*79 Decision will be entered under Rule 155.
P attempted to elect special use valuation, under
*168 OPINION
Respondent determined a deficiency*80 of $ 111,228 in petitioner's Federal estate tax. The issue for decision is whether petitioner is entitled to value real property at its special use value pursuant to
The parties submitted this case fully stipulated. The stipulation of facts and the exhibits attached thereto are incorporated herein by this reference.
*169 BackgroundGeorgia Lee Merwin (decedent) died testate on October 18, 1984. Darrell Merwin, decedent's husband and the executor of her estate, resided in Clarksburg, California, at the time the petition was filed in this case.
Petitioner timely filed a Federal estate tax return on July 16, 1985, with the Internal Revenue Service (IRS) District Director at Sacramento, California. The filed return was the March 1985 version of Form 706. On page 2 of petitioner's Form 706, in answer to the question, "Do you elect special use valuation?", petitioner marked the "yes" box. Immediately below the question about special use valuation, Form*81 706 (March 1985) reads: "If 'yes,' complete and attach Schedule N and the agreements required by the instructions to Schedule N." This statement is part of the Form 706 "directions," as we use the term herein, meaning preprinted guidance and commands on the face of Form 706. By "instructions," in contrast, we mean the supplementary guidance to Form 706 entitled "Instructions for Form 706."
Schedule N of Form 706 (March 1985), entitled "
Listed on Schedule A of petitioner's Form 706 are nine parcels of real property, *82 each with a date-of-death value, according to petitioner's entries, "based on Special Use Valuation, copy of which is attached." The first parcel is described as containing the residence of decedent and Darrell Merwin, and has a listed value of $ 27,500. (Any numerical real property value discussed herein, either fair market value or special use value, represents decedent's community property one-half interest.) The remaining eight *170 parcels, each with its own listed value, have a summed listed value of $ 152,583. Immediately following Schedule A is a three-page "Annexation A," which properly computes the special use values of the parcels for farming purposes, based on net share rentals under
As filed with the IRS, petitioner's completed estate tax return, including attachments, makes no reference to the fair market value of the nine parcels, either individually or in the aggregate.
Petitioner did not attach a notice of election to its filed estate tax return, as that notice is described in
IRS attorney David Alfredson (Alfredson) sent a letter to Darrell Merwin, dated February 3, 1987, stating that he had been assigned to audit the estate tax return. The letter also stated: "I wish to inform you at this time that the estate does not qualify for special use valuation under
By transmittal letter dated September 25, 1987, petitioner's representative sent an "Agreement to Special Use Valuation under
During the course of his examination of the estate tax return, Alfredson reviewed an "Inventory and Appraisement" contained in decedent's probate case file at the Yolo County (California) Courthouse. On the cover page of this document, a probate referee had signed a declaration, dated September 16, 1985, stating that he had appraised "each item set forth in attachment 2." Attachment 2 lists, among other things, the nine parcels of real property appearing on Schedule A of petitioner's Form 706. The total of their appraised values in attachment 2 is $ 536,817, which the parties now stipulate was the fair market value of decedent's interest in the nine parcels at her death. At the appeals conference on February 16, 1989, petitioner's representative provided the IRS appeals officer with a copy of the*85 inventory and appraisement.
In his notice of deficiency dated June 20, 1988, respondent determined that petitioner had failed to make a timely and effective election for special use valuation. Prior to this time, apart from the recapture agreement omission, respondent did not notify petitioner that the information and documentation relating to special use valuation was insufficient, nor did he request additional information. Apart from the inventory and appraisement provided to respondent's representative on February 16, 1989, no written appraisals of the subject real property have been submitted to respondent.
The parties agree that petitioner did not make a protective election to specially value qualified real property within the meaning of
The value of property included in the gross estate of a decedent is generally the fair market value of the property interest at the time of death.
An estate must meet several conditions to be eligible for special use valuation and strict compliance with
Another requirement for special use valuation, separate from the notice of election, is the filing of a written recapture agreement, which relates to the contingent imposition of an additional estate tax.
Petitioner admittedly failed to file either a notice of election*88 or a recapture agreement with the estate tax return. Petitioner argues, however, that it substantially *173 complied with the applicable requirements and is thus entitled to special use valuation under
One statutory provision that is somewhat forgiving of less than strict compliance is
(3) Modification of election and agreement to be permitted. -- The Secretary shall prescribe procedures which provide that in any case in which --
(A) the executor makes an election under paragraph (1) within the time prescribed for filing such election, and
(B) substantially complies with the regulations prescribed by the Secretary with respect to such election, but --
(i) the notice of election, as filed, does not contain all required information, or
(ii) signatures of 1 or more persons required to enter into the [recapture] agreement * * * are not included on the agreement as filed, or the agreement does not contain all required information,
the executor will have a reasonable period of time (not exceeding 90 days) after notification of such failures to provide such information*89 or agreements.As provided in
Petitioner makes two principal arguments that its initial omission of a recapture agreement is not dispositive. First, *174 on brief petitioner argues that decedent's*90 qualified heirs will be liable for any additional estate tax under
We recognize that State law is sometimes applicable to the recapture agreement. For example, regarding who has an interest in the property to be specially valued and thus must execute the recapture agreement, the regulations provide: "An interest in property is an interest which * * * can be asserted under applicable local law so as to affect the disposition of the specially valued property by the estate."
Despite the possible application of State law to the recapture agreement, petitioner's reliance on
Petitioner's second argument for excusing its omitted recapture agreement is before the Court as a written request for judicial notice. Although not clear from the request, which we have had filed as a motion, petitioner appears to argue that respondent should be deemed to have conceded the irrelevance of a formal and timely recapture agreement because the Government made some kind of concession to this effect in another case. Petitioner relies on a brief (Brief for Appellant) filed with the U.S. Court of Appeals for the Seventh Circuit in
Aside from whether something done in a totally unrelated case is relevant here, we note that petitioner takes this excerpt out of context. *93 The Government in effect argued that a recapture agreement would not serve independently to impose liability if the statutory conditions in
Despite the lack of a formal notice of election attached to the estate tax return, petitioner asserts that the return as filed included much of the information that would otherwise be found in such a notice. Respondent does not dispute that some of the information is included in the filed return. Furthermore, this Court has recently stated that, of the 14 items to be included in a notice of election under the regulations, "there are certain informational items that do not relate to the substance or essence of the statute." *176
Even if a timely recapture agreement had been filed in this case, petitioner's concededly omitted information, in the aggregate, precludes substantial compliance with
Petitioner admits that the return does not contain enough information to fully satisfy the following items, which we paraphrase from
To place these omissions in rough perspective, we note that this Court has found the omission of a single item from a notice of election to be sufficient, under some circumstances, to prevent substantial compliance under
We hold that petitioner failed to substantially comply with the applicable regulations within the meaning of
Petitioner also contends that a 1986 amendment to
(a) In General. -- In the case of any decedent dying before January 1, 1986, if the executor --
(1) made an election under
(2) provided substantially all the information with respect to such election required on such return of tax,
such election shall be a valid election for purposes of
(b) Executor Must Provide Information. -- An election described in subsection (a) shall not be *97 valid if the Secretary of the Treasury or his delegate after the date of enactment of this Act requests information from the executor with respect to such election and the executor does not provide such information within 90 days of receipt of such request.
Petitioner maintains that it provided substantially all the information required on the estate tax return and that, with the possible exception of an omitted recapture agreement, respondent has never requested further information concerning the election.
The courts that have considered section 1421 have differed greatly in their interpretations. There appear to be two primary reasons for such disparate views. First, the words of the statute do not correlate well with the legislative history. Compare
The courts generally agree that section 1421(a) will validate an election if both of the following are true: (1) The estate timely filed the June 1982 version of Form 706, and (2) the only transgression under the statute and the regulations was a failure to attach a recapture agreement to the return. (The legislative history expressly targets the "March 1982" version of Form 706. H. Rept. 99-841 (Conf.) (1986), 1986-3 C.B. (Vol. 4) 771. What Congress meant, however, was "June 1982."
