115 T.C. 135">*136 OPINION

PARR, JUDGE: Respondent determined a deficiency of $ 421,214 in the estate's Federal estate tax and an addition to tax of $ 58,450 for the failure to file the estate tax return timely.

After concessions, ¹ the issues for decision are: (1) Whether, despite the executor's failure to make the alternate valuation election pursuant to section 2032 within 1 year after the time prescribed by law (including extensions) for filing the Federal estate tax return, the value of the gross estate may be determined by valuing all the property included in the gross estate as of the alternate valuation date. ² We hold it may not. (2) Whether the estate is liable for the section 6651 addition to tax for the failure to file the estate tax return timely. We hold it is.

2000 U.S. Tax Ct. LEXIS 55">*57 BACKGROUND

This case was submitted fully stipulated under Rule 122. The stipulation of facts and the attached exhibits are incorporated herein by this reference.

Edward H. Eddy (decedent), died testate on April 13, 1993, in Cuyahoga County, Ohio. At the time the petition in this case was filed, Douglas Eddy (Eddy) was the executor of the estate and resided at Bainbridge, Ohio. ³

At the time of his death, decedent owned 237,352 shares of stock in Browning-Ferris Industries, Inc. (BFI), which represented approximately 0.014 percent of the BFI shares outstanding during 1993. Shares of BFI are traded on an established securities market.

The due date for filing the2000 U.S. Tax Ct. LEXIS 55">*58 decedent's Federal estate tax return was January 13, 1994, 9 months after decedent's death. The return was not filed then. Instead, on the day before the 115 T.C. 135">*137 return was due, Carl Wells, preparer of the estate's return and counsel for petitioner herein, signed and submitted a Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, requesting an extension for filing to July 13, 1994. A check for $ 2 million was submitted with the application. ⁴

2000 U.S. Tax Ct. LEXIS 55">*59 A note attached to the application stated that the executor was waiting for a "Major Securities Firm" to complete its valuation of the estate's "principal asset", and that the $ 2 million was payment of the estate's tax liability, which was estimated without regard to that valuation. The application was approved; however, the executor did not file the return before the time provided by the extended due date expired.

Eddy engaged a brokerage firm to provide its opinion of the value of the estate's BFI shares. Sometime before the extended due date, the brokerage firm informed the executor that it would not complete the valuation on time. Another firm was engaged, and it completed the valuation on November 29, 1994. The firm opined that to dispose of the estate's block of shares on the alternate valuation date, October 13, 1993, the estate would have had to accept 75 cents per share less than that day's mean trading price (the discount for blockage). ⁵ The firm did not offer its opinion of the appropriate discount for blockage or the fair market value of the shares on the date of decedent's death.

2000 U.S. Tax Ct. LEXIS 55">*60 On January 19, 1996, the executor filed the estate tax return, which reported the alternate value of all the assets included in the estate. The estate reported $ 5,988,440 as the alternate value of the gross estate and showed $ 6,604,782 as 115 T.C. 135">*138 the date-of-death value. The estate reported $ 5,721,987 as the alternate value of the taxable estate, including $ 5,370,089 as the value of the BFI stock (reflecting the discount for blockage).

In the notice of deficiency, respondent allowed the 75- cent-per-share discount for the estate's BFI stock. However, respondent determined that the estate must report the fair market value of all the assets as of the date of decedent's death, because the executor's election to value the property as of the alternate valuation date was untimely and therefore invalid.

Respondent determined that the date-of-death value of the taxable estate, without consideration of the issues conceded by petitioner, see supra note 1, is $ 6,399,230, ⁶ including $ 6,052,251 as the value of the BFI stock (reflecting the discount for blockage).

2000 U.S. Tax Ct. LEXIS 55">*61 Petitioner asserts that Rev. Proc. 92-85, 1992-2 C.B. 490, and the regulations provide respondent discretionary authority to allow the executor to make an untimely election to use the alternate valuation date, and that the estate qualifies for the relief provided by the revenue procedure.

