[WSBAPT] Alternate Valuation Date - Separate Elections?

Fri Aug 12 14:03:16 PDT 2016

Hi Amy,

Thank you again for your response!  It proved very helpful!

For others who may be interested, I contacted the DOR, and they confirmed what Amy said, citing RCW 83.100.047(1)(a) (last sentence) as their authority, "All other elections or valuations on the Washington return must be made in a manner consistent with the federal return, if a federal return is required, and such rules as the department may provide."

To me, this seems to put Washington taxpayers at a severe disadvantage for no meaningful reason with regards to the alternate valuation date (AVD) and the portability election.  If a decedent's estate is between the WA and federal exemption amounts (e.g., $4.0 million) and that value drops between DOD and the AVD, then the estate is forced to choose between (1) electing the AVD for Washington (but not filing a federal return and missing out portability), or (2) using DOD values for Washington and paying the state more tax, so it can then file the federal return and make the portability election.

The DOR representative told me they have had cases where estates filed using AVD for Washington and DOD for federal, and in those cases the DOR ignores the AVD and imposes tax based on the DOD value.  Candidly, I can't think of any good public policy reason for this. I don't understand why Washington would effectively penalize a taxpayer by making the Washington AVD and the federal portability elections mutually exclusive.  Was that really the legislative intent behind RCW 83.100.047(1)(a)?

Thoughts?

Jared

Jared E. Adams, JD, LL.M.

Condie & Adams, PLLC
611 4th Avenue, Suite A
Kirkland, WA  98033
(voice):  (425) 450-1040
(fax):  (425) 450-1041
(email): jared at condieadams.com<mailto:jared at condieadams.com>
(web): www.condieadams.com<http://www.condieadams.com/>

Unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Lewis, Amy C.
Sent: Wednesday, August 10, 2016 5:52 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] Alternate Valuation Date - Separate Elections?

Jared,

                Unfortunately I think the answer is "no" based on the following information I received from the Department of Revenue:

If the estate is not required to file the Federal Form 706, the estate may be able to elect alternate valuation on the Washington only filing.  The election once made is irrevocable.  Per IRC §2032(c)<https://www.law.cornell.edu/uscode/text/26/2032>, there are two conditions to electing alternate value: 1) the value of the gross estate must decrease, and 2) the total tax due must decrease.  If these two conditions are not met the estate may not elect alternate valuation.  When an estate does not file a Federal Form 706 then the Washington taxable estate is determined per RCW 83.100<http://apps.leg.wa.gov/rcw/default.aspx?cite=83.100&full=true>, WAC 458.57<http://apps.leg.wa.gov/wac/default.aspx?cite=458-57&full=true> and the IRC as it existed on January 1, 2005.

If the estate is required to file a 706 (including for the portability election) and wanting to elect alternate valuation, the estate must elect alternate valuation for both federal and state purposes.  When an estate files a Federal Form 706 then the Washington taxable estate means the federal taxable estate (see either RCW 83.100.20(13)<http://apps.leg.wa.gov/rcw/default.aspx?cite=83.100.020> or WAC 458-57-105(3)(q)<http://apps.leg.wa.gov/wac/default.aspx?cite=458-57-105>).

An estate has the option of filing a Federal Form 706 to take advantage of the portability election.  If the estate chooses to file the Federal Form 706, then the Washington taxable estate must equal the federal taxable estate.  If the estate is unable to elect alternate valuation for federal purposes then the estate would not be able to elect alternate valuation for Washington filing purposes.

Amy C. Lewis, Attorney

[cid:image002.jpg at 01D1F4A1.4984D890]

ESTATE PLANNING & PROBATE

1201 Pacific Avenue, Suite 1200 | Tacoma, WA 98402
phone 253.572.4500 | fax 253.272.5732 | www.eisenhowerlaw.com<http://www.eisenhowerlaw.com/>

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Jared E. Adams
Sent: Wednesday, August 10, 2016 5:21 PM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Alternate Valuation Date - Separate Elections?

Hi Group,

A quick question about a scenario I am sure some of you have run into before.  I am administering an estate that is above the Washington exemption but below the federal exemption. I am required to file a state estate tax return, and taxes will be due. In addition, the executor (surviving spouse) would like me to file the federal return to make the portability election.

The estate dropped significantly in value between date of death and the 6-month alternate valuation date.  Because no federal tax is due, I know I have to use date of death values for the federal return.  But, can I use the alternate valuation date for Washington (even though I can't for the federal), because for Washington it will reduce overall taxes payable?  In other words, can I make separate alternate valuation date elections for federal and state similar to the right to make separate QTIP elections?

Thanks in advance for any feedback!

Best,

Jared

Jared E. Adams, JD, LL.M.

Condie & Adams, PLLC
611 4th Avenue, Suite A
Kirkland, WA  98033
(voice):  (425) 450-1040
(fax):  (425) 450-1041
(email): jared at condieadams.com<mailto:jared at condieadams.com>
(web): www.condieadams.com<http://www.condieadams.com/>

Unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

PLEASE READ THIS ENTIRE DISCLAIMER
This message is from the Law Office of CONDIE & ADAMS, PLLC, and is intended only for the addressee.  The information contained in this message is privileged, confidential, and protected by the attorney-client or attorney work product privileges.  Unauthorized forwarding, printing, copying, distribution, disclosure or use of such information is strictly prohibited.  If you are not the addressee, please promptly delete this message and notify the sender of the delivery error by return e-mail or you may call our office at (425) 450-1040. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document.

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