Estate of Golda E. Rixon Kokernot, Deceased, Mary Ann K. Lacy, Executrix - Page 3

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          value of the Ranch as $2,696,536.  Decedent's estate’s tax return           
          included a Schedule A-1 "Section 2032A Valuation," on which                 
          Executrix made a protective election pursuant to section                    
          20.2032A-8(b), Estate Tax Regs.2  The estate tax return was                 
          subsequently selected for audit.  The principal issue on audit              
          centered on the fair market value of the Ranch.  Unable to                  
          resolve the fair market value issue at the audit level,                     
          respondent issued a notice of deficiency to Executrix on June 9,            
          1994.  Respondent's notice makes no mention of Executrix's                  
          protective election under section 2032A and the regulations                 
          thereunder.  Nor does the petition filed with this Court by the             
               The case was set for the trial session in Washington, D.C.,            
          commencing on June 19, 1995.  At the suggestion of the Court, the           
          parties engaged in negotiations prior to the start of this                  
          session in an attempt to resolve the fair market value of the               
          Ranch.  During these negotiations Executrix never mentioned                 

          2 Enacted by the Tax Reform Act of 1976, Pub. L. 94-455,                    
          sec. 2003, 90 Stat. 1856, primarily to encourage the continued              
          operation of family farms, sec. 2032A permits qualified real                
          property to be valued for estate tax purposes by reference to its           
          use in the farming activity, rather than at its value based on              
          its highest and best use.  Where it is not certain that property            
          meets the requirements for special use valuation, an estate may             
          under sec. 20.2032A-8(b), Estate Tax Regs., make a protective               
          election to specially value qualified real property, contingent             
          on the property values as finally determined meeting the                    
          requirements of sec. 2032A.                                                 

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