IN THE UNITED STATES COURT OF APPEALS
                            FOR THE FIFTH CIRCUIT



                                  No. 94-40211



ESTATE OF HARRY M. HUDGINS,
Deceased, LEE C. HUDGINS and
HARRY HUDGINS II, Co-Independent
Executors,

                                                    Petitioners-Appellees,


                                        versus


COMMISSIONER OF INTERNAL REVENUE,

                                                    Respondent-Appellant.



                   Appeal from the United States Tax Court

                                 (No. 5506-91)


                                (June 28, 1995)


Before JOLLY and WIENER, Circuit Judges.*

WIENER, Circuit Judge.


     In this federal estate tax case, implicating "special use

valuation" of several tracts of farm or ranch property owned by

Harry       M.   Hudgins   (Decedent)    at   the   time   of   his   death,   the



        *
        Judge Irving L. Goldberg was a member of this panel when
counsel presented arguments to the court, but he died before the
opinion was written and circulated. The case is therefore being
decided by a quorum. 28 U.S.C. § 46(d).
Commissioner of Internal Revenue (Commissioner) appeals the adverse

decision   of   the   United   States   Tax   Court   (Tax   Court).   The

Commissioner questions the Tax Court's holding that, when filing

Decedent's federal estate tax return (706), the independent co-

executors of Decedent's estate (Estate) "substantially complied"

with the requirements of the Internal Revenue Code (Code) and

applicable Treasury Regulations (Regs.) for electing a special use

valuation of the Estate property, thereby entitling the Estate to

perfect its election within ninety days following notice from the

IRS that the Estate's election was defective.         Concluding that the

Tax Court's substantial compliance ruling was erroneous, we reverse

and remand for further proceedings consistent with this opinion.

                                    I

                         FACTS AND PROCEEDINGS

     Decedent was a Texas rancher who died testate in 1987.1           In

his Last Will and Testament (the Will), Decedent left several

tracts of ranch property to various combinations of five grandsons.

The Will's SECTION 5., which applied to each legacy of ranch

property that resulted in two or more of Decedent's grandsons

becoming "joint owners," imposed several ten year restrictions on

the legatees and the property thus bequeathed: (1) No such jointly

owned tract could be mortgaged or partitioned; (2) any joint owner

of an interest in one tract could sell his interest to another

      1
         As Decedent died after December 31, 1981, the issue of
special use valuation in his estate is governed by the provisions
of the Economic Recovery Tax Act of 1981. Economic Recovery Tax
Act of 1981, Pub. L. No. 97-34, § 421(k)(3), 95 Stat. 172, 313
(1981).

                                    2
joint owner of that tract but not to any other person; and (3) any

joint owner could rent or lease his interest to another joint owner

but not to any other person.        [Neither SECTION 5. nor any other

provision of the Will expressly required that the land actively be

used for ranch purposes, expressly prohibited any other use of the

property,    expressly   required   the    grandsons     to   participate   in

qualifying activities, or expressly imposed any penalties, such as

reversion,    revocation,   forfeiture     or    other   loss    of   ownership

interests, in the event of an actual or attempted alienation in

violation of the restriction.]2

     The Will appointed Decedent's son, Lee C. Hudgins, grandson,

Harry Hudgins II, and long-time attorney and scrivener of the Will,

Joe A. Keith, to serve as Independent Co-Executors (Executors).

The Will specified that Mr. Keith's service as a co-executor would

not preclude his being compensated "for also being attorney for my

estate."      Although   not   expressed    in    the    Will,   Mr.   Hudgins

apparently expected the Estate to retain Mr. Keith as its attorney,

which it did.

     Mr. Keith was an experienced attorney who had represented Mr.

Hudgins for over forty years, had also represented other prominent

ranching families in that part of North Texas, and had prepared and

filed a number of federal estate tax returns, including some in


     2
      SECTION 9. directed that in each business in which Decedent
may be engaged at his death "whether in individual, partnership,
corporate or other form, shall be discontinued and liquidated as
soon as reasonably possible" following the death of Decedent.
Neither the Tax Court nor any of the parties contend that the
provisions of SECTION 9. affect the use of the subject property.

                                    3
which special use valuation elections were made.              The record

reflects that Mr. Keith was incapacitated at the time this action

was commenced in the Tax Court and has since died.

     Mr. Keith prepared and timely filed the 706 for the Estate.

In the portion of the 706 that asks if the estate intends to elect

special use valuation on any of its property,         the "Yes" box was

checked.    In compliance with instructions in the 706, the Estate

completed   and   affixed   a   Schedule   N,   together   with   required

attachments to that schedule.        A "Notice of Election" was also

attached to the 706, but it contained only nine of the fourteen

items required by the instructions and the Regs.           The Notice of

Election contains a statement, presumably affixed by Mr. Keith, to

the effect that "[i]t is considered that all requirements exist for

special valuation of the qualified real property."          Although the

Notice of Election contains signature lines for all five grandsons,

only three of the five had signed that instrument by the time it

was filed with the 706.     This is at least partially explained in a

"Memorandum" typed at the bottom of the Notice of Election and

signed by Mr. Keith, which states that one of the grandsons had not

signed "because he is in military service" and that another had not

signed because he was "not presently available."           The Memorandum

concludes with the following statement:

     "To remedy that situation, the undersigned preparer of
     this Form 706 will undertake to obtain the signatures of
     [the two grandsons who had not signed] on a counterpart
     hereof, which when available will be transmitted to the
     office of the Internal Revenue Service at Austin, Texas."

The record does not reflect that any steps were taken to effectuate


                                    4
the promised "remedy" until after the IRS audited the 706 and

notified the Estate that its special use valuation election was

defective due to the incomplete Notice of Election and the failure

to attach an executed Recapture Agreement.

