§2032 — Alternate valuation

1960), Brett says that "courts disfavor the application ofthe duty ofconsistency because ofthe inequity imposed upon a minor." But here, unlike the taxpayers in Ford, the minor--Brett--wasrepresented by a guardian ad litem, and that guardian was requiredto make a representation on the estate-tax return for the section 2032A election to be effective.

We do not agree with petitioners' assertion that the disposal ofproperty (and the development rights attached thereto) constitutes cultivating the soil, raising agricultural or horticultural commodities, the handling ofsuch commodities, or tree farming.

We do not agree with petitioners' assertion that the disposal ofproperty (and the development rights attached thereto) constitutes cultivating the soil, raising agricultural or horticultural commodities, the handling ofsuch commodities, or tree farming.

After concessions by the parties,2 the issues remaining for decision are the following: (1) whether the estate timely elected to use an alternate valuation date pursuant to section 2032 to value decedent’s gross estate; (2) whether the estate may exclude $200,000 from the value of property located at 90 and 90-A Industrial Park Road, Hingham, Massachusetts (Hingham Property), for a qualified conservation easement contribution; (3) whether the fair market value of the Hingham Prope

Respondent also reduced the estate’s Schedule F assets by the $4,632,489 value of the estate’s pending claim against the SK Trust, as originally reported on the 6 On neither the executors’ nor the limited administrators’ Form 706 did the estate elect pursuant to section 2032 to have the gross estate valued as of a date subsequent to decedent’s death.

Exception to Section 2031--Alternate Valuation Date Pursuant to section 2032, property includible in the gross estate is included at its fair market value on the date ofthe decedent's death unless the executor elects the alternate valuation method.

After concessions,1 the issues for decision are: (1) Whether, despite the executor's failure to make the alternate valuation election pursuant to section 2032 within 1 year after the time prescribed by law (including extensions) for filing the Federal estate tax return, the value of the gross estate may be determined by valuing all the property included in the gross estate as of the alternate valuation date.2 We hold it may not.

value was $2,785,248. Held: The fair market value was $2,417,491. 4. P elected special use valuation of certain farm real property on its Form 706. R disallowed the election because P failed to document comparable rental property in accordance with sec. 2032A(e)(7), I.R.C., and the regulations thereunder. See sec. 20.2032A-4, Estate Tax Regs. Held: P may not value its elected properties under the valuation formula of sec. 2032A(e)(7), I.R.C. Held, further, by reason of sec. 20.2032A-4, Estate T

olyn J. Rogers (decedent). After concessions by the parties,1 the issue 1The parties made the following concessions: Petitioner did (continued...) - 2 - remaining for decision is the valuation of decedent's qualified and elected real property under section 2032A. There are two questions for determination: (1) Whether petitioner can value the real property under the provisions of section 2032A(e)(7) or must value the property under section 2032A(e)(8), which requires a determination of whether th

After concessions, the issues for decision are: (1) Whether, despite the executor’s failure to make the alternate valuation election pursuant to section 2032 within 1 year after the time prescribed by law (including extensions) for filing the Federal estate tax return, the value of the gross estate may be determined by valuing all the property included in the gross estate as of the alternate valuation date.

ndent's other arguments that the note was not bona fide or enforceable against decedent's estate under Washington law or that decedent lacked competence to execute the power of attorney. ¹¹ The estate did not elect the alternate valuation date under sec. 2032. - 18 - having reasonable knowledge of relevant facts.'" United States v. Cartwright, 411 U.S. 546, 551 (1973) (quoting section 20.2031-1(b), Estate Tax Regs.). The fair market value of a note is generally the amount of the unpaid principal

specifying the manner of resolving all issues raised in R's notice of deficiency. During discussions regarding the proposed stipulated decision document, P sought to raise an issue as to its entitlement to use the special use valuation provisions of sec. 2032A, I.R.C. This issue was not covered in R's notice of deficiency, and was not raised or preserved by P in the pleadings or the stipulated settlement agreement. Held: The issue raised by P is a new issue that is not before the Court. - 2 - St

