AmbriaWilliamsCodeSection of the Week #1Spring,2018 Code Summary:Code Section 2032A allows relatives that are lineal decedents to elect aspecial use valuation for acquired farm property. To qualify for the specialuse valuation, the adjusted gross value of the decedent’s estate must have beenat least 50 percent farm property. In addition,the decedent or lineal descendent must have maintained active engagement infarm operations for at least 25% of the farm property. The active engagement infarm operations must have been consistent for 5 years in an 8-year periodpreceding the decedent’s date of death. If the special use valuation is made, allpersons that have an interest in the property must complete and sign all necessarydocumentation to make the election valid.
The relative must continue farmingactivities, remain heavily engaged in farm operations, and pass interests to linealdescendants once that relative wants to relinquish their interest. If therelative fails to abide by the rules, then the election will become invalid andan additional estate tax will be imposed. Guidance to the Taxpayer:Cameron Jones, the daughter and only child of Bob Jones, should verify that sheis to receive interest in the farm property. Once Cameron is verified as a linealdescendent, she should make sure that the adjusted gross value of her father’sestate was comprised of at least 50 percent of farm property. In addition,Cameron should confirm that Bob maintained ownership and active engagement infarm operations for at least 25% of the farm property. If these requirementsare met, Cameron should elect the special use valuation to reduce her taxliability. To stove off tax liability, Cameron must maintain the farmingactivities on the property, maintain substantial engagement in the farmoperations, and correctly pass her interest to another lineal descendent whenshe decides to relinquish her interests.
Case Summary:In Cowser, EST OF v. Comm., 54 AFTR 2d 84-6474 Patricia Tucker, the grandnieceof Ralph D. Cowser, attempted to elect the special use valuation for the familyfarm that was passed to her by Ralph D. Cowser. However, Tucker was related to Cowserby marriage, not lineage.
Because Tucker was not a lineal descendant of Cowser,she was not allowed to elect a special use valuation for the farm property. PatriciaTucker appealed the decision, but the Tax Court maintained that Tucker was noteligible for the special use valuation. Inthe case of Cameron Jones, it would be in her best interest to make sure that sheleaves the farm property to a family member that is a lineal descendent of herfather, Bob Jones. This strategy may ensure the option to a special usevaluation for subsequent lineal descendants.