There is nothing [in section 1421] about filing a recapture agreement or for that matter a notice of election. All that is required (in marked contrast to the Treasury regulation defining valid election for purposes of
The executrix in Prussner filed the January 1979 version of Form 706, which on its face directs the taxpayer to attach a recapture agreement, without attaching a recapture agreement. In finding that the estate was nonetheless entitled to section 1421 relief, the court noted that a recapture agreement itself is a commitment rather than information, and further noted that information required to be included*100 in the recapture agreement by
Because the case before us is not appealable to the Seventh Circuit, we are not bound by the holding in Prussner. See
Our analysis of section 1421 attaches some significance to the report of the Senate Finance Committee, S. Rept. 99-313 (1986), 1986-3 C.B. (Vol. 3) 876, a source of legislative history not mentioned in Prussner. The pertinent provisions of the associated Senate bill are identical to section 1421(a) and (b) as eventually enacted. See H.R. 3838, sec. 1615, 99th Cong., 2d Sess. 2431 (1986).
We begin our examination of the statute with the "information" reference*101 in section 1421(a)(2), which is part of a requirement that the estate provide "substantially all the information with respect to such election required on such return of tax." As indicated in the legislative history, this means that the estate must provide substantially all the relevant information requested by the face of Form 706:
The bill provides that, if an estate * * * provided substantially all the information elicited by Form 706, * * * the election is valid if the estate provides * * * additional information necessary to perfect the election * * *. (This provision permits notices of election and agreements to the election to be filed late where the estate timely filed those documents to the extent requested and described on Form 706.) * * * [S. Rept. 99-313 (1986), 1986-3 C.B. (Vol. 3) 876. Emphasis added.]
See also H. Rept. 99-841 (Conf.) (1986), 1986-3 C.B. (Vol. 4) 770 ("requirements enumerated on the Federal Estate Tax Return").
If the face of Form 706, however, makes no reference to a required "agreement" or to specific instructions describing a recapture agreement, then the estate is excused from attaching*102 a recapture agreement to the filed return (assuming this is the only omission). This is so even if the unreferenced instructions are clear and detailed. We know *180 this because Congress specifically targeted for section 1421 relief those estates that filed the June 1982 version of Form 706 without an attached recapture agreement. See H. Rept. 99-841 (Conf.) (1986), 1986-3 C.B. (Vol. 4) 770-771 (as supplemented by our earlier point that "March 1982" means "June 1982"). The face of Form 706 (June 1982) makes reference neither to a required "agreement" nor to the applicable parts of the instructions, yet those instructions include detailed requirements relating to both the notice of election and the recapture agreement.
In contrast to the June 1982 version of Form 706, if the face of the applicable Form 706 refers expressly to a required "agreement" or to specific instructions that describe a recapture agreement, then Congress appears to have intended the "information with respect to such election required on such return of tax" to expand accordingly. See
The committee is concerned that, in certain cases, the Federal estate tax return (Form 706) provided by the Treasury Department for filing estate tax returns did not sufficiently inform taxpayers of what information must be provided to elect current use valuation and that an agreement to the election is required to be attached to Form 706. The committee determined, therefore, that limited relief permitting taxpayers additional time to supply information is appropriate where taxpayers could have been misled by an absence of information on Form 706. [S. Rept. 99-313 (1986), 1986-3 C.B. (Vol. 3) 876. Emphasis added.]
As noted above in our discussion of
We consequently disagree with the Seventh Circuit position that a recapture agreement requirement referred to on the face of Form 706 does not make the recapture agreement "information" as that word is used and qualified in section 1421(a)(2). See
"Information" is not a technical term of art. It is instead an ordinarily vague reference with many possible meanings, depending on the context. Nowhere is this more aptly demonstrated than in the following passage: "The committee determined, therefore, that limited relief permitting taxpayers additional time to supply information is appropriate where taxpayers could have been misled by an absence of information on Form 706." S. Rept. 99-313 (1986), 1986-3 C.B. (Vol. 3) 876 (emphasis added). "Information" is plainly used here in two different ways within the same sentence, first referring to what the taxpayer supplies and then referring to how Form 706 reads. It is not at all surprising that a similar lack of precision appears in the corresponding statute. The same legislative history source also tells us more directly that a recapture agreement may be considered*106 information. Sandwiched between references to requested additional information is this parenthetical: "(This provision permits * * * agreements to the election to be filed late where the estate timely filed those documents to the extent requested and described on Form 706.)" S. Rept. 99-313 (1986), 1986-3 C.B. (Vol. 3) 876. See also H. Rept. 99-841 (Conf.) (1986), 1986-3 C.B. (Vol. 4) 771.