We further hold that the fair market value of DP on the valuation date was $4,829,252. FINDINGS OF FACT Some of the facts have been stipulated and are so found. The stipulation of facts is incorporated herein by this reference. ¹ The estate filed a sec. 2032A protective election with its estate tax return. The estate has indicated its intent to perfect this protective election by filing an additional notice of election if we determine the value of DP to be greater than the amount it asserted at

The date with respect to which the asset is valued is either the date of death or, if the alternate valuation method under section 2032 is elected, the date prescribed in that section.

r the maintenance of CMP pending the resolution of this dispute. On a timely filed Federal estate tax return, P reported the value of CMP at its fair market value (FMV). P also made a valid protective election for special use valuation of CMP under sec. 2032A, I.R.C. In addition, P deducted the interest incurred on the borrowed funds from the value of D's gross estate as an administrative expense under sec. 2053(a)(2), I.R.C. On a timely filed amended estate tax return, P claimed that it is enti

NITED STATES TAX COURT RICHARD D. HOHENSTEIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 22282-94. Filed January 30, 1997. P, a qualified heir, received farm property subject to a special use valuation election pursuant to sec. 2032A, I.R.C. P farmed the property for approximately 8 years after the death of his father and then, after becoming physically incapacitated, sold a portion of the farmland and leased the remainder of the property to unrelated parties on a cash

x Return. On that return the executors reported that the value of decedent’s shares was - 11 - $2,298,161.25. That was the amount paid for the shares under the 1987 redemption agreement. The executors elected alternate valuation, as provided for in section 2032. Value of Decedent’s Shares The value of decedent’s shares on the alternate valuation date was $4,000,000. OPINION I. Introduction A. Questions Presented This case concerns the value for Federal estate tax purposes of certain shares of st

§ 2032 and 26 C.F.R. § 20.2032-1. To accomplish this on remand, the Tax Court may choose to reconsider the present record, or it may have further proceedings allowing the parties to present additional evidence; the Court should then make its new findings and decision. [Id. at 1439-1440.] Pursuant to the direction of the Court of Appeals, additional

e in its highest and best use on the valuation date. See Estate of Kahn v. Commissioner, 125 T.C. 227, 240 (2005); Estate of Mitchell v. -100- [*100] Commissioner, 101 T.C.M. (CCH) 1435, 1438-39 (2011). The Code provides some exceptions. See, e.g., sec. 2032A (exception for family farms); Van Alen v. Commissioner, 106 T.C.M. (CCH) 427, 430 (2013). But it makes these exceptions explicit. And here, there are none that apply. We must include the value of Jackson’s image and likeness at its highest

For purposes ofthis Section, death taxes shall not include any additional estate tax imposed by Section 2031(c)(5)(C), Section 2032A(c) or Section 2057(f) ofthe Internal Revenue Code or any other comparable recapture tax imposed by any taxing authority.

butable Cash shall be made to the Partners on a regular basis according to their respective Partnership Interests." Decedent died on January 7, 2009, and July 7, 2009, was selected as the alternate valuation date for decedent's estate as allowed by section 2032. The fair market value ofall ofthe assets owned by Oak Capital, without discount or other adjustment, on July 7, 2009, was $4,064,759. The value ofdecedent's interest in Oak Capital was reported on Schedule F, Other Miscellaneous Property

M - 31 - The next wave ofcases addressed section 2032A, enacted in 1976, which provided beneficial estate tax treatment for certain farm property.

eath). When he filed the petition, petitioner resided in Pennsylvania. Estate Tax Return Petitioner timely filed Form 706, United States Estate (and Generation- Skipping Transfer) Tax Return, electing thereon alternate valuation as provided for in section 2032. Schedule G, Transfers During Decedent's Life, attached to the Form 706, includes the subject interest, reporting the interest to be worth $1,788,000 both on the date ofdecedent's death and on August 23, 2007, the alternate valuation date

Except as otherwise provided in § 20.2053-5 with respect to pledges or subscriptions, Section 2053(c) (1) (A) provides that the allowance of a deduction for a claim founded upon a promise or agreement is limited to the extent that the liability was contracted bona fide and for an adequate and full consideration in money or money's worth.

f the valuation date was $34,936,000, or $8,800.per unit, based upon a July 12, 2004, appraisal of the company's units by D vid Michael Paxton (Mr. Paxton), PMG's president and chief executive officer.2 They did not elect alternative valuation under section 2032. Upon J. Frederick Paxton's death, petitioner became the sole personal representative of decedent's estate. Respondent selected the return for examination, and, on June 13, 2007, petitioner received respondent's notice of proposed adjust

time of his death, whether or not then matured, and interest thereon which had accrued at the time of death. Only interest accrued at the date of the decedent’s death is allowable even though the executor elects the alternate valuation method under section 2032. Only claims enforceable against the decedent’s estate may be deducted. Except as otherwise provided in § 20.2053-5 with respect to pledges or subscriptions, Section 2053(c)(1)(A) provides that the allowance of a deduction for a claim fou

Respondent argues that because section 6165 provides that he "may" require a bond, and provides no other conditions for this authority, the decision to require security when granting a section 6166 extension is "committed entirely to respondent's discretion.

In most instances, the value of the gross estate is the fair market value of the included property as of either the date of death, or the alternate valuation date under section 2032 if elected by the executor as is the case here.

General Rules on Valuation Date Section 2032 allows the executor of an estate to choose to value the estate’s property at a time after the date of death.

General Rules on Valuation Date Section 2032 allows the executor of an estate to choose to value the estate’s property at a time after the date of death.

General Rules on Valuation Date Section 2032 allows the executor of an estate to choose to value the estate’s property at a time after the date of death.

raph (3), exceeds 50 percent of the adjusted gross estate, and (D) during the 8-year period ending on the date of the decedent's death there have been periods aggregating 5 years or more during which– (i) such interests were owned by the decedent or a member of the decedent's family, and (ii) there was material participation (within the meaning of section 2032A(e)(6)) by the - 6 - decedent or a member of the decedent’s family in the operation of the business to which such interests relate.

luation is set forth in section 20.2031-1(b), Estate Tax Regs.: The value of every item of property includible in a decedent's gross estate under sections 2031 through 2044 [now 2045 due to addition and renumbering] is its fair market value at the time of the decedent's death, except that if the executor elects the alternate valuation method under section 2032, it is the fair market value thereof at the date, and with the adjustments, prescribed in that section.

989, 994 (1984) (looking to principles of administrative law, “now incorporated into the Administrative Procedure Act”, as supporting a presumption that the Commissioner’s discretionary actions in denying a request for a filing extension under section 2032A were subject to judicial review).

tled to only limited recognition for Federal tax purposes. We acknowledge that, as pointed out by the estate, this Court has relied on the doctrine in determining the requisite signatory beneficiaries for a valid special use valuation election under section 2032A. McDonald v. Commissioner, 89 T.C. 293, 304-305 (1987), affd. in part on this issue and revd. in part on other grounds 853 F.2d 1494 (8th Cir. 1988). In McDonald v. Commissioner, supra at 304-305, we held insufficient an election signed

- 42 - section 931 confers no benefit of the type contemplated in Estate of Maddox (i.e., reduction in estate tax due to application of section 2032A), and First Chicago and Occidental (i.e., relief from alternative minimum tax liability).

In the estate tax return, petitioner valued the shares at $16,380,000, or $26,000 a share. In determining a deficiency in estate tax, respondent valued the shares at $30,177,000, or $47,900 a share. Organization and Operation of Korbel Korbel was formed in 1903. Its business began in 1860, when three Korbel brothers purchased property in

oceeds), section 2042 - 5 - (relating to powers of appointment), or section 2044 (relating to qualified terminable interest property) of the Internal Revenue Code, or any comparable provision of state law, but excluding, however, any tax imposed by section 2032A(c) (relating to qualified real property) or chapter 13 (relating to generation-skipping transfers) of the Ihternal Revenue Code, or any comparable provision of state law, for which my estate is not liable.

l rule is set forth in section 20.2031-1(b), Estate Tax Regs.: The value of every item of property includible in a decedent’s gross estate under sections 2031 through 2044 [now 2045 due to addition and renumbering] is its fair market value at the time of the decedents’s death, except that if the executor elects the alternate valuation method under section 2032, it is the fair market value thereof at the date, and with the adjustments, prescribed in that section.

the postdeath lease was $3,350,000. In the notice of deficiency, respondent determined that the fair market value of the Sinton Ranch on the date of decedent's death was $4,150,000. Respondent reduced the value by $750,000 for a valid election under section 2032A. The estate reported the fair market value of the interest in the Cotulla Ranch on Form 706, Schedule A, at $1,070,000. The real estate appraisal report that was prepared by Dorsey and submitted with the estate's Form 706 concludcd that

The election to value decedent’s property as of the alternate valuation date was made in the instant case. The term value means fair market value, which is defined for Federal estate tax purposes as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy

l rule is set forth in section 20.2031-l(b), Estate Tax Regs.: The value of every item of property includible in a decedent’s gross estate under sections 2031 through 2044 [now 2045 due to addition and renumbering] is its fair market value at the time of the decedents’s death, except that if the executor elects the alternate valuation method under section 2032, it is the fair market value thereof at the date, and with the adjustments, prescribed in that section.

eral estate tax purposes of decedent's interests in the five partnerships. Under the regulations, the value of property includable in decedent's gross estate is its fair market value at the alternate valuation date with adjustments prescribed under section 2032. See sec. 20.2031-1(b), Estate Tax Regs. Fair market value is defined for these purposes as "the net amount which a willing purchaser * * * would pay for the interest to a willing seller, neither being under any compulsion to buy or to se

* * * * * * * (3) 3-Year Rule Retained for Certain Purposes.--Paragraph (1) shall not apply for purposes of– - 11 - (A) section 303(b) (relating to distributions in redemption of stock to pay death taxes), (B) section 2032A (relating to special valuation of certain farm, etc., real property), and (C) subchapter C of chapter 64 (relating to lien for taxes).

* * * * * * * (3) 3-Year Rule Retained for Certain Purposes.--Paragraph (1) shall not apply for purposes of– - 11 - (A) section 303(b) (relating to distributions in redemption of stock to pay death taxes), (B) section 2032A (relating to special valuation of certain farm, etc., real property), and (C) subchapter C of chapter 64 (relating to lien for taxes).

For Federal estate tax purposes, the fair market value of the subject property is determined as of the date of death of the decedent, or alternatively, on the alternate valuation date under section 2032; ordinarily, no consideration is given to any unforeseeable future event that may have affected the value of the subject property on some later date.

Section 2031(a) provides that "the value of the gross estate of the decedent shall be determined by including to the extent provided for in this part [sections 2031-2046], the value at the time of his death of all property, real or personal, tangible or intangible, wherever - 17 - situated." It provides that the time of valuat

Such part of the entire value is that portion of the entire value of the property at the decedent's death (or at the alternate valuation date described in section 2032) which the consideration in money or money's worth furnished by the other joint owner or owners bears to the total cost of acquisition and capital additions.

