[Code of Federal Regulations]
[Title 26, Volume 14]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR20.2032A-8]

[Page 302-305]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 20_ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 
1954--Table of Contents
 
Sec.  20.2032A-8  Election and agreement to have certain property valued 
under section 2032A for estate tax purposes.

    (a) Election of special use valuation--(1) In general. An election 
under section 2032A is made as prescribed in paragraph (a)(3) of this 
section and on Form 706, United States Estate Tax Return. Once made, 
this election is irrevocable; however, see paragraph (d) of this section 
for a special rule for estates for which elections are made on or before 
August 30, 1980. Under section 2032A(a)(2), special use valuation may 
not reduce the value of the decedent's estate by more than $500,000. 
This election is available only if, at the time of death, the decedent 
was a citizen or resident of the United States.
    (2) Elections to specially value less than all qualified real 
property included in an estate. An election under section 2032A need not 
include all real property included in an estate which is eligible for 
special use valuation, but sufficient property to satisfy the threshold 
requirements of section 2032A(b)(1)(B) must be specially valued under 
the election. If joint or undivided interests (e.g. interests as joint 
tenants or tenants in common) in the same property are received from a 
decedent by qualified heirs, an election with respect to one heir's 
joint or undivided interest need not include any other heir's interest 
in the same property if the electing heir's interest plus other property 
to be specially valued satisfy the requirements of section 
2032A(b)(1)(B). If successive interests (e.g. life estates and remainder 
interests) are created by a decedent in otherwise qualified property, an 
election under section 2032A is available only with respect to that 
property (or portion thereof) in which qualified heirs of the decedent 
receive all of the successive interests, and such an election must 
include the interests of all of those heirs. For example, if a surviving 
spouse receives a life estate in otherwise qualified property and the 
spouse's brother receives a remainder

[[Page 303]]

interest in fee, no part of the property may be valued pursuant to an 
election under section 2032A. Where successive interests in specially 
valued property are created, remainder interests are treated as being 
received by qualified heirs only if such remainder interests are not 
contingent upon surviving a nonfamily member or are not subject to 
divestment in favor of a nonfamily member.
    (3) Time and manner of making election. An election under this 
section is made by attaching to a timely filed estate tax return the 
agreement described in paragraph (c)(1) of this section and a notice of 
election which contains the following information:
    (i) The decedent's name and taxpayer identification number as they 
appear on the estate tax return;
    (ii) The relevant qualified use;
    (iii) The items of real property shown on the estate tax return to 
be specially valued pursuant to the election (identified by schedule and 
item number);
    (iv) The fair market value of the real property to be specially 
valued under section 2032A and its value based on its qualified use 
(both values determined without regard to the adjustments provided by 
section 2032A(b)(3)(B));
    (v) The adjusted value (as defined in section 2032A(b)(3)(B)) of all 
real property which is used in a qualified use and which passes from the 
decedent to a qualified heir and the adjusted value of all real property 
to be specially valued;
    (vi) The items of personal property shown on the estate tax return 
that pass from the decedent to a qualified heir and are used in a 
qualified use under section 2032A (identified by schedule and item 
number) and the total value of such personal property adjusted as 
provided under section 2032A(b)(3)(B);
    (vii) The adjusted value of the gross estate, as defined in section 
2032A(b)(3)(A);
    (viii) The method used in determining the special value based on 
use;
    (ix) Copies of written appraisals of the fair market value of the 
real property;
    (x) A statement that the decedent and/or a member of his or her 
family has owned all specially valued real property for at least 5 years 
of the 8 years immediately preceding the date of the decedent's death;
    (xi) Any periods during the 8-year period preceding the date of the 
decedent's death during which the decedent or a member of his or her 
family did not own the property, use it in a qualified use, or 
materially participate in the operation of the farm or other business 
within the meaning of section 2032A(e)(6);
    (xii) The name, address, taxpayer identification number, and 
relationship to the decedent of each person taking an interest in each 
item of specially valued property, and the value of the property 
interests passing to each such person based on both fair market value 
and qualified use;
    (xiii) Affidavits describing the activities constituting material 
participation and the identity of the material participant or 
participants; and
    (xiv) A legal description of the specially valued property.

If neither an election nor a protective election is timely made, special 
use valuation is not available to the estate. See sections 2032A(d)(1), 
6075(a), and 6081(a).
    (b) Protective election. A protective election may be made to 
specially value qualified real property. The availability of special use 
valuation pursuant to this election is contingent upon values as finally 
determined (or agreed to following examination of a return) meeting the 
requirements of section 2032A. A protective election does not, however, 
extend the time for payment of any amount of tax. Rules for such 
extensions are contained in sections 6161, 6163, 6166, and 6166A. The 
protective election is to be made by a notice of election filed with a 
timely estate tax return stating that a protective election under 
section 2032A is being made pending final determination of values. This 
notice is to include the following information:
    (1) The decedent's name and taxpayer identification number as they 
appear on the estate tax return;
    (2) The relevant qualified use; and
    (3) The items of real and personal property shown on the estate tax 
return which are used in a qualified use,

[[Page 304]]

and which pass to qualified heirs (identified by schedule and item 
number).

