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a late-filed Form 706 provided it is not the decedent’s death are not property Line 2. Special-Use Valuation filed later than 1 year after the due date of the gross estate on the date of death of Section 2032A (including extensions actually granted). and are not included in the alternate Relief under sections 301.9100-1 and valuation. However, if dividends are In general. Under section 2032A, you 301.9100-3 may be available to make declared to stockholders of record after may elect to value certain farm and an alternate valuation election or a the date of the decedent’s death so that closely held business real property at protective alternate valuation election, the shares of stock at the later its farm or business use value rather provided a Form 706 is filed no later valuation date do not reasonably than its fair market value (FMV). You than 1 year after the due date of the represent the same property at the date may elect both special-use valuation return (including extensions actually of the decedent’s death, include those and alternate valuation. granted). dividends (except dividends paid from To elect this valuation, you must earnings of the corporation after the If you elect alternate valuation, value check “Yes” on line 2 and complete and date of the decedent’s death) in the the property that is included in the attach Schedule A-1 and its required alternate valuation. gross estate as of the applicable dates additional statements. You must file as follows: Schedule A-1 and its required As part of each Schedule A through • Any property distributed, sold, attachments with Form 706 for this I, you must show: exchanged, or otherwise disposed of or election to be valid. You may make the 1. What property is included in the separated or passed from the gross election on a late-filed return so long as gross estate on the date of the estate by any method within 6 months it is the first return filed. decedent’s death; after the decedent’s death is valued on The total value of the property 2. What property was distributed, the date of distribution, sale, exchange, valued under section 2032A may not be sold, exchanged, or otherwise disposed or other disposition, whichever occurs decreased from FMV by more than of within the 6-month period after the first. Value this property on the date it $1,020,000 for decedents dying in decedent’s death, and the dates of ceases to form a part of the gross 2011. these distributions, etc. estate; for example, on the date the title (These two items should be entered in passes as the result of its sale, Real property may qualify for the the “Description” column of each exchange, or other disposition. section 2032A election if: schedule. Briefly explain the status or • Any property not distributed, sold, 1. The decedent was a U.S. citizen disposition governing the alternate exchanged, or otherwise disposed of or resident at the time of death; valuation date, such as: “Not disposed within the 6-month period is valued on 2. The real property is located in the of within 6 months following death,” the date 6 months after the date of the United States; “Distributed,” “Sold,” “Bond paid on decedent’s death. 3. At the decedent’s death, the real maturity,” etc. In this same column, • Any property, interest, or estate that property was used by the decedent or a describe each item of principal and is “affected by mere lapse of time” is family member for farming or in a trade includible income); valued as of the date of decedent’s or business, or was rented for such use death or on the date of its distribution, 3. The date of death value, entered by either the surviving spouse or a sale, exchange, or other disposition, in the appropriate value column with lineal descendant of the decedent to a whichever occurs first. However, you items of principal and includible income family member on a net cash basis; may change the date of death value to shown separately; and 4. The real property was acquired account for any change in value that is 4. The alternate value, entered in from or passed from the decedent to a not due to a “mere lapse of time” on the the appropriate value column with items qualified heir of the decedent; date of its distribution, sale, exchange, of principal and includible income 5. The real property was owned and or other disposition. shown separately. used in a qualified manner by the (In the case of any interest or estate, decedent or a member of the The property included in the the value of which is affected by lapse decedent’s family during 5 of the 8 alternate valuation and valued as of 6 of time, such as patents, leaseholds, years before the decedent’s death; months after the date of the decedent’s estates for the life of another, or 6. There was material participation death, or as of some intermediate date remainder interests, the value shown by the decedent or a member of the (as described above) is the property under the heading “Alternate value” decedent’s family during 5 of the 8 included in the gross estate on the date must be the adjusted value; for years before the decedent’s death; and of the decedent’s death. Therefore, you example, the value as of the date of 7. The qualified property meets the must first determine what property was following percentage requirements: death with an adjustment reflecting any part of the gross estate at the a. At least 50% of the adjusted difference in its value as of the later decedent’s death. value of the gross estate must consist date not due to lapse of time.) Interest. Interest accrued to the date of the adjusted value of real or personal of the decedent’s death on bonds, property that was being used as a farm Distributions, sales, exchanges, and notes, and other interest-bearing or in a closely held business and that other dispositions of the property within obligations is property of the gross was acquired from, or passed from, the the 6-month period after the decedent’s estate on the date of death and is decedent to a qualified heir of the death must be supported by evidence. included in the alternate valuation. decedent, and If the court issued an order of Rent. Rent accrued to the date of the b. At least 25% of the adjusted distribution during that period, you must decedent’s death on leased real or value of the gross estate must consist submit a certified copy of the order as personal property is property of the of the adjusted value of qualified farm part of the evidence. The IRS may gross estate on the date of death and is or closely held business real property. require you to submit additional included in the alternate valuation. evidence, if necessary. Dividends. Outstanding dividends that For this purpose, adjusted value is If the alternate valuation method is were declared to stockholders of record the value of property determined used, the values of life estates, on or before the date of the decedent’s without regard to its special-use value. remainders, and similar interests are death are considered property of the The value is reduced for unpaid figured using the age of the recipient on gross estate on the date of death, and mortgages on the property or any the date of the decedent’s death and are included in the alternate valuation. indebtedness against the property, if the value of the property on the Ordinary dividends declared to the full value of the decedent’s interest alternate valuation date. stockholders of record after the date of in the property (not reduced by such -8- Part Instructions