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IRS Grants Extension for Farmland Estate to File Section 2032A Special Use Election

Special Use Valuation

The IRS privately ruled that am extension of time should be granted in a farmland estate.  In the scenario, the estate had an appointed executor who hired a professional to file the federal estate tax return.  There was farmland involved; however, the estate did not make a Section 2032A special use election for the farmland.  Once the successor executor took over the job, a second law firm was hired to handle the estate tax return.

The second firmed realized the omission and filed a supplemental estate tax return making an election for the special valuation for farmland.  The IRS granted the request for extension, because the executor relied on professional advice that was reasonable, in good faith, and did not prejudice the interest of the government.  The IRS did not comment on whether the election would be effective or not.

Editor’s Comment

This case is important because many farmers and their attorneys do not know about this part of the tax code.  Section 2032A requires that if a special use valuation for farmland is made, then the heirs of the estate must agree to carry on the farm activity for ten years OR be subject to the estate tax that was due upon the due date of the estate tax return.  In this case, the opportunity was passed up to get the special use value, but the estate was granted an extension of time in order to take the special use election.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors