The executor of an estate meant to file a timely Form 8939 for a Section 1022 election (which would allow the estate to elect out of the federal estate tax, thereby not needing to file a Form 706 return).  However, the IRS never received the Form 8939, and therefore requested the executor produce a Form 706 return.  When asked, the executor indicated he had sent the Form 8939, but not by registered or certified mail.  He instead submitted affidavits from his accounting firm claiming they timely mailed the form.

The IRS found that the affidavits were not prima facie evidence of delivery to the IRS, and therefore the Veteran would have to seek relief under I.R.C. 301.9100, which requires that the taxpayer show he acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government.

Section 301.9100-3(b)(1) provides, in relevant part, that a taxpayer is deemed to have acted reasonably and in good faith if (a) the taxpayer failed to make the election because of intervening events beyond the taxpayer’s control, or (b) the taxpayer reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election. Section 301.9100-3(b)(1)(ii) and (v).

The IRS ruled that because the executor could have sent the form by certified or registered mail, he could have prevented the form from being allegedly lost in the mail, and therefore that nondelivery was not the result of intervening events beyond the executor’s control.  Furthermore, the executor’s attempt to hide behind his accounting firm’s failure to inform him of preferred mailing methods which would ensure timely filing was also found inadequate; the IRS ultimately ruled he had not acted reasonably and in good faith.

See “Estate Denied Extension to Make Carryover Basis Election,” 2014 TNT 202-46 (Oct. 20, 2014).

Posted by Morgan Yuan, Esq., Associate Editor, Wealth Strategies Journal.