For an estate of a decedent dying in calendar-year 2006, if the executor elects special-use valuation
, the aggregate decrease in the value of qualified real property cannot exceed $900,000.
Beryl elected the special-use valuation (IRC section 2032A), which more than halved the farm's value for estate tax purposes.
Section 2032A special-use valuation requires, among other things, that the property pass to or be acquired by a "qualified heir' (a family member) from the decedent.
The special-use valuation election allows qualifying real property to be valued according to its actual use, rather than its highest or best use, subject to restrictions.
This provision, called special-use valuation, can reduce or eliminate estate tax for estates containing qualified property used in family farms and businesses (e.
For example, if 98% of a decedent's farm passes to a qualified heir and a 2% interest passes to a nonqualified heir, the special-use valuation election is allowed if the 98% is used for a qualified use.
1040(c), the property's basis will be lower after electing special-use valuation.
Gifting and special-use valuation provisions vary not only among death tax systems, but also among the states within a category.
Although New Jersey does not allow special-use valuation, it values forest land according to comparable forest land sales and requires a recalculation of the estate tax if the land's use is changed.
Many of the other inheritance and estate tax states have laws similar to the Federal special-use valuation provisions.
2032A special-use valuation rules, if the triggering event occurs within two years of the decedent's death.
2032A recapture rule (previously discussed) applies, special-use valuation is completely disregarded for property valuation purposes.