31-2046], the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.” It provides that the time of valuation is at the date of the decedent’s death (or the alternate valuation date as provided by section 2032). Value is “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” United States v. C

ted in North Myrtle Beach, South Carolina known as the Oak Den Trailer Court (Oak Den). Oak Den had a fair market value of $259,000 on the date of Mr. Ogden's death. The executor of Mr. Ogden's estate did not elect the alternate valuation date under section 2032. Mrs. Ogden died testate on May 11, 1990. Her will had been prepared by Mr. Williams and was executed on May 14, 1982. Mrs. Ogden's will was probated, and her estate was distributed according to its provisions. Mr. Ogden's will directed

v. Commissioner, T.C. Memo. 1985-179; Appraisal Institute, The Appraisal of Real Estate, 280 n.5, 282 (10th ed. 1992). Respondent's assertions fail to consider reality as it existed on 1Petitioner does not argue that it made an election pursuant to sec. 2032A. Sec. 2032A permits an estate to elect to value qualified real property used for farming and small business purposes on the basis of income capitalization rather than on the basis of highest and best use. Sec. 2032A(e)(7); Williamson v. Co

. Corp. F. Decedent's Estate Tax Return On decedent's estate tax return, the estate reported a gross estate of $2,813,175, deductions of $1,772,808, and adjusted taxable gifts of $595,091.6 The estate did not elect the alternate valuation date under section 2032. The estate reported that the value of decedent's Beth W. Corp. stock was $2,293,800, or $307.61 per share. The estate 6The parties have stipulated that the gross estate should be increased by $3,343 because petitioner inadvertently omit

r. 1988); cf. Estate of Hoover v. Commissioner, 102 T.C. 777, 782 (1994), revd. on another issue 69 F.3d 1044 (10th Cir. 1995), where we adopted a similar view in respect of the absence of regulations directed to be prescribed by the Secretary under section 2032A(g). More recently, in H. Enters. Intl., Inc. v Commissioner, supra, we dealt with a situation comparable to that herein, involving the impact of the failure of the Secretary to issue regulations to prevent tax avoidance under section 77

ident of Indiana when he petitioned the Court, filed a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, on behalf of the Decedent's estate. Form 706 reflects the Fiduciary’s election of an alternate valuation date under section 2032. The alternate valuation date is June 11, 1990. Corporation for General Trade (CGT) is a corporation whose stock is not listed on an exchange. CGT’s stock was entirely owned by the Decedent when he died. CGT’s principal asset at the time

sue bearing this evidence in mind. 2. Value of Property For Federal estate tax purposes, property includable in a decedent's gross estate is valued on either: (1) The date of the decedent's death or (2) the alternate valuation date as provided under section 2032. Secs. 2031(a) and 2032(a); sec. 20.2031- 1(b), Estate Tax Regs. For Federal gift tax purposes, property is valued on the date of the gift. Sec. 2512(a); sec. 25.2512-1, Gift Tax Regs. In both cases, value is a factual determination for

- 18 - or money's worth". Sec. 2036(a).10 The parties do not dispute that the 1971 transfer in trust of the proceeds of Cyril's shares in JM was one in which he retained a life interest within the meaning of section 2036(a). Instead, petitioner contends that the transfer of the remainder interest to Cyril's children was made pursuant to

Rohmer v. Commissioner, supra at 1106 (withholding - 17 - payments to be paid from gift proceeds do not reduce value of gift); Rev. Rul. 81-230, 1981-2 C.B. 186 (value of gift not reduced for additional tax that could subsequently be imposed under section 2032A(c)). This Court has previously addressed this argument. In Gray v. Commissioner, a Memorandum Opinion of this Court dated June 7, 1944, 3 T.C.M. (CCH) 552, 555, 44 P-H Memo T.C. par. 44,203 at 646, it was stated: In the instant proceedin

- 7 - for her remainder interest in the stock. According to the executrix, Decedent's gross estate does not include the value of any Vaparo preferred stock because, during her life, she sold the remainder interest in the stock for adequate and full consideration. The executrix argues that Gradow v. United States, 11 Cl. Ct. 808 (1987),

Nor are we bound by the opinions of commentators on which the executrix relies.