88 T.C. 1453 (1987), 968-85, Estate of Gunland v. C.I.R.

Docket Nº:968-85
Citation:88 T.C. 1453
Opinion Judge:COHEN, JUDGE:
Party Name:ESTATE OF CARL C. GUNLAND, DECEASED, R. ELAINE GUNLAND EXECUTRIX, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:James H. Perkins and Walter S. Moeller, for the petitioner. Steven Mather, for the respondent.
Case Date:June 04, 1987
Court:United States Tax Court
 
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Page 1453

88 T.C. 1453 (1987)

ESTATE OF CARL C. GUNLAND, DECEASED, R. ELAINE GUNLAND EXECUTRIX, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 968-85

United States Tax Court

June 4, 1987

Petitioner attempted to elect sec. 2032A, I.R.C. 1954, special use valuation. An agreement of the type referred to in sec. 2032A(d)(2) was not attached to petitioner's original estate tax return. Such an agreement was attached to petitioner's late filed amended return. HELD, petitioner's failure to attach an agreement of the type referred to in sec. 2032A(d)(2) to its original estate tax return defeated petitioner's attempted election of sec. 2032A special use valuation.

James H. Perkins and Walter S. Moeller, for the petitioner.

Steven Mather, for the respondent.

OPINION

COHEN, JUDGE:

Respondent determined a deficiency of $325,094 in petitioner's estate tax. After concessions, the issues for decision are: (1) whether petitioner's failure to attach a recapture agreement of the type referred to in section 2032A(d)(2)[1] to its original estate tax return defeats petitioner's attempted election of section 2032A special use valuation and, if not, (2) whether petitioner also may claim a minority or marketability discount in the valuation of certain stock.

BACKGROUND

Carl C. Gunland (decedent) died testate on February 10, 1981. R. Elaine Gunland, decedent's widow and executrix of

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his estate, resided in Fresno, California, when the petition was filed. This case was submitted fully stipulated, and the facts set forth in the stipulation are incorporated by reference as our findings.

On November 9, 1981, respondent received an application for extension of time to file petitioner's estate tax return. Respondent granted an extension to May 10, 1982, and on that date petitioner mailed its estate tax return (the original return).

The original return made reference to and contained computations reflecting section 2032A special use valuations. For example, petitioner typed an ‘ X‘ in the ‘ Yes‘ block on page 2 of the return in response to the question: ‘ Do you elect the special valuation described in instruction 13?‘ Fair market valuations and section 2032A valuations of decedent's interests in certain property were attached to the return. Included on the return were the names, identifying numbers, relationships and addresses of the parties receiving any interest in the specially valued property.

An agreement of the type referred to in section 2032A(d)(2) was not, however, attached to the return. On September 23, 1982, respondent received petitioner's amended return. The amended return contained revised fair market valuations and section 2032A valuations. An agreement dated April 14, 1982 was attached to the amended return. The parties agree that except as to timeliness, the agreement filed with the amended return meets the requirements of section 2032A(d)(2).

DISCUSSION

The pertinent provisions of section 2032A were adopted as a part of the Tax Reform Act of 1976, sec. 2003(a), Pub. L. 94-455, 90 Stat. 1856, in order to encourage the continued use of property for farming and other small business purposes. H. Rept. 94-1380 (1976), 1976-3 C.B. (Vol. 3) 755-756; S. Rept. 94-938 (Part 2) (1976), 1976-3 C.B. (Vol. 3) 657. Section 2032A permits special valuation of property on the basis of actual use, rather than the fair market value, for estate tax purposes.

Section 2032A provides limited tax relief. The decedent must have been a citizen or a resident of the United States,

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and the subject property must be located in the United States. The real property must have been used as a farm or in a trade or business by the decedent or by a member of the decedent's family, and the decedent or a member of the decedent's family must have materially participated in the operation of the farm or the business. The property qualifies for special use valuation only if it passes to a qualified heir, who must also be a member of the decedent's family. Ownership and use requirements set forth in the statute must be satisfied for 15 years after the decedent's death to avoid recapture of part of the tax...

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