Spouse received late GST exemption allocation relief

Plain-English summary

A decedent created an irrevocable trust for children and their descendants, and the spouses elected to split the original gift. The gift-tax returns failed to allocate either spouse's generation-skipping transfer exemption to the trust. After the decedent's death, an attorney discovered the omission, and the surviving spouse had enough exemption available for the year of the transfer. The IRS found the Section 301.9100-3 requirements satisfied and granted the spouse 120 days to allocate GST exemption on a supplemental Form 709. The allocation would take effect as of the original transfer date using the value determined for federal gift-tax purposes.

Ruling snapshot

• Question: Could the surviving spouse make a late allocation of GST exemption to the earlier gift-split transfer to the trust?
• Outcome: Approved, with 120 days to file a supplemental Form 709.
• Key authorities: IRC §§ 2513, 2631, and 2642(g); Treas. Reg. § 301.9100-3; Notice 2001-50.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201815012 Third Party Communication: None
Release Date: 4/13/2018 Date of Communication: Not Applicable
Index Number: 2642.00-00, 9100.00-00
Person To Contact:
------------------- ------------------------------, ID No. ------------
--------------------------------- ---------
------------------------------ Telephone Number:
----------------------
In Re: ----------------------------------- Refer Reply To:
CC:PSI:B04
PLR-134456-17
Date:
November 14, 2017

Legend

Decedent = --------------------------------------------------------
Spouse = --------------------------------------------------
Trust = ----------------------------------------------------------
Trustee = -------------------------
Executor = -------------------------------------------------
CPA = -----------------------------
Attorney = -----------------------
Date 1 = ------------------
Date 2 = ----------------------------
Date 3 = -------------------
Year 1 = -------
Year 2 = -------

Dear ------------------:

This responds to your personal representative’s letter of May 16, 2017, requesting an
extension of time under § 301.9100 of the Procedure and Administration Regulations
and § 2642(g) of the Internal Revenue Code to allocate generation-skipping transfer
(GST) exemption to a trust.

Facts

The facts and representations submitted are summarized as follows: Decedent
established Trust, an irrevocable trust, on Date 1, in Year 1. Trust was created and
funded for the benefit of Decedents’s children and their descendants. Date 1 is prior to
December 31, 2000. Decedent died on Date 2, survived by spouse, Spouse, and his
children.

PLR-134456-17 2

Accountant prepared the Forms 709 United States Gift (and Generation-Skipping
Transfer) Tax Return for Year 1 reporting the transfer to Trust. Decedent and Spouse
elected to gift split on the Forms 709. However, Decedent failed to allocate any of their
GST exemption to the Year 1 transfer to Trust. The error was discovered in Year 2
when Attorney discovered that no GST exemption had been allocated to the Year 1
transfer to Trust on Decedent’s Year 1 Form 709. Spouse has sufficient GST
exemption in Year 1 to allocate to the transfer to Trust.

Spouse requests an extension of time under § 2642(g)(1) and § 301.9100-3 to allocate
Spouse’s GST exemption to the Year 1 transfer to Trust.

Law and Analysis

Section 2513(a)(1), provides that a gift made by one spouse to any person other than
his spouse shall be considered as made one-half by him and one-half by his spouse,
but only if at the time of the gift each spouse is a citizen or resident of the United States.
Section 2513(a)(1) only applies if both spouses have signified their consent to the
application of this section in the case of all such gifts made during the calendar year by
either while married to the other.

Section 2601 imposes a tax on every generation-skipping transfer. A generation-
skipping transfer is defined under § 2611(a) as (1) a taxable distribution, (2) a taxable
termination, and (3) a direct skip.

Section 2631(a), as in effect in Year 1, provided that, for purposes of determining the
GST tax, every individual shall be allowed a GST exemption amount of $1 million which
may be allocated by such individual (or his executor) to any property with respect to
which such individual is the transferor. Section 2631(b) provides that any allocation
under § 2631(a), once made, shall be irrevocable.

