[Federal Register Volume 68, Number 247 (Wednesday, December 24, 2003)]
[Proposed Rules]
[Pages 74534-74535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31615]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 20 and 301

[REG-139845-02]
RIN 1545-BB12


Gross Estate; Election to Value on Alternate Valuation Date

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to the 
election under section 2032 to value a decedent's gross estate on the 
alternate valuation date. The proposed regulations reflect a change to 
the law made by the Deficit Reduction Act of 1984. The proposed 
regulations affect estates that are required to file Form 706, United 
States Estate (and Generation-Skipping Transfer) Tax Return.

DATES: Written or electronic comments and requests for a public hearing 
must be received by March 23, 2004.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-139845-02), room 
5203, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered between the 
hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-139845-02), Courier's 
Desk, Internal Revenue Service, 1111 Constitution Avenue NW., 
Washington, DC. Alternatively, taxpayers may submit electronic comments 
directly to the IRS Internet site at: http://www.irs.gov/regs.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Theresa Melchiorre, (202) 622-7830; concerning submissions of comments 
or to request a hearing, Treena Garrett, (202) 622-3401 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Background

    As a general rule, section 2031 provides that the value of a 
decedent's gross estate is to be determined as of the date of the 
decedent's death. Section 2032 provides that the executor may elect to 
value the property on an alternate valuation date. Prior to the 
enactment of the Deficit Reduction Act of 1984, Public Law 98-369 (98 
Stat. 494), section 2032(c) and Sec.  20.2032-1(b) of the Estate Tax 
Regulations required the election to be made on a timely filed estate 
tax return, including extensions of time to file actually granted. The 
Deficit Reduction Act amended section 2032, effective for estates of 
decedents dying after July 18, 1984, by redesignating section 2032(c) 
as section 2032(d) and amending section 2032(d) to provide that the 
election may be made on the estate tax return, whether it is filed 
timely or late, as long as the return is filed no more than 1 year 
after the due date, including extensions. Temporary Regulation Sec.  
301.9100-6T(b), issued on September 5, 1984, reflects this change to 
the law and provides a transition rule for estates of decedents dying 
before July 19, 1984. The temporary regulation, however, also provides 
that once a return that fails to make the election is filed, the 
election may not be made on a subsequent return unless the subsequent 
return is filed by the due date (including extensions) of the original 
return. This limitation is not found in Sec. Sec.  301.9100-1 and 
301.9100-3 of the Procedure and Administration Regulations that apply 
to all requests for an extension of time to make an election submitted 
to the IRS on or after December 31, 1997.
    The Deficit Reduction Act of 1984 also added new section 2032(c) 
that provides that, in the case of estates of decedents dying after 
July 18, 1984, the election to use the alternate valuation method may 
be made only if the election results in a reduction in both the value 
of the gross estate and the actual estate tax liability. The Tax Reform 
Act of 1986, Public Law 99-514 (100 Stat. 2085), amended section 
2032(c)(2) to provide that the election may be made only if the 
election results in a decrease both in the value of the gross estate 
and in the sum of the estate tax and generation-skipping transfer tax 
liability (reduced by credits allowable against these taxes).

Explanation of Provisions

    These proposed regulations will amend Sec.  20.2032-1(b) to reflect 
the change made to section 2032 by the Deficit Reduction Act of 1984. 
In addition, the proposed regulations, when finalized, will remove 
temporary regulation Sec.  301.9100-6T(b) of the Procedure and 
Administration Regulations so that estates that fail to

[[Page 74535]]

make the alternate valuation election on the last estate tax return 
filed before the due date or the first return filed after the due date 
will be able to request an extension of time to make the election under 
the provisions of Sec. Sec.  301.9100-1 and 301.9100-3. However, in 
view of the statutory 1 year limitation imposed under section 
2032(d)(2), no request for an extension of time will be granted if the 
request is submitted to the IRS more than 1 year after the due date of 
the return (including extensions of time to file actually granted). The 
proposed regulations also provide guidance on making a protective 
election under section 2032.