      Within ninety days after receiving that notice from the IRS,

the       Estate   submitted   all   previously        missing    information,

documentation,      and   signatures.       The   Commissioner    nevertheless

denied the special use valuation claimed by the Estate, contending

that, as the Estate's initial election was not "in substantial

compliance" with the requirements of the Regs., the Estate was

precluded from perfecting its election post hoc. The Commissioner

assessed the subject properties at their fair market values,

thereby increasing the value of the gross estate by $487,790SQthe

excess of the aggregate fair market value of the subject tracts

over their aggregate special use valuations.3            As a result of this

adjustment the Commissioner issued a deficiency notice to the

Estate for underpayment of taxes in the amount of $149,622.

      The Estate petitioned the Tax Court for a redetermination of

the deficiency.      Following a trial on mostly stipulated facts, the

Tax Court held that the Estate was indeed entitled to the special

use valuation, thus there was no deficiency in estate taxes.               The

court's conclusion that the Estate was entitled to special use

valuation was grounded in its determination that the Estate's

initial      election     substantially     complied    with     the   election

      3
       The parties stipulated at the redetermination hearing that
the appropriate increase to the gross estate was $403,345, not
$487,790.

                                        5
requirements, entitling the Estate to perfect its election within

the statutory period following notice of the defective election.

This review followed the Commissioner's timely filing of a notice

of appeal.

                                          II

                                    ANALYSIS

     The Tax Court's holding for the Estate apparently served as a

wake-up call for the Commissioner, for his brief to this court

presents both a comprehensive explanation of the law applicable to

special use valuation elections and an application of that legal

framework to the pertinent facts.              We therefore borrow extensively

from the Commissioner's brief in the analysis that follows.

A.   Standard of Review

     In reviewing decisions of the Tax Court we apply the same

standards used in reviewing a decision of the district court:

Questions of law are reviewed de novo; findings of fact are

reviewed for clear error.4         We will not find a ruling to be clearly

erroneous unless we are left with the definite and firm conviction

that a mistake has been made.5

     In   the    instant    case    the    discrete     facts,    as   noted,   are

stipulated      for   the   most   part       and   otherwise    are   essentially

undisputed.     That the belated efforts of the Estate to perfect the


     4
        Park v. Commissioner, 

, 1291 (5th Cir. 1994)
(citing McKnight v. Commissioner, 

, 450 (5th Cir. 1993)),
cert. denied, 

(1994).
     5
     United States v. United States Gypsum Co., 

, 395
(1948).

                                          6
election were substantively adequate is not disputed; thus the sole

issue       presented      is   whether     the     Estate's       initial   effort    was

sufficient       to       constitute      "substantial         compliance,"       thereby

entitling the Estate to perfect its election within ninety days

following notice from the IRS that the original election was

defective.          Even    though    the   parties      assumed      that   this     issue

presented a factual question, i.e., whether the facts of the case

constitute       "substantial        compliance"SQa          term    of    art   in   Code

§ 2032A(d)(3)SQwe believe that, despite the fact that in other

contexts       issues      of   substantial        compliance,       like    substantial

completion,         are    indeed    questions      of   fact,      the   question    here

presented is one of law.             Resolution of this fact/law dichotomy is

not important         in    this    appeal,       however,    as    we    conclude    that,

irrespective of whether we review the issue de novo or for clear

error, the Tax Court erred reversibly in determining that the

Estate's initial filing was in substantial compliance with the

requirements for a valid special use election.

B.    Special Use Valuation

      Generally, property subject to federal estate tax is returned

at   its     fair     market    value.6       One     limited       exception    to   that

generality is found in § 2032A of the Code, which provides an

alternative, more "taxpayer friendly" method for valuing some

family farms and closely held businesses.7                    Courts have recognized

        6
        United States v. Cartwright, 

, 550-51 (1973);
Treas. Reg. § 20.2031-1(b).
      7
       See Tax Reform Act of 1976, Pub. L. No. 94-455, § 2003(a),
90 Stat. 1520, 1856 (1976); I.R.C. § 2032A.

                                              7
that, in enacting § 2032A, Congress sought to provide relief to

those who, when inheriting family farms, might otherwise be forced

to sell them to pay estate taxes calculated on "highest and best

use" values, which often exceed significantly the land's value for

farming purposes.8        In the hope of avoiding such a result and

helping to preserve family farms and other closely held businesses,

Congress allows qualifying property to be returned for estate tax

purposes at its actual (farm) use value rather than its fair market

value based on its highest and best use.9         As permission to elect

this so-called "special use valuation" constitutes an act of grace

or a special dispensation by Congress, the courts have strictly

construed § 2032A and its requirements.10

     Briefly summarized, the conditions that must be met to qualify

for special use valuation are:            The decedent must have been a

citizen or resident of the United States at the time of his death;

the property must be located in the United States; the value of the


         8
         See, e.g., McAlpine v. Commissioner, 

, 460
(5th Cir. 1992) (noting that purpose of exception is to grant
relief to heirs); Estate of Thompson v. Commissioner, 

, 1133 (4th Cir. 1989) (same); see H.R. Conf. Rep. No. 94-1380,
94th Cong., 2d Sess. 21-22 (1976).
     9
             

.
    10
        See, e.g., Martin v. Commissioner, 

, 83-84 (7th
Cir. 1986) (construing strictly "qualified use" provision of
§ 2032A); Estate of Sherrod v. Commissioner, 

, 1062-67
(11th Cir. 1985) (construing strictly "material participation" and
"qualified use" tests of § 2032A), cert. denied, 

(1986); Estate of Cowser v. Commissioner, 

, 1171 (7th
Cir. 1984) (adhering to precise language of § 2032A defining
"qualified heir"). Cf. Corn Products Ref. Co. v. Commissioner, 

, 52 (1955) (construing narrowly term "capital assets" in
§ 117).