Section 26.2632-1(b)(4)(i) of the Generation-Skipping Transfer Tax Regulations
provides that an allocation of GST exemption to property transferred during the
transferor’s lifetime, other than in a direct skip, is made on Form 709.

Section 2642(b)(1) provides that, except as provided in § 2642(f), if the allocation of the
GST exemption to any transfers of property is made on a gift tax return filed on or
before the date prescribed by § 6075(b) for such transfer, the value of such property for
purposes of § 2642(a) shall be its value as finally determined for purposes of chapter 12
(within the meaning of § 2001(f)(2)).

Section 2642(g)(1)(A) provides that the Secretary shall by regulation prescribe such
circumstances and procedures under which extensions of time will be granted to make
an allocation of GST exemption described in § 2642(b)(1) or (2), and an election under

PLR-134456-17 3

§ 2632(b)(3) or (c)(5). Such regulations shall include procedures for requesting
comparable relief with respect to transfers made before the date of the enactment of
this paragraph.

Section 2642(g)(1)(B) provides that in determining whether to grant relief under this
paragraph, the Secretary shall take into account all relevant circumstances, including
evidence of intent contained in the trust instrument or instrument of transfer and such
other factors as the Secretary deems relevant. For purposes of determining whether to
grant relief under this paragraph, the time for making the allocation (or election) shall be
treated as if not expressly prescribed by statute.

Notice 2001-50, 2001-2 C.B. 189, provides that, under § 2642(g)(1)(B), the time for
allocating the GST exemption to lifetime transfers is to be treated as if not expressly
prescribed by statute and taxpayers may seek an extension of time to make an
allocation described in § 2642(b)(1) or (b)(2) under the provisions of § 301.9100-3.

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3
to make a regulatory election, or a statutory election (but no more than 6 months except
in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles
E, G, H, and I.

Section 301.9100-3 provides the standards used to determine whether to grant an
extension of time to make an election whose due date is prescribed by a regulation (and
not expressly provided by statute). In accordance with § 2642(g)(1)(B) and
Notice 2001-50, taxpayers may seek an extension of time to make an allocation
described in § 2642(b)(1) or (b)(2) or an election described in § 2632(b)(3) or (c)(5)
under the provisions of § 301.9100-3.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides the
evidence to establish to the satisfaction of the Commissioner that the taxpayer acted
reasonably and in good faith, and that granting relief will not prejudice the interests of
the government.

Section 301.9100-3(b)(1)(v) provides that a taxpayer is deemed to have acted
reasonably and in good faith if the taxpayer reasonably relied on a qualified tax
professional, including a tax professional employed by the taxpayer, and the tax
professional failed to make, or advise the taxpayer to make, the election.

Based on the facts submitted and the representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Therefore, Spouse is granted an
extension of time of 120 days from the date of this letter to allocate Spouse’s available
GST exemption to the Year 1 transfer to Trust. The allocation will be effective as of the
respective date of the transfer to Trust and the value of the transfer to Trust as

PLR-134456-17 4

determined for federal gift tax purposes will be used in determining the amount of
Spouse’s GST exemption to be allocated to Trust.

This allocation should be made on a supplemental Form709 and filed with the Cincinnati
Service Center at the following address: Internal Revenue Service, Cincinnati Service
Center – Stop 82, Cincinnati, OH 45999. A copy of this letter should be attached to the
supplemental Forms 709.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

Except as specifically ruled herein, we express or imply no opinion on the federal tax
consequences of the transaction under the cited provisions or under any other
provisions of the Code.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

                                 Sincerely,

                                  Associate Chief Counsel
                                 (Passthroughs & Special Industries)



                                      Lorraine E. Gardner
                          By:     ________________________
                                  Lorraine E. Gardner
                                  Senior Counsel, Branch 4
                                  Office of the Associate Chief Counsel
                                  (Passthroughs and Special Industries)

Enclosures
Copy for section 6110 purposes
Copy of this letter

cc: