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property being specially valued. You annual gross cash rental can be section 2032A(b)(1)(B) must be may not use: determined. Net share rental is the specially valued under the election. • Appraisals or other statements difference between the gross value of If joint or undivided interests (that is, regarding rental value or areawide produce received by the lessor from the interests as joint tenants or tenants in averages of rentals, or comparable land and the cash common) in the same property are • Rents that are paid wholly or partly operating expenses (other than real received from a decedent by qualified in-kind, and the amount of rent may not estate taxes) of growing the produce heirs, an election for one heir’s joint or be based on production. that, under the lease, are paid by the undivided interest need not include any The rental must have resulted from an lessor. The production of the produce other heir’s interest in the same arm’s-length transaction. Also, the must be the business purpose of the property if the electing heir’s interest amount of rent is not reduced by the farming operation. For this purpose, plus other property to be specially amount of any expenses or liabilities produce includes livestock. valued satisfies the requirements of associated with the farm operation or section 2032A(b)(1)(B). The gross value of the produce is the lease. generally the gross amount received if If successive interests (that is, life Comparable property. the produce was disposed of in an estates and remainder interests) are Comparable property must be situated arm’s-length transaction within the created by a decedent in otherwise in the same locality as the specially period established by the Department qualified property, an election under valued property as determined by of Agriculture for its price support section 2032A is available only for that generally accepted real property program. Otherwise, the value is the property (or part) in which qualified valuation rules. The determination of weighted average price for which the heirs of the decedent receive all of the comparability is based on all the facts produce sold on the closest national or successive interests, and such an and circumstances. It is often regional commodities market. The election must include the interests of all necessary to value land in segments value is figured for the date or dates on of those heirs. where there are different uses or land which the lessor received (or For example, if a surviving spouse characteristics included in the specially constructively received) the produce. receives a life estate in otherwise valued land. qualified property and the spouse’s Valuing a real property interest in The following list contains some of brother receives a remainder interest in closely held business. Use this the factors considered in determining fee, no part of the property may be method to determine the special-use comparability: valued under a section 2032A election. valuation for qualifying real property • Similarity of soil; used in a trade or business other than Where successive interests in • Whether the crops grown would farming. You may also use this method specially valued property are created, deplete the soil in a similar manner; for qualifying farm property if there is no remainder interests are treated as • Types of soil conservation comparable land or if you elect to use being received by qualified heirs only if techniques that have been practiced on it. Under this method, the following the remainder interests are not the two properties; factors are considered: contingent on surviving a nonfamily • Whether the two properties are • The capitalization of income that the member or are not subject to subject to flooding; property can be expected to yield for divestment in favor of a nonfamily • Slope of the land; farming or for closely held business member. • For livestock operations, the carrying purposes over a reasonable period of Protective Election capacity of the land; time with prudent management and • For timbered land, whether the You may make a protective election to traditional cropping patterns for the timber is comparable; specially value qualified real property. area, taking into account soil capacity, • Whether the property as a whole is Under this election, whether or not you terrain configuration, and similar unified or segmented. If segmented, the may ultimately use special-use factors; availability of the means necessary for valuation depends upon values as • The capitalization of the fair rental movement among the different finally determined (or agreed to value of the land for farming or for sections; following examination of the return) closely held business purposes; • Number, types, and conditions of all meeting the requirements of section • The assessed land values in a state buildings and other fixed improvements 2032A. that provides a differential or use value located on the properties and their assessment law for farmland or closely To make a protective election, check location as it affects efficient held business; “Yes” on line 2 and complete Schedule management, use, and value of the • Comparable sales of other farm or A-1 according to the instructions for property; and closely held business land in the same Protective election. • Availability and type of transportation geographical area far enough removed If you make a protective election, facilities in terms of costs and of from a metropolitan or resort area so you should complete the initial Form proximity of the properties to local that nonagricultural use is not a 706 by valuing all property at its FMV. markets. significant factor in the sales price; and Do not use special-use valuation. You must specifically identify on the • Any other factor that fairly values the Usually, this will result in higher estate return the property being used as farm or closely held business value of and GST tax liabilities than will be comparable property. Use the type of the property. ultimately determined if special-use descriptions used to list real property on valuation is allowed. The protective Making the Election Schedule A. election does not extend the time to Include the words “section 2032A Effective interest rate. See Tables pay the taxes shown on the return. If valuation” in the “Description” column of 2 and 3 of Revenue Ruling 2011-17, you wish to extend the time to pay the any Form 706 schedule if section 2011-33 I.R.B. 160, available at www. taxes, you should file Form 4768 in 2032A property is included in the irs.gov/pub/irs-irbs/irb11-33.pdf, for the adequate time before the return due decedent’s gross estate. average annual effective interest rates date. in effect for 2011. An election under section 2032A If it is found that the estate qualifies Net share rental. You may use need not include all the property in an for special-use valuation based on the average annual net share rental from estate that is eligible for special-use values as finally determined (or agreed comparable land only if there is no valuation, but sufficient property to to following examination of the return), comparable land from which average satisfy the threshold requirements of you must file an amended Form 706 -10- Part Instructions