                                     8
property must exceed specified percentages of the decedent's gross

estate       and     adjusted   estate;     the   property   must     devolve    to   a

"qualified heir," who must be a member of the decedent's family;

and the decedent or a member of the decedent's family must have

been materially participating in the operation of the farm or

business at the time of the decedent's death and for five of the

eight years preceding his death.11

       Although not as initial eligibility requirements, the Code

imposes two           continuing    conditions    if   the   estate    is   to   avoid

subsequent recapture of the tax savings produced by special use

valuation:          The property's ownership must remain in the family and

must be used for the qualified use for at least ten years following

the   decedent's         death.12     The   qualified    successors     must     agree

contractually, at the time that the special use valuation election

is made, to keep the property in the family and to operate it for

the qualified use for the specified period.13                 That contract must

be executed and filed with the estate tax return; and to ensure the

Commissioner's ability to accomplish recapture if necessary, the

heirs must bind themselves therein to be responsible personally for


      11
       Whalen v. United States, 

, 669 (7th Cir. 1987);
Schuneman v. United States, 

, 697 (7th Cir. 1986).
       12
                 I.R.C. § 2032A(c).
            13
           I.R.C. § 2032A(c) and (d)(2).      See, e.g., 

(noting that heirs must continue to use property as
family farm or business for ten year period to avoid recapture of
tax savings); Bartlett v. Commissioner, 

, 320 (7th Cir.
1991) (same); Prussner v. United States, 

, 221 (7th
Cir. 1990) (discussing requirement that recapture agreement must be
filed for valid election).

                                            9
additional     tax    in   the    event    of   premature    disposition      of   the

property or cessation of qualified use.                This contract, which must

be enforceable by the Commissioner under state law, is generally

referred to as a "Recapture Agreement."

      The benefits of § 2032A do not appertain automatically just

because all prerequisites happen to coalesce:                 The estate must act

affirmatively to elect such treatment.                 Important to the instant

case are the mechanics of electing special use valuation, principal

among which are (1) checking the appropriate box or blank on the

estate tax return and completing Schedule N, thereby evidencing the

intention to make such an election, (2) completing and attaching to

the   return    a    Notice      of    Election   containing     the    information

specified in § 2032A and the applicable Regs.,14 and (3) as just

discussed, attaching a Recapture Agreement that has been signed by

all parties with interests in the property to be specially valued,

expressly consenting to the imposition of the additional tax and to

be personally liable to pay it in the event of a premature

disposition of the property or cessation of its qualified use.15

Thus a Notice of Election and a Recapture Agreement, validly and

completely executed and filed contemporaneously with the estate tax

return, are essential prerequisites if an estate that elects

special use valuation is to be in full compliance with § 2032A.

Not   even   the     Executors        contend   that   the   Estate    was   in    full


      14
           I.R.C. § 2032A(d)(1); Treas. Reg. § 20.2032A-8(a)(3).
      15
        I.R.C. § 2032A(a)(1)(B) and (d); Treas. Reg. § 20.2032A-
8(a)(3) and (c).

                                           10
compliance when the 706 was filed; thus the need to determine if

the Estate was in substantial compliance.

                       Recapture Agreement

     The 706 was not accompanied by any instrument labeled or

purporting to be a Recapture Agreement.      Yet § 2032A(b)(1)(B) of

the Code makes abundantly clear that the Recapture Agreement, i.e.,

"the agreement described in subsection (d)(2)" is an integral and

indispensable element of a special use valuation election.       The

legislative history of § 2032A confirms the essential nature of the

Recapture Agreement:

           One of the requirements for making a valid
           election is the filing with the estate tax
           return [of] a written [recapture] agreement
           signed by each person in being who has an
           interest in any qualified real property with
           respect to which the special use valuation is
           elected.    The [recapture] agreement must
           evidence the consent of each of those parties
           to the application of the recapture tax
           provisions to the property.16

That the filing of a valid Recapture Agreement is indispensable has

also been recognized by the courts and in the Regs.17

     The contents required for a valid Recapture Agreement are

specified in § 2032A(d)(2):

           The agreement referred to in this paragraph is
           a written agreement signed by each person in
           being who has an interest (whether or not in
           possession) in any property designated in such

      16
           H. R. Conf. Rep. No. 94-1380, 94th Cong., 2d Sess. 27
(1976).
     17
        See 

; 

;
McDonald v. Commissioner, 

, 1495 (8th Cir. 1988),
cert. denied sub nom. Cornelius v. Commissioner, 

(1989); Treas. Reg. §§ 20.2032A-8(a)(3) and (c)(1).

                                11
          agreement consenting to the application of
          subsection (c) [imposition of the additional
          estate tax] with respect to such property.18
By making the heirs personally responsible for any additional tax,

which is triggered either by a disposition of the property or

cessation of its qualified use within the statutory period, the

Recapture      Agreement   provides    considerable   assurance   to   the

Commissioner of collectibility.        Treas. Reg. § 20.2032A-8(c) sets

forth the required contents of the Recapture Agreement in greater

detail than does the Code.            Indeed, a model form of such an

agreement is available for those who care to avail themselves of

it.19    Among other things, the Recapture Agreement (1) must express

the consent of the heirs to be liable personally under Code

§ 2032A(c) in the event of early disposition of the property or

early cessation of qualified use; (2) must be binding under local

law on all parties with an interest in the property; and (3) must

designate an agent for the parties and endow such agent with

authority to act for all parties to the agreement in dealing with

the IRS.20

        In addition to the in personam security obtained by the

Commissioner through the Recapture Agreement, in rem security is

garnered through the provisions of § 6324B of the Code, which

create a statutory lien on the subject property.              This lien

attaches automatically at the time an election is filed under


        18
             I.R.C. § 2032A(d)(2).
        19
             Rev. Proc. 81-14, 1981-1 C.B. 669.
        20
             Treas. Reg. § 20.2032A-8(c).

