Court Opinion

ID: 4486509
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:29.206917+00
Date Added: 2024-06-11T14:53:54.662635
License: Public Domain

COLVIN, J., concurring: I believe the result reached by the majority is entirely consistent with section 2032A(d)(3) and applicable legislative history. I also agree with the majority that petitioner prevails under section 2032A(d)(3) even if we do not reach the question of which persons had interests necessitating signatures on the recapture agreement. When the estate tax return and election for special use valuation under section 2032A was filed, it included a recapture agreement signed by “Jocelyn Me Alpine Gree-man, Trustee.” It was not signed by the three trust beneficiaries, Mrs. Greeman’s three children (decedent’s grandchildren), then ages 9, 20, and 22. Respondent notified the estate that he viewed the election as invalid. Less than 90 days thereafter, the estate supplied an amended agreement with the additional signatures. Respondent admits that the only grounds for invalidating the special use valuation election is the omission of the grandchildren’s signatures from the election originally filed. Under a plain reading of the statute and applicable legislative history, petitioner properly perfected the election for special use valuation under section 2032A. An executor may elect to value real property used for farming or for closely held business use on the basis of the property’s actual use, rather than on its highest or best use, if numerous requirements are met. Sec. 2032A(a). Section 2032A(d)(l), enacted in 1981 (Pub. L. 97-34, sec. 421(j)(3), 95 Stat. 313), directs the Secretary to prescribe regulations to establish the manner in which the election is to be made. Section 2032A(d)(3), enacted in 1984 (Pub. L. 98-369, sec. 1025(a), 98 Stat. 494, 1030), further directs the Secretary to prescribe procedures that where there has been an election that substantially complies with the regulations promulgated by the Secretary, the executor will have a reasonable period of time to perfect the election (not exceeding 90 days after notification of the need to perfect the election). Perfection of an election is allowed even if the notice of election, as filed, does not contain all required information, sec. 2032A(d)(3)(B)(i); or if the signatures of one or more persons required to enter into the agreement are not included on the agreement as filed, or the agreement does not contain all required information, sec. 2032A(d)(3)(B)(ii). Thus, section 2032A(d)(3) makes two things clear: 1. The Secretary was instructed by Congress to prescribe procedures permitting the executor to supply certain information up to 90 days after being notified of the need to do so. 2. One item expressly allowed to be supplied late was the “signatures of 1 or more persons required to enter into the agreement.” Sec. 2032A(d)(3)(B)(ii). The mandate to promulgate these procedures was enacted in 1984. Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 1025(a). To date these regulations have not been issued, which prevents the petitioner here from pointing to prescribed procedures for supplying signatures after filing the election. However, it would be bizarre to hold that the Treasury Department’s failure to comply with the Congress’ mandate somehow bars petitioner from claiming the relief provided by the statute. Legislative History Section 2032A(d)(3) originated as a Senate amendment to the Deficit Reduction Act of 1984, Pub. L. 98-369. During Senate floor debate on the amendment, the sponsor of the amendment (Senator Dixon) presented the following example: In one case, the IRS has taken the position that an attempt to elect section 2032A treatment was invalid, even though timely filed, because the mother signed for her minor children without first having gone to court to be appointed as guardian for her own children. When this error was pointed out, the woman went to an Illinois judge, who promptly granted the guardianship and made its application retroactive. However, the Service would not permit the election to be perfected. Now, I will not take the time of the Senate to argue whether the woman acted correctly. The point is that she acted in good faith and that even if she was in error, she should have been allowed to correct it. [Cong. Rec. S4318 (daily ed. Apr. 11, 1984).] The conference report accompanying enactment of section after of 2032A(d)(3) states that: The Senate amendment directs the Treasury Department to develop procedures permitting perfection of notices within 90 days of a request from the Interned Revenue Service. * * * [H. Rept. 98-861 (Conf.), at 1240 (1984), 1984-3 C.B. (Vol. 2) 494.] The conference report continues: The conference agreement follows the Senate amendment. The conferees wish to reiterate that, as under the Senate amendment, perfection of notices of election and of agreements to current use valuation elections is to be permitted only in cases where the estate tax return, as filed, evidences substantial compliance with the requirements of the Treasury regulations. For example, merely checking the applicable box on the Federal estate tax return that an election is being made is not sufficient action by the estate to secure the benefits of the current use valuation provision. Both a notice of election and an agreement that themselves evidence substantial compliance with the requirements of the regulations must be included with the estate tax return, as filed, if the estate is to be permitted to perfect its election. [H. Rept. 98-861 (Conf.), at 1240-1241 (1984), 1984-3 C.B. (Vol. 2) 494-495.] The conference report requires that both a notice of election and an agreement that themselves evidence substantial compliance be included with the estate tax return as filed. Question may arise under this language whether signatures that are not on the original agreement that is filed with the return can be added. However, there should be no basis for doubt since the statute specifically states that the executor may provide “signatures of one or more persons required to enter into the agreement” within a reasonable period of time after notification of the need to do so. Sec. 2032A(d)(3)(B)(ii). The conference report also states the following: To be eligible for perfection, the agreement as originally filed must at a minimum be valid under State law and must include the signatures of all parties having a present interest or a remainder interest other than an interest having a relatively small value.1 The right to perfect agreements is intended to be limited to cases where, for example, a parent of a minor remainderman, rather than a guardian ad litem as required under State law, signs the agreement. * * * The dissenting opinion relies on this report language. The dissenting opinion somehow concludes that the report language does not permit what the statute clearly does permit. I submit that the report language clearly illustrates that a reasonable error in who should sign the document — in the instant case, the legal titleholder rather them the holders of beneficial interests — is the sort of error that may be corrected. Thus, the report language confirms the applicability of the statute to the facts of the instant case. I conclude from the foregoing that the statute makes crystal clear that, under circumstances such as in this case, signatures may be provided after the original election is filed, and that petitioner has properly done so here. Accordingly, I agree with the majority’s holding for petitioner. Drennen, Chabot, Korner, Swift, Jacobs, Wright, Parr, Wells, Ruwe, and Whalen, JJ., agree with this concurring opinion.   The conferees are aware that the current use valuation provision requires that, when successive interests or concurrent interests are created in specially valued property, all parties with any interest in the property must be qualified heirs and all such parties must enter into the agreement to the election, regardless of the relative values of their interests. The de minimis rule established in this provision is intended to apply solely as a guideline in determining whether perfection of an agreement is to be permitted. The guideline is not intended to give rise to an inference that parties having an interest in specially valued property which has a relatively small value are not required to enter into the agreement or that such persons need not be qualified heirs. [H. Rept. 98-861 (Conf.), at 1241 (1984), 1984-3 C.B. (Vol. 2) 495.]