The Downer family has owned Downer’s Dairy Farm for generations. The farm totals approximately 800 acres of land. John and his oldest son, Jack, managed the farm.

John, a widower, died in 2013. Realizing that not all of his children were interested in the family business, John bequeathed in his will 200 acres of land each to his four children, including Jack. Jack would like to continue in the farming business. The other siblings would prefer to sell their land. While Jack is a potential buyer for the others’ 600 acres, his financial ability to purchase the land is questionable. Moreover, local developers would pay significantly more than Jack can afford.

John’s estate has been valued at $7 million, including $6 million for the land at its best use value. However, as farmland, the property is worth $4 million, or $1 million per 200-acre parcel. Alison Townsend, the executor of John’s estate, has approached you about the valuation of the estate for Federal estate tax purposes. Specifically, Alison wants to know about the Federal special use valuation rules and whether they might help reduce the transfer tax on John’s estate. Summarize your findings in a memo to the tax research.