                                      12
§ 2032A, regardless of the enforceability or timeliness of filing

the Recapture Agreement.21

     Obviously, the comprehensive statutory and regulatory scheme

just described envisions the combination of in personam of the

heirs and in rem responsibility of the property, not merely as

security for     the    collection     of   additional    taxes   but   also   to

constrain at least ten years of qualified ownership and qualified

use of the property.        Personal liability of the heirs enhances the

likelihood that the property will be kept in the family and used

for qualified purposes, and that the Commissioner would be able to

recover the defaulted tax benefit if, by the time recapture is

triggered, the value of the property shall have so declined that

the § 6324B lien is then wholly or partially worthless.                     It is

beyond the authority of the courts, then, to say that alone the

lien would suffice:         The heirs' agreement to be personally liable

for the tax consequences is equally indispensable, for "without the

heirs' signatures, the election on the original return may not

effectively bind the heirs."22

                              Notice of Election

     The    Notice     of   Election   is   the   other   document   that    must

accompany a timely filed estate tax return in which a special use

valuation election is made.        Unlike the Recapture Agreement, which

here was omitted entirely, a Notice of Election did accompany

     21
           I.R.C.§ 6324B; 

.
     22
        McDonald v. Commissioner, 

, 305 n. 31 (1987),
aff'd in part and rev'd in part, 

(8th Cir.), cert.
denied sub nom. Cornelius v. Commissioner, 

(1989).

                                       13
Decedent's 706. All concede, however, that several of the required

contents of and attachments to this document were missing SQfive

out of fourteen, to be more precise.

      Schedule N of the estate tax returnSQyet another document

required to be completed and included in connection with a special

use valuation electionSQcontains instructions which provide, inter

alia, that the return preparer must complete and attach the Notice

of Election.    Those instructions are derived from Reg. § 20.2032A-

8(a)(3), which lists the fourteen specific items required for a

valid Notice of Election.          The five items omitted from the instant

Notice     of Election are:        (1) information supporting the special

use values listed in the return, (2) written appraisals of the fair

market values of the properties, (3) the name, address, taxpayer

identification number, and relationship to the Decedent of each

person     succeeding    to   an   interest   in   the     subject   properties,

(4) value of the property interests being received by each such

successor, based on both fair market value and qualified use, and

(5) affidavits setting forth the activities constituting material

participation and identity of the participants in the qualified use

of the properties.

      The Estate's Notice of Election was also deficient in regard

to   the   requirement    that     the   signatures   of    all   successors   be

affixed: As noted earlier, only three of the five grandsons signed

the Notice; one did not sign by virtue of military service and

another simply did not sign, the Estate offering no explanation

other than that he was "not presently available."                 As a matter of


                                         14
law, the Estate's cryptic, conclusionary statement on its Notice of

Election that "All requirements exist for special valuation of

qualified real property" adds nothing to the substantialitySQor

lack thereofSQof the Estate's compliance with the requirements for

making a valid election. Neither does Mr. Keith's signed statement

that    he   would     undertake   to    obtain    the     missing     signatures,

particularly given the fact that neither of the missing signatures

nor any of the other items missing from the Notice of Election were

submitted to the IRS between the time that the return was filed and

the time that the notice of deficiency disallowing special use

valuation was sent by the IRS and received by the Estate.

       The record does not reflect the reason or reasons for the

Estate's omissions of so many of the substantive requirements23 for

a complete Notice of Election.           Beyond the statement "explaining"

the missing signatures, the Estate offers nothing to justify the

omission     of      appraisals,   affidavits,       and     other      supporting

documentation in addition to the omitted Recapture Agreement;

neither does the Estate explain why nothing was done to supply the

missing pieces of the puzzle, as promised, until after the notice

of   disallowance       was   received    from    the    IRS.        Whatever   the

explanation for the omissions might be, it matters not; we deal

only with the facts directly affecting less-than-full compliance

with the election requirements, not with the excuses therefor,

particularly when, as here, none have been proffered except as to


       23
        We respectfully but firmly disagree with the Tax Court's
characterization of these omissions as "technicalities."

                                         15
the signature of the grandson who was serving in the military at

the timeSQfor whatever that might be worth.

                                  Substantial Compliance

      It is undisputed that here the Notice of Election filed with

the 706 was incomplete, both as to content and signature, and that

no separate Recapture Agreement was filed with the 706.                           Clearly,

then,      the     Estate        did   not    initially      comply    fully      with    the

requirements for electing special use valuation.                           As there was no

full compliance, then, whatever compliance was made must be found

to have been "substantial" under the applicable Regs. when the 706

was filed if the Estate is to be held entitled to perfect its

defective         election.24          This   case    thus   turns    on    the   issue    of

substantial compliance.

