Farm Valuation for Basis

[Sparky]

If a taxpayer uses the 2032A Valuation election, and reduces the value when determining Estate Tax, does the basis of the asset become this new value and not the FMV?

[DaveinTexas]

Cake and eat it too

If a taxpayer uses the 2032A Valuation election, and reduces the value when determining Estate Tax, does the basis of the asset become this new value and not the FMV?

I am guessing this election was made during a time when Estate exemptions were much lower than today. Reading Van Alen V Comm (http://lexis.com/research/xlink?go=t...ION_CODE=00247), it appears the taxpayer will be stuck with this valuation for cost basis, rather than using the full potential fair market value.

See TC Memo 2013-35.

Also, be aware there is a 10 recapture rule that states the estate tax savings is eliminated if the property is sold within 10 years of the election. But, it is ignored if within 10 years the heir passed away.

But, you might want to make sure the election was valid on the original Estate return. Here is an excellent article regarding some late elections that were upheld. It seems the IRS finds a way to grant the election if it is in their favor to do so; go figure! http://archives.cpajournal.com/old/10428242.htm

Apologies for the board for the outside links; this subject is not easily researchable without digging into the archives.