Special Analyses

    It has been determined that this proposed regulation is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations and, because 
these regulations do not impose on small entities a collection of 
information requirement, the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis 
is not required. Pursuant to section 7805(f) of the Internal Revenue 
Code, this notice of proposed rulemaking will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. The IRS and the Treasury Department specifically request comments 
on the clarity of the proposed regulations and how they may be made 
easier to understand. All comments will be available for public 
inspection and copying. A public hearing may be scheduled if requested 
in writing by any person that timely submits written comments. If a 
public hearing is scheduled, notice of the date, time, and place for 
the hearing will be published in the Federal Register.

Drafting Information

    The principal author of these regulations is Theresa Melchiorre, 
Office of Associate Chief Counsel (Passthroughs and Special 
Industries). However, other personnel from the IRS and the Treasury 
Department participated in their development.

List of Subjects

26 CFR Part 20

    Estate taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 20 and 301 are proposed to be amended as 
follows:

PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 
1954

    Paragraph 1. The authority citation for part 20 continues to read 
in part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 20.2032-1(b) is revised to read as follows:


Sec.  20.2032-1  Alternate valuation.

* * * * *
    (b) Method and effect of election--(1) In general. The election to 
use the alternate valuation method is made on the return of tax imposed 
by section 2001. For purposes of this paragraph (b), the term return of 
tax imposed by section 2001 means the last estate tax return filed by 
the executor on or before the due date of the return (including 
extensions of time to file actually granted) or, if a timely return is 
not filed, the first estate tax return filed by the executor after the 
due date, provided the return is filed no later than 1 year after the 
due date (including extensions of time to file actually granted). Once 
the election is made, it is irrevocable, provided that an election may 
be revoked on a subsequent return filed on or before the due date of 
the return (including extensions of time to file actually granted). The 
election may be made only if it will decrease both the value of the 
gross estate and the sum (reduced by allowable credits) of the estate 
tax and the generation-skipping transfer tax with respect to the 
property includible in the decedent's gross estate. If the election is 
made, the alternate valuation method applies to all property included 
in the gross estate and cannot be applied to only a portion of the 
property.
    (2) Protective election. If, based on the return of tax as filed, 
use of the alternate valuation method would not result in a decrease in 
both the value of the gross estate and the sum (reduced by allowable 
credits) of the estate tax and the generation-skipping transfer tax 
liability of the estate, a protective election may be made to use the 
alternate valuation method if it is subsequently determined that such a 
decrease would occur. A protective election made on the return of tax 
imposed by section 2001 is irrevocable, provided that it may be revoked 
on a subsequent return filed on or before the due date of the return 
(including extensions of time to file actually granted). Absent such 
revocation, if it is later determined that use of the alternate 
valuation method would result in a decrease in both the value of the 
gross estate and in the sum (reduced by allowable credits) of the 
estate tax and generation-skipping transfer tax liability of the 
estate, the protective election becomes effective and cannot thereafter 
be revoked.
    (3) Requests for extension of time to make the election. A request 
for an extension of time to make the election pursuant to Sec. Sec.  
301.9100-1 and 301.9100-3 of this chapter will not be granted unless 
the request is submitted to the Internal Revenue Service no later than 
1 year after the due date of the return (including extensions of time 
to file actually granted).
* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 3. The authority citation for part 301 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *


Sec.  301.9100-6T  [Amended]

    Par. 4. Section 301.9100-6T is amended by:
    1. Removing the language ``paragraph (b)(2)'' from paragraph (a)(2) 
introductory text, and adding the language ``paragraph (a)(2)'' in its 
place.
    2. Removing paragraph (b).
    3. Redesignating paragraphs (c) through (s) as paragraphs (b) 
through (r), respectively.
    4. Removing the language ``paragraph (c)(2)'' from the last 
sentence in newly designated paragraph (b)(2) and adding the language 
``paragraph (b)(2)'' in its place.
    5. Removing the language ``paragraph (l)'' from the second, fourth 
and last sentences in newly designated paragraph (k) and adding the 
language ``paragraph (k)'' in its place.

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 03-31615 Filed 12-23-03; 8:45 am]
BILLING CODE 4830-01-P