      We have noted that when Congress adopted § 2032(A) as part of

the Tax Reform Act of 1976, it provided a special dispensation or

act   of        grace   to   a    defined     class    of    heirs    and    legatees     who

gratuitously acquire family farms and some other closely-held

businesses under specified conditions and circumstances.                                 In a

further act of grace Congress added subsection (d)(3) to Code

§ 2032(A) (effective retroactively to estates of decedents dying

after December 31, 1976) when it adopted the Deficit Reduction Act

(DEFRA) in 1984.25           Labeled "Modification of Election and Agreement

to be Permitted," subsection (d)(3) requires the Secretary of the


      24
            I.R.C. § 2032A(d)(3).
           25
           Deficit Reduction Act of 1984, Pub. L. No. 98-369,
§ 1025(a), 98 Stat. 494 (1984).

                                               16
Treasury to promulgate procedures that would allow executors and

administrators a reasonable timeSQnot to exceed ninety daysSQto

bring flawed special use valuation elections into full compliance

if a timely election has been made and if it

           substantially complies with the regulations
           prescribed by the Secretary with respect to
           such election, butSQ

           (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 [.]26

As thus modified, the Code section itself, at least by strong

implication, requires that a Notice of Election and a Recapture

Agreement signed by at least one of the parties acquiring an

interest in the property must have been filed with the estate tax

return, and that a considerable amount of the required information

must have been included in or with those instruments.

     "Substantial compliance" is not a defined term in § 2032A;

indeed, defining that term with precision would be a tall order for

the legislative draftsmen.   We are, however, the beneficiaries of

some congressional guidance in the relevant legislative history

that accompanied DEFRA, reflecting the sense of Congress that any

permissible deficiencies in compliance with the requirements of a

valid election had to be minor:

           The conferees wish to reiterate that, as under
           the Senate amendment, perfection of notices of
           election and of [recapture] agreements to

     26
          I.R.C. § 2032(A)(d)(3).

                                    17
            current use valuation elections is to be
            permitted only in cases where the estate tax
            return,   as  filed,    evidences  substantial
            compliance with the requirements of the
            Treasury Regulations.     For example, merely
            checking the applicable box on the federal
            estate tax return that an election is being
            made is not sufficient action by the estate to
            secure the benefits of the current use
            valuation provision.       Both a notice of
            election and [a recapture] agreement that
            themselves evidence substantial compliance
            with the requirements of the Regulations must
            be included with the estate tax return, as
            filed, if the estate is to be permitted to
            perfect its election.27

That same conference report goes on to explain by example just how

minor the deficiencies must be to permit subsequent correction:

            Illustrations of the type of information that
            may be supplied after the initial filing of
            the notice of election are omitted Social
            Security numbers and addresses of qualified
            heirs and copies of written appraisals of the
            property to be specially valued . . . . To be
            eligible for perfection, the [recapture]
            agreement as originally filed must at a
            minimum be valid under state law and must
            include the signatures of all parties having a
            present interest or a remainder interest other
            than an interest having a relatively small
            value.   The right to perfect agreements is
            intended to be limited to cases where, for
            example, a parent of a minor remainderman,
            rather than a guardian ad litem as required
            under   State   law,  signs   the   agreement.
            Similarly, failure to designate an agent in
            the agreement as filed may be corrected under
            this provision.28

     The significance of the quoted language, expressing the intent

of Congress to allow correction only for such hypertechnical


      27
         H.R. Conf. Rep. No. 98-861, 98 Cong., 2d Sess. 1240-41
(1984). (emphasis added).
     28
           

(emphasis added).

                                  18
glitches as the signing of the Recapture Agreement for a minor by

a parent when a guardian ad litem was required, is discussed below

when we address the "common sense" approach that we advocated under

similar   circumstances   in   McAlpine   v.    Commissioner.29    More

significant to the present discussion, however, is the emphasized

portion of the foregoing quotation, explaining what is required if

a Recapture Agreement is to be susceptible of perfection under the

substantial compliance rubric:     (1) validity and enforceability

under state law, and (2) signatures of all parties with a present

or remainder interest other than those of relatively small value.

Implicit beyond cavil is the obvious requirement that the original,

timely filed estate tax return in which the election is made must

be accompanied by an instrumentSQany instrument, regardless of

labelSQthat constitutes an enforceable contract under state law,

executed by those successors in interest who must be bound.

     Demonstrating an admirable but unavailing bit of ingenuity,

counsel for the Estate would have us deem the agglomeration of

(1) a few designated provisions of the Will, (2) the incomplete

Notice of Election, and (3) his proffered interpretation of Texas

law, to be the legal equivalent of a Recapture Agreement sufficient

for purposes of substantial compliance.        We must, however, reject

out of hand that specious bit of legal legerdemain.         Neither in

form nor in substance, singly or in combination with the Will and

the Estate's (and the Tax Court's) version of the Texas law of

descent and distribution, can the instant Notice of Election be

     29
          

(5th Cir. 1992).

                                  19
stretched to constitute an "agreement . . . valid under state law

. . . ."    And if that were not enough, the Notice of Election,

which was filed with the 706, does not even bear the signatures of

"all parties having a present interest or remainder interest

. . ."SQa requirement for a Recapture Agreement to be eligible for

post hoc perfection.   Assuming, arguendo, that the absence of the

signature of the grandson who was in military service were excused,

there still remains the unexcused omission of the signature of

another of the five grandsons.

