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I. Introduction
"The hardest thing in the world to understand is the income tax."1 Albert Einstein spoke these words. The complexities of tax preparation and reporting have certainly not diminished over the years. One cause for the complexity of the federal tax code is the countless number of tax elections (elections) offered to taxpayers.2 Elections require taxpayers to choose from two or more possible tax treatments for a single taxable event3 and are usually adopted by Congress in an attempt to provide relief and equity through increased flexibility.4 The ability to elect an alternate valuation date for estate property, for example, was first created in 1935 to address a nationwide decline in property values caused by the Great Depression.5 Prior to 1935, executors were required to use a decedent's date of death in assessing property values for estate tax purposes.6 During the Depression, property values declined so quickly that for many estates by the time the estate tax was paid the tax itself exceeded the value of the estate property.7 The addition of an alternate valuation date election improved the equity in the tax code by providing executors flexibility when determining gross estate values.8
The benefits proffered by elections have not been absolute. Early in the history of the Code, the Service began successfully arguing that taxpayers should be bound to their initial choices between alternative tax treatments, even if the original election did not provide the greatest tax benefit, and despite the fact that the Code and Treasury regulations did not bind taxpayers to the original election. The courts quickly coined the terms "doctrine of election" and "binding election rule" when referring to this new theory that was serving as precedent.9 In a 2002 Technical Advice Memoranda, the Service provided a succinct summary of the doctrine of election:
The doctrine of election, as it applies to Federal tax law, consists of two elements: (i) a free choice between two or more alternatives, and (ii) an overt act by the taxpayer communicating the choice to the Commissioner; i.e., a manifestation of choice. A taxpayer who makes such an election may not, without the consent of the Commissioner, retroactively revoke or amend it merely because another alternative now appears to be more advantageous (citations omitted).10
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