Estate gets more time to make a missed QTIP marital-deduction election after the preparer put the property on the wrong schedule

Plain-English summary

When a person dies, property left in trust for a surviving spouse can qualify for the unlimited estate-tax marital deduction only if the estate makes a "QTIP" election under section 2056(b)(7) on the estate tax return (Form 706). Here the attorney who prepared the return mistakenly listed the marital-trust property in the "all other property" part of Schedule M instead of the QTIP section, so no election was made. The estate asked for more time under Treasury Regulation §§ 301.9100-1 and 301.9100-3. Because the estate reasonably relied on a tax professional who failed to make the election, the IRS found it acted reasonably and in good faith and that relief would not prejudice the government. It granted 120 days from the date of the letter to make the QTIP election on a supplemental Form 706.

Ruling snapshot

• Question: May an estate get extra time under § 301.9100-3 to make a QTIP marital-deduction election its preparer failed to make?
• Outcome: Approved (120-day extension granted).
• Key authorities: IRC § 2056(b)(7); Treas. Reg. § 20.2056(b)-7; Treas. Reg. §§ 301.9100-1 and 301.9100-3 (esp. § 301.9100-3(b)(1)(v)).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202223010 Third Party Communication: None
Release Date: 6/10/2022 Date of Communication: Not Applicable
Index Number: 2056.07-00, 9100.00-00
Person To Contact:
---------------------------------------------------------- -------------------------- ID No. -----------------
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---------------------------- Telephone Number:
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Refer Reply To:
CC:PSI:B04
-------------------------------------------------- PLR-119271-21
Date:
March 15, 2022

Legend

Decedent ------------------------------------------------------------------------
Spouse --------------------------------------------------------------------
Trust ----------------------------------------
Date 1 --------------------------------------------
Date 2 -------------------------------------
Date 3 --------------------------------------------
Date 4 ---------------------------------------
Attorney -------------------------------------

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

  This letter responds to your authorized representative’s letter dated

September 8, 2021, requesting an extension of time under § 301.9100-1 and
§ 301.9100-3 of the Procedure and Administration Regulations to make a qualified
terminable interest property (QTIP) election under § 2056(b)(7) of the Internal Revenue
Code.

    The facts and representations submitted are summarized as follows:

 On Date 1, Decedent executed a revocable trust, Trust. Trust was most recently

amended on Date 2.

    Paragraph A.1. of Article VI of Trust provides, in relevant part, that the “pecuniary

amount” is to mean property having a value equal to the largest amount that if
distributed pursuant to this paragraph would result in the least possible federal and state
estate taxes being payable by reason of Decedent’s death. The trustee is to allocate to
Family Trust an amount equal to the lesser of the pecuniary amount or Decedent’s
unutilized GST exemption.
PLR-119271-21 2

    Paragraph A.3 of Article VI provides, in relevant part, that after providing for the

allocations required by the foregoing provisions of this section, the trustee is to allocate
to the Marital Trust an amount equal to Decedent’s unutilized GST exemption reduced
by the amount of property allocated pursuant to the preceding paragraphs of this
section, to be administered and disposed of as directed in Article VIII. Provided, that
the allocation of property to the Marital Trust is to be contingent on the election by the
trustee or personal representative to qualify such property for the federal marital
deduction.

   Paragraph A.4 of Article VI provides, in relevant part, that after making or fully

providing for the allocations required by the foregoing provisions of this section, the
trustee is to allocate the balance of the trust property to be disposed of pursuant to the
provisions of this article to another separate Marital Trust, provided, however, that the
allocation of property to the Marital Trust is to be contingent on the election by the
trustee or the personal representative to qualify such property for the federal marital
deduction.

   The trust created by paragraph A.3 is referred to as the “GST Marital Trust” and

the trust created by paragraph A.4 is referred to as the “Non-GST Marital Trust.”

   Paragraph A.1 of Article VIII provides, in relevant part, that upon Decedent’s

death, the trustee is to pay to Spouse, Decedent’s spouse, all of the trust, in annual or
more frequent installments.

   Paragraph A.2 of Article VIII provides, in relevant part, that the independent

trustee is to pay to Spouse such amount or amounts of the principal of the trust for any
purpose, even to the extent of all or none, at any time and from time to time, as the
independent trustee determines in his discretion.

    Paragraph B of Article VIII provides, in relevant part, that upon Spouse’s death,

the trustee is to dispose of such amount of the trust property as Spouse may appoint to
or in favor of any one or more persons or entities, other than himself, his creditors, his
estate or the creditors of his estate, but such power may not be exercised to discharge
or satisfy Spouse’s legal obligations.

   Decedent died on Date 3, survived by Spouse. Spouse, in his capacity as

personal representative of Decedent’s estate, hired Attorney to prepare Decedent's
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. On
Date 4, the Form 706 was timely filed (with extensions) on behalf of the estate.
Attorney mistakenly listed the property comprising the GST Marital Trust and the
Non-GST Marital Trust in the “all other property” section of Schedule M, instead of