     Even if we could agree with the Tax Court's overly generous

characterization of the subject omissions as "technicalities," we

perceive them to be far more substantial than the "slightest

technicality" referred to by Senator Dixon of Illinois,30 which he

illustrated with two hypothetical examples:   One featured a mother

who signed a Recapture Agreement for her minor children without

first having been appointed their guardian by a court; the second

featured a Recapture Agreement that had been signed by the mother

of a newly born infant but had not been signed by a duly appointed

legal guardian for that infantSQwho also had an interest in the

propertySQfor the simple reason that the executors were unaware of

the birth of that child.     These were examples of defects that

Senator Dixon characterized as the kind of "simple technical flaws"

that should not destroy the election.31   Similar explanations and

examples of "technical" defects were provided by the staff of the

     30
          130 Cong. Rec. S8,700 (1984).
     31
          

Committee on Taxation.32

     Presupposed in the legislative history of § 2032A(d)(3) was

the timely filing of some agreement, binding under state law,

actually signed by or on behalf of all parties at interest (albeit

possibly by someone without technically sufficient credentials),

purporting to bind those parties personally to liability for

additional tax in the event of the occurrence of a disqualifying

event. In stark contrast, the only supporting document (other than

the Schedule N which was filed by the Estate with the 706) was the

Notice of Election, itself signed by only sixty percent in number

of the qualified heirs, lacking significantly in required (although

possibly curable) contents, but in no way implicating recapture and

in no way constituting a contract enforceable under state law.

     In addition to the legislative history and the plain wording

of the Code and the Regs., the applicable jurisprudence strongly

supports      the   Commissioner's    position   while   furnishing   no

justifiable comfort to the Estate. We find three federal appellate

decisions especially instructive.

     In the first of these, McDonald v. Commissioner,33 a widow's

state law disclaimers of farm land, one relating back to her

husband's death and another relating to property that would pass to

her children if she were to have predeceased her husband, made her


    32
       See Staff of Joint Comm. on Taxation, 98th Cong., 2d Sess.,
General Explanation of the Revenue Provisions of the Deficit
Reduction Act of 1984 1123-25. (Jt. Comm. Print 1984).
         33
          

(8th Cir. 1988), cert. denied sub nom.
Cornelius v. Commissioner, 

(1989).

                                     21
children's participation in the election necessary as a matter of

law.    But in the Notice of Election and the Recapture AgreementSQ

both filed       timely     with   the   Estate    Tax    ReturnSQthe      widow   was

erroneously identified as being the sole heir; and she alone signed

as such.        Thus, despite the timely filed and properly executed

estate tax return, and despite the accompaniment of an otherwise

complete and legally sufficient Notice of Election and a similarly

qualified Recapture Agreement, the election was flawed by the

omission of the names and signatures of the widow's children.

Under       circumstances     considerably     less      blatant    than   those   we

consider today, the attempt of the estate in McDonald to cure its

defective election under a claim of substantial compliance was

disallowed      by    the   Eighth   Circuit   which      held     that,   under   the

statutory language, signatures could not subsequently be added to

an agreement that did not already bind "all parties taking an

interest in the property."34             The McDonald court, relying on the

language of the statute as well as the above noted legislative

history, found no substantial compliance, as neither the name nor

the signature of anyone with an interest in the property, was

affixed.        The   court   concluded     that   "[t]he     omission     from    the

recapture agreement of the signatures of all persons with an

interest in the property is not the type of slight technicality

envisioned by Congress when the 1984 amendment was enacted."35                      We

are satisfied that the Eighth Circuit would have needed even less

       34
             

       35
             

                                          22
time and fewer words to reach that conclusion under the facts

before us today:     In McDonald, there was at least an otherwise

complete and timely filed Recapture Agreement that the court

nevertheless found to be ineligible for retroactive perfection

because none of the persons with an interest in the property had

signed it.     Here, no Recapture Agreement (or any combination of

instruments and legal principles that could, by any stretch, be

deemed    to   suffice   for   a   Recapture   Agreement)   was   filed

contemporaneously with the 706 in which the election was made.36

     The second special use valuation "substantial compliance" case

of recent vintage that we find instructive is our own McAlpine v.

Commissioner.37   The Estate urges us to apply the kind of "common

sense" flexibility here that we enunciated in McAlpine.38     Although

that "dog won't hunt" under the instant circumstances, which are so

distinguishable from those in McAlpine that they constitute a

material difference and are thus inapposite, McAlpine presents a

     36
         This is not mere speculation on our part: Shortly after
deciding McDonald, the Eight Circuit decided Foss v. United States,

(8th Cir. 1989) and considered a situation almost
identical to that before us: The estate tax return reflected a
special use valuation election but was filed without either a
recapture agreement or a notice of election. In denying the estate
the right to correct these deficiencies under the "substantial
compliance" provisions of I.R.C. § 2032A(d)(3), the Foss court
concluded that there was no eligibility for perfection when
"nothing was filed with the return containing the substance of the
recapture agreement or the principal beneficiary's consent to be
personally liable for the recapture tax." 

     37
          

(5th Cir. 1992).
     38
        See 

("We must give the statute a common sense
interpretation, with an eye towards protecting the family farm and
business as Congress intended.") (citing Estate of Thompson v.
Commissioner, 

, 1134 (4th Cir. 1989)).

                                   23
case of life imitating art, in the incarnation of one of the

hypothetical       illustrations        described     by     Senator      Dixon    in    the

legislative history of subsection (d)(3). The testator in McAlpine

bequeathed all of his interest in the eligible property to three

separate        trusts,   one     for     the      benefit     of    each     of    three

grandchildren, one of whom was a minor.                       The mother of those

grandchildren was the trustee, and in each trust she was vested

with   the      discretionary     power       to   distribute       both    income       and

principal.       In making a timely special use valuation election, the

return preparer dutifully attached a Recapture Agreement which was

binding under state law but was signed only by the beneficiaries'

mother     as     trustee.        The     Commissioner        asserted       the    legal

positionSQlater       proved      to     be     correctSQthat        the    two     major

beneficiaries and a court-appointed representative of the minor

beneficiary, not the mother as trustee, should have signed the

Recapture Agreement.         Within ninety days following notice of these

defects, an amended Recapture Agreement was filed, signed by the

two major trust beneficiaries and by the minor beneficiary's

motherSQnot as trustee this time but as the minor's duly appointed

guardian ad litem.

