. The Executor hired CPA to prepare Form 706. The CPA did not make on the Form 706 the alternate valuation election under § 2032. After appraisals were obtained, CPA prepared a supplemental Form 706. On Date 3 (within one year of the due date of the return, including extensions), the Executor filed the supplemental Form 706 making that election.
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 and the tax imposed by chapter 13 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 such return is filed more than 1 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 1 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 301.9100-1(a).
Section 301.9100-2 provides 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. The Supplemental Form 706 was filed within one year after the due date of the return including extensions. Consequently, the Executor is granted an extension of time to Date 3 for making 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.
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.
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.
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 yours,
Curt G. Wilson
Associate Chief Counsel
(Passthrough & Special Industries)