DISCUSSION

ISSUE 1. WHETHER THE EXECUTOR MAY ELECT ALTERNATE VALUATION DATE

TREATMENT FOR THE ESTATE

In general, a decedent's gross estate is valued for Federal estate tax purposes as of the date of the decedent's death. See sec. 2031(a). ⁷ However, if the executor so elects, the value of the gross estate may be determined by valuing all the property included in the gross estate as of an alternate valuation date, which is the earlier of the date on which the property is disposed of or the date 6 months after the decedent's death. See sec. 2032(a)(1) and (2). ⁸ The election to 115 T.C. 135">*139 determine the value of the property on the alternate date must be made on the estate tax return, and the election may not be made if the return is filed more than 1 year after the time prescribed by law (including extensions) for filing the2000 U.S. Tax Ct. LEXIS 55">*62 return. See sec. 2032(d)(1) and (2). ⁹

2000 U.S. Tax Ct. LEXIS 55">*63 [14] The return in this case was due no later than July 13, 1994, 15 months after the date of decedent's death. See sec. 6075(a) (estate tax return due 9 months after date of death); sec. 6081(a) (the Secretary may grant a reasonable extension of time for filing any return; such extension not to exceed 6 months, except in the case of taxpayers who are abroad); sec. 20.6081-1(a), Estate Tax Regs. ("unless the executor is abroad, the due date for filing the return under any extension granted by a district director or a director of a service center may not be later than 15 months * * * from the date of the decedent's death"). The estate tax return was filed on January 19, 1996 -- more than 33 months after the date of decedent's death and more than 18 months after the extended due date to file the return.

Before the Deficit Reduction Act of 1984 (DEFRA), Pub. L. 98-369, 98 Stat. 494, the election to use the alternate valuation date had to be exercised on a timely filed estate tax return (including extensions), or it was lost. ¹⁰ See, e.g., Estate of Bradley v. Commissioner, 511 F.2d 527">511 F.2d 527 (6th Cir. 1975), affg. T.C. Memo 1974-17; Estate of Ryan v. Commissioner, 62 T.C. 4">62 T.C. 4, 62 T.C. 4">10 (1974);2000 U.S. Tax Ct. LEXIS 55">*64 Estate of Downe v. Commissioner, 2 T.C. 967">2 T.C. 967, 2 T.C. 967">970-971 (1943); Estate of Dixon v. Commissioner, T.C. Memo 1990-17; Estate of Archer v. Commissioner, T.C. Memo 1984-57. DEFRA amended section 115 T.C. 135">*140 2032(d), ¹¹ to effect Congress' intent that "an election may be made on a late- filed return only if the return is filed within one year of the due date." H. Conf. Rept. 98-861, at 497 (1984), 1984-3 C.B. (Vol. 2) 1, 497; see supra note 9; see also sec. 301.9100-6T(b)(1), Temporary Proced. & Admin. Regs., 49 Fed. Reg. 35489 (Sept. 10, 1984) ("no election shall be allowed unless made on a return filed within one year of the due date (including extensions) of such return").

2000 U.S. Tax Ct. LEXIS 55">*65

The opportunity to elect to value property of a decedent's estate as of a date after the decedent's death is one of "legislative grace" and therefore must be made in the manner and the time prescribed by Congress. Estate of Flinchbaugh v. Commissioner, 1 T.C. 653">1 T.C. 653, 1 T.C. 653">655 (1943). It is clear that the statute, the temporary regulation, and the legislative history all provide that the alternate valuation election may not be made later than 1 year after the due date (including extensions) of the estate tax return. Petitioner, however, asserts that respondent has discretionary authority under Rev. Proc. 92-85, 1992-2 C.B. 490, ¹² to allow the executor to make an untimely election to use the alternate valuation date. We disagree.