       In rejecting the Commissioner's continued disallowance of the

election after it was timely perfected, we factually and legally

distinguished the McAlpine situation from the facts considered in

prior jurisprudence          in   which    compliance        was    not    found    to    be

substantial because the timely filed Recapture Agreements had not

been signed by the right persons.                   In those earlier cases the


                                           24
courts    had    reasoned   that,   as    the   taxpayers   "did   not   have

reasonable, good faith arguments that the regulations did not

require what was omitted, their compliance with the Regs. was not

substantial and thus could not be perfected."39             In contrast, we

concluded that under the trust situation of McAlpine the law was

less than pellucid that the major beneficiaries and the legally

appointed representative of the minor beneficiarySQrather than the

trusteeSQwere the parties who were required to sign the Recapture

Agreement.      We emphasized that the Regs. mentioned "trustees" when

referring to persons with interests in the property who were

required to sign, but did not mention trust beneficiaries.                We

recognized the existence of a good faith argument under state law

that the signatures of beneficiaries were not required and that the

signature of the trustee alone would be sufficient. Even though we

held that the legal misunderstanding in McAlpine presented a

reasonable basis for permitting perfection under the substantial

compliance exception, we cautioned that we were also relying on the

absence of "evidence of fraud or dilatory or slipshod preparation

of the necessary documentation."40

     We clearly viewed the McAlpine facts as presenting a close

call, yet the facts we analyzed under the good faith or "common

sense" approach there were much more favorable to the taxpayer than

    39
       

v. United States, 

(7th Cir. 1990), McDonald v. Commissioner, 

(8th Cir.
1988), Estate of Doherty v. Commissioner, 

(1990) rev'd
by 

(10th Cir. 1992), and Estate of Strickland v.
Commissioner, 

(1989)).
     40
          

now before us:         The McAlpine Recapture Agreement was timely

filed as an attachment to the estate tax return; classic per se

fiduciary relationships were involved; a party with legal authority

over all qualified property executed the Recapture Agreement,

thereby both assuming personal liability and signing de facto for

the beneficial owners of the property; and a serious, good faith

legal disagreement existed as to the identity of the party or

parties who were required to sign the Recapture Agreement.                 When

those characteristics are compared to the facts of instant case,

the distinguishing differences are obvious.                Indeed, McAlpine's

"common sense" approach to statutory interpretation (not to factual

analysis) cuts against rather than in favor of a conclusion of

substantial compliance in the instant case.                 Furthermore, even

though there is not the first hint of fraud or intentional delay

here, the same cannot be said about "slipshod preparation of the

necessary documentation."          Far from substantial compliance, the

documentation supporting the election in the instant case was at

most    a   lick   and   a   promise;   and   even   the   "promise"   remained

unfulfilled until after the Estate's hand was called by the IRS's

deficiency notice disallowing the election.

       The third opinion we find persuasive was rendered by our

colleagues on the Seventh Circuit, sitting en banc.               It provides

perhaps the best analysis of the instant problem under facts

closely analogous to those we are now considering.             In Prussner v.

United States,41 post hoc perfection of a defective special use

       41
            

(7th Cir. 1990) (en banc).

                                        26
valuation election was sought under the "substantial compliance"

provisions of § 2032A(d)(3). A duly executed estate tax return had

been timely filed; it was accompanied by a Notice of Election but,

as here, was devoid of a Recapture Agreement.               Not unlike the

statement affixed to the Hudgins' 706 by Mr. Keith, a cover letter

accompanying the estate tax return in Prussner advised that a

Recapture Agreement would be submitted subsequently when signed by

the geographically scattered heirs.         Unlike the "promise" in the

case sub judice, the Prussner promise was fulfilled a mere four

months later by the supplemental filing of a fully executed,

legally binding Recapture Agreement before the estate tax return

was ever audited.     Construing the facts liberally in favor of the

taxpayer, the trial court treated the cover letter as a Recapture

Agreement, a holding reversed on appeal when the en banc Seventh

Circuit determined that the estate was ineligible for post-filing

perfection, irrespective of the cover letter.            The Prussner court

treated the date of filing the timely estate tax return as the

"deadline" for filing a Schedule N, a Notice of Election, and a

Recapture Agreement, observing that courts have no authority to

vary    deadlines   fixed   by   Congress   or   by   agencies   exercising

delegated     legislative   powers.42     The    court   cautioned   against

expansive, loose treatment of substantial compliance in the context

of § 2032A.     After noting that little comfort or guidance could be

gained from prior Tax Court decisions on the subject of substantial

compliance, the Seventh Circuit admonished that:

       42
            

                                     27
            The common law doctrine of substantial
            compliance should not be allowed to spread
            beyond cases in which the taxpayer had a good
            excuse (though not a legal justification) for
            failing to comply with either an unimportant
            requirement or one unclearly or confusingly
            stated in the regulations or the statute. So
            conceived the doctrine is broader in scope,
            but less forgiving, than section 2032A(d)(3).
            It is not limited to the specific requirements
            made curable by subsection (B)(i) and (B)(ii),
            but there must be a showing that the
            requirement is either unimportant or unclearly
            or confusingly stated; no such showing is
            required by those subsections . . . .

