Six-Month Alternate Valuation Not Elected on Filed 706, But Extension of Time to Make Election Granted

By Kathleen Ford Bay  

Richards Rodriguez & Skeith LLP, Austin, TX 

The representative of an estate filed a federal estate tax return timely, but failed to elect alternate valuation under §2032 of the Code, which allows all assets of an estate to be reported for federal estate tax purposes at their value six months after the date of the decedent's death if the result will be a lower federal estate tax liability. In PLR 201103003 (1/21/11) the representative of an estate sought and was granted an extension of time in which to elect alternate valuation. Before granting the extension, the PLR contains a nice blueprint of when Regs. §301-9100 can be used to request relief: 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. … 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. 

A request for an extension of time under Regs. §301.9100 regarding an alternate valuation extension must be made within one year of the time the estate tax return was timely filed (including extensions). Without really discussing the facts stated in the ruling – that the first return preparer died, there was a proper extension of time to file made, and then the second return preparer filed the return without electing alternate valuation, the ruling states that the taxpayer met the standards required in order to receive an extension and thus was entitled to a 120-day extension.

 For more information, in the Tax Management Portfolios, see Peebles and Janes, 822 T.M., Estate, Gift, and Generation-Skipping Tax Returns and Audits,  and in Tax Practice Series, see ¶6290, Valuation—Generally.