If it is found that the estate qualifies for special use valuation based 
upon values as finally determined (or agreed to following examination of 
a return), an additional notice of election must be filed within 60 days 
after the date of such determination. This notice must set forth the 
information required under paragraph (a)(3) of this section and is to be 
attached, together with the agreement described in paragraph (c)(1) of 
this section, to an amended estate tax return. The new return is to be 
filed with the Internal Revenue Service office where the original return 
was filed.
    (c) Agreement to special valuation by persons with an interest in 
property--(1) In general. The agreement required under section 2032A 
(a)(1)(B) and (d)(2) must be executed by all parties who have any 
interest in the property being valued based on its qualified use as of 
the date of the decedent's death. In the case of a qualified heir, the 
agreement must express consent to personal liability under section 
2032A(c) in the event of certain early dispositions of the property or 
early cessation of the qualified use. See section 2032A(c)(6). In the 
case of parties (other than qualified heirs) with interests in the 
property, the agreement must express consent to collection of any 
additional estate tax imposed under section 2032A(c) from the qualified 
property. The agreement is to be in a form that is binding on all 
parties having an interest in the property. It must designate an agent 
with satisfactory evidence of authority to act for the parties to the 
agreement in all dealings with the Internal Revenue Service on matters 
arising under section 2032A and must indicate the address of that agent.
    (2) Persons having an interest in designated property. An interest 
in property is an interest which, as of the date of the decedent's 
death, can be asserted under applicable local law so as to affect the 
disposition of the specially valued property by the estate. Any person 
in being at the death of the decedent who has any such interest in the 
property, whether present or future, or vested or contingent, must enter 
into the agreement. Included among such persons are owners of remainder 
and executory interests, the holders of general or special powers of 
appointment, beneficiaries of a gift over in default of exercise of any 
such power, co-tenants, joint tenants and holders of other undivided 
interests when the decedent held only a joint or undivided interest in 
the property or when only an undivided interest is specially valued, and 
trustees of trusts holding any interest in the property. An heir who has 
the power under local law to caveat (challenge) a will and thereby 
affect disposition of the property is not, however, considered to be a 
person with an interest in property under section 2032A solely by reason 
of that right. Likewise, creditors of an estate are not such persons 
solely by reason of their status as creditors.
    (3) Consent on behalf of interested party. If any person required to 
enter into the agreement provided for by paragraph (c)(1) either desires 
that an agent act for him or her or cannot legally bind himself or 
herself due to infancy or other incompetency, or to death before the 
election under section 2032A is timely exercised, a representative 
authorized under local law to bind such person in an agreement of this 
nature is permitted to sign the agreement on his or her behalf.
    (4) Duties of agent designated in agreement. The Internal Revenue 
Service will contact the agent designated in the agreement under 
paragraph (c)(1) on all matters relating to continued qualification 
under section 2032A of the specially valued real property and on all 
matters relating to the special lien arising under section 6324B. It is 
the duty of the agent as attorney-in-fact for the parties with interests 
in the specially valued property to furnish the Service with any 
requested information and to notify the Service of any disposition or 
cessation of qualified use of any part of the property.
    (d) Special rule for estates for which elections under section 2032A 
are made on or before August 30, 1980. An election to specially value 
real property under section 2032A that is made on or before August 30, 
1980, may be revoked. To revoke an election, the executor must file a 
notice of revocation with the Internal Revenue Service office where

[[Page 305]]

the original estate tax return was filed on or before January 31, 1981 
(or if earlier, the date on which the period of limitation for 
assessment expires). This notice of revocation must contain the 
decedent's name, date of death, and taxpayer identification number, and 
is to be accompanied by remittance of any additional amount of estate 
tax and interest determined to be due as a result of valuation of the 
qualified property based upon its fair market value. Elections that are 
made on or before August 30, 1980, that do not comply with this section 
as proposed on July 13, 1978 (43 FR 30070), and amended on December 21, 
1978 (43 FR 59517), must be conformed to this final regulation by means 
of an amended return before the original estate tax return can be 
finally accepted by the Internal Revenue Service.

[T.D. 7710, 45 FR 50743, July 31, 1980, as amended by T.D. 7786, 46 FR 
43037, Aug. 26, 1981]