2000 U.S. Tax Ct. LEXIS 55">*66

Rev. Proc. 92-85, supra, applies, inter alia, "to extensions of time when a statute provides that an election be made by the due date of the taxpayer's return or the due date of the taxpayer's return including extensions." ¹³ However, the date 115 T.C. 135">*141 of expiration of the 1-year period of grace after the "time prescribed by law (including extensions) for filing * * * [the estate tax] return" is not the due date of the taxpayer's return or the due date of the taxpayer's return including extensions. Thus, Rev. Proc. 92- 85, supra, does not apply to the 1-year period of grace provided by section 2032(d)(2), during which time the alternate valuation election may be made.

Accordingly, we find that the executor's failure to make the alternate valuation election on a Federal estate tax return filed on or before the date that2000 U.S. Tax Ct. LEXIS 55">*67 is 1 year after the time prescribed by law (including extensions) for filing the return precludes the election.

ISSUE 2. WHETHER THE ESTATE IS LIABLE FOR THE ADDITION TO TAX FOR THE

     FAILURE TO FILE ITS RETURN TIMELY

Section 6651(a)(1) imposes an addition to tax for the failure to file a required return timely unless the failure is due to reasonable cause and not due to willful neglect. "Reasonable cause as applied in section 6651 has been defined as the 'exercise of ordinary business care and prudence.'" Estate of Duttenhofer v. Commissioner, 49 T.C. 200">49 T.C. 200, 49 T.C. 200">204 (1967) (quoting Southeastern Fin. Co. v. Commissioner, 153 F.2d 205">153 F.2d 205 (5th Cir. 1946), affg. 4 T.C. 1069">4 T.C. 1069 (1945)), affd. 410 F.2d 302">410 F.2d 302 (6th Cir. 1969); see also sec. 301.6651- 1(c)(1), Proced. & Admin. Regs. ("If the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time, then the delay is due to a reasonable cause.").

Whether the failure to file on time was due to reasonable cause is primarily a question of fact to be decided from all the circumstances in a particular case. See 49 T.C. 200">Estate of Duttenhofer v. Commissioner, supra.2000 U.S. Tax Ct. LEXIS 55">*68 Petitioner bears the burden of proving that the failure to file timely was both due to reasonable cause and not due to willful neglect. See Rule 142(a); United States v. Boyle, 469 U.S. 241">469 U.S. 241, 469 U.S. 241">245, 83 L. Ed. 2d 622">83 L. Ed. 2d 622, 105 S. Ct. 687">105 S. Ct. 687 (1985). The fact of submission of a case fully stipulated under Rule 122(a) does not alter the burden of proof, or the requirements otherwise applicable with respect to adducing proof, or the effect of failure of proof. See Rule 122(b).

115 T.C. 135">*142 The estate tax return was filed more than 18 months after the extended due date. Petitioner has not shown that the delinquent filing was due to reasonable cause. Furthermore, we find the fact that the executor was waiting for an opinion of the size of the discount for blockage is not reasonable cause for the failure to file a timely return. The record shows that both the value of the gross estate and the estate tax liability were less on the alternate valuation date than on the date of decedent's death without consideration of the discount for blockage. See sec. 2032(c). Moreover, the estate tax return was not filed until more than 1 year after the executor received the firm's valuation report.

It is clear that the executor should have filed the2000 U.S. Tax Ct. LEXIS 55">*69 estate tax return on time, electing alternate valuation (and attaching whatever explanation was appropriate), continued to seek the necessary information, and then filed a supplemental return with additional information that decreased the estate tax liability. See Estate of Ryan v. Commissioner, 62 T.C. 4">62 T.C. 4, 62 T.C. 4">10 (1974); Estate of Archer v. Commissioner, T.C. Memo 1984-57; sec. 20.6081-1(c), Estate Tax Regs. Accordingly, we find the estate is liable for the section 6651(a)(1) addition to tax as determined by respondent.

In reaching our holdings herein, we have considered each argument made by the parties and, to the extent not discussed above, find those arguments to be irrelevant or without merit.

To reflect the foregoing,

Decision will be entered for respondent.