*182 The second reference to "information" in section 1421 is in subsection (b): "An election described in subsection (a) shall not be valid if the Secretary * * * requests information from the executor with respect to such election and the executor does not provide such information within 90 days of receipt of such request." Although we do not rely on this provision in resolving the instant case, we discuss it in some detail to demonstrate that our interpretation of section 1421 as a whole is both sensible and consistent with congressional intent.
Despite the clear emphasis on taxpayer relief in section 1421, there is not even a hint in the legislative history that Congress intended to limit what the IRS can request or what the estate*107 must then provide within 90 days, so long as it relates to a requirement of the election. Section 1421 relaxes the timeliness requirement for certain parts of the election, but does not purport to relax the required contents of the election. See H. Rept. 99-841 (Conf.) (1986), 1986-3 C.B. (Vol. 4) 770-771; S. Rept. 99-313, 1986-3 C.B. (Vol. 3) 876;
Accordingly, section 1421(b) information must be everything that
We recognize that the normal rules of statutory construction attribute*108 the same meaning to words used more than once in the same section. Our broad reading of "information" in section 1421(b) thus may appear to be, at first glance, unjustifiably inconsistent with our narrower (though expandable) reading of section 1421(a)(2). This superficial inconsistency, however, is negated by the differing contexts in which the statute presents the word "information" and *183 the conspicuous lack of a cross-reference between the two uses.
With respect to the contexts, section 1421(a)(2) refers to information "required on such return of tax," yet section 1421(b) has no such qualifier. With respect to cross-references, if Congress had intended the "information" in the two provisions to be the same, it presumably would have preceded the reference in subsection (b) with "the missing" or "the omitted." In this regard, we note that section 1421 is otherwise replete with internal cross-references. In subsection (a), for example, initial references to "an election," "the Internal Revenue Code," and "the return" are followed by "such election," "such Code," and "such return"; as another example, subsection (b) cross-references subsection (a) for the description of*109 "election."
Based on the foregoing analysis, we decline to adopt the view of the Seventh Circuit that an estate can provide all the information described in section 1421(a)(2) even if a recapture agreement is not attached to the filed estate tax return. Although we agree with this view in the specific context of the June 1982 version of Form 706, we do not agree that it applies to a version that on its face alerts the estate to the necessity of a recapture agreement, such as the 1979 version at issue in Prussner and the 1985 version at issue in this case. Form 706 (March 1985) on both page 2 and Schedule N directs the taxpayer to complete and attach "agreements" described in the Schedule N "instructions." Petitioner's failure to comply, even partially, with these express directions leads us to hold that petitioner did not satisfy section 1421(a)(2).
Additionally, setting aside the omission of the recapture agreement, petitioner has failed to provide substantially all of the other information with respect to the election required on the estate tax return, even under the analysis, as we understand it, in Prussner. The Seventh Circuit in Prussner would apparently require*110 the taxpayer to meet the "substantially all" standard at least for special use valuation data that the face of Form 706 directs the taxpayer to enter on, rather than attach to, Form 706. See
Petitioner's failure to include "Identifying [numbers]" for Darrell Merwin and Gary Merwin on Schedule N is not alone significant, in part because those numbers appear elsewhere on the return. (Petitioner apparently thought it was supposed to identify the subject real property rather than the people with property interests.) Also, petitioner's failure to include a total special use value on Schedule N is arguably not fatal because that information, parcel by parcel, appears in petitioner's Annexation A following Schedule A.
Nowhere on the return, however, did petitioner list even the total fair market value of the specially*111 valued property. Schedule N, as formatted, goes a step further and calls for that information to be broken down by property interest recipient. See
In light of the cumulative effect of these omissions and errors, we cannot conclude that petitioner satisfied any reasonable*112 interpretation of section 1421(a)(2), including what we understand to be the position of the Seventh Circuit in Prussner.
*185 An order will be issued denying petitioner's motion for judicial notice.
Decision will be entered under Rule 155.