            In this case a regulation the validity of
            which is not challenged unequivocally required
            the filing of a recapture agreement with the
            return. The taxpayer's lawyer made no effort
            to comply, and given his alternative remedies
            SQmost simply, a request for an extension of
            time in which to file the returnSQhe had no
            excuse for the failure . . . . The Internal
            Revenue Service cannot allow qualified-use
            valuation until a recapture agreement is filed
            because . . . the statute makes the filing of
            such an agreement a condition of a valid
            election. Until it is filed, the return is in
            limbo. Failure to comply with the regulations
            may   also    create   confusion   about   the
            irrevocability of the election.      "Such an
            election, once made, shall be irrevocable."
            26 U.S.C. § 2032A(d)(1). When is it made, if
            no recapture agreement is filed?43

     We discern an obvious lesson from McDonald, Prussner and

McAlpine.    During the decade since subsection (d)(3) was added to

§ 2032A by DEFRA, in not one case in which no Recapture Agreement

(or other contractually sufficient substitute, personally binding

the qualified heirs and enforceable under state law) had been

submitted    contemporaneously    with    the    estate   tax   return   has

substantial   compliance   been   found    and    post-filing    perfection

     43
          

(emphasis added).

                                   28
permitted.      At least no such case has been cited to us by the

parties and we have found none independently. Consistent with that

history, we hold today that a special use valuation election can

never be in substantial compliance with the requirements of § 2032A

if the estate tax return in which the election is made is not

accompanied by a Recapture Agreement or some reasonable facsimile

thereof, signed by the holders of all             interests (other than de

minimis) in the qualified assets, and personally binding the

interest holders under state law to be liable for tax deficiencies

in the event of disqualifying use or disposition of the property

during the statutory period.

C.     The Tax Court Opinion

       The Tax Court, in its "speaking opinion" from the bench, may

well have had in mind our admonition in McAlpine that "[w]e must

give the statute a common sense interpretation, with an eye towards

protecting the family farm and business as Congress intended."44

If so, the court read that admonition far too expansively.                   For

whether we here review the Tax Court's handling of the substantial

compliance issue de novo as an issue of law or for clear error as

a    question   of   fact,   we   are   "left   with   a   firm   and   definite

conviction that a mistake has been committed."45              The Tax Court's

approach may best be analogized to a bankruptcy court's fashioning


       44
         

(citing Estate of Thompson v.
Commissioner, 

, 1134 (4th Cir. 1989)).
      45
        Anderson v. City of Bessemer City, N.C., 

, 573
(1985) (quoting United States v. United States Gypsum Co, 

, 395 (1948)).

                                        29
unauthorized remedies under the banner of equity.46 Confronted here

with a McAlpine-proscribed "slipshod preparation of the necessary

documentation," the Tax Court faced what we have now demonstrated

to have been an impossible task if it were to find substantial

compliance despite the total absence of a Recapture Agreement.

For, as recognized by consistent jurisprudence, failure timely to

file        a   Recapture     Agreement     bars    a    finding     of    substantial

compliance. That bar looms even more impenetrable here in light of

the Estate's additional omissions of such proportion as appraisals

of   the        property    and    substantiation       of   the   method   used   for

determining special value based on qualified use.47

       Neither can the Tax Court's holding be sustained by its

reliance on those portions of the Will to which that court adverts.

The Tax Court's conclusion that particular Will provisions "provide

adequate assurances" to the Commissioner is simply wrong.                     Indeed,

they provide the Commissioner no legal assurance whatsoever.                        In

the total absence of a Recapture Agreement and in the face of an

otherwise substantially defective election, we can conceive of no

way for the Will to afford the Commissioner the ability to recover

from the heirs personally in the event of a breach.                           Equally

unavailing         is   the       Tax   Court's    expressed       but    unsupported,

       46
        See, e.g., Matter of Oxford Management, Inc., 

,
1334 (5th Cir. 1993) ("The `statute does not authorize the
bankruptcy courts to create substantive rights that are otherwise
unavailable under applicable law, or constitute a roving commission
to do equity.'") (quoting United States v. Sutton, 

,
1308 (5th Cir. 1986)).
        47
                See Estate of Strickland v. Commissioner, 

, 28
(1989).

                                            30
conclusional "belief" that:

      Texas law would recognize the testator's intent in that
      regard [non-alienation and affirmative ranch use for ten
      years] and hold and bind the beneficiaries to those
      provisions . . . and on the totality of the evidence in
      this case, establishes effectively a constructive
      agreement and legally binding commitment among the
      beneficiaries that they will comply with the requirements
      of the special-use valuation statutes . . . .

We are not convinced; and neither the Estate nor the Tax Court has

cited us to Texas authority in support of such a proposition.

                                         III

                                     CONCLUSION

      We    follow    constant       jurisprudence,   as        reflected   by   the

decisions of every court that has directly addressed the issue, in

holding that there can be no substantial compliance with the

requirements     of     Code     §     2032A    without,        inter   alia,    the

contemporaneous filing of a Recapture Agreement or its equivalent.48

Thus we hold that the Tax Court reversibly erred in finding that

the   Estate's   special       use    value    election    was     in   substantial

compliance with       the requirements of the Code and the Regs. and

allowing perfection of the flawed election.                We therefore reverse

the Tax Court and remand this case to it for the limited purpose of

entering a judgment in favor of the Commissioner, rejecting the

Estate's     petition    for     redetermination,         and    reinstating     the

deficiency assessed by the Commissioner, modified to any extent


       48
          We do not imply that there must be a separate, free-
standing contract, labeled "Recapture Agreement"; indeed, we can
envision inter alia a single instrument serving as both the Notice
of Election and the Recapture Agreement, as long as the substantive
contents and legal requirements for both are present.

                                         31
necessary   to   reflect   precisely   the   correct   values   and   the

appropriate estate taxes and interest due.

REVERSED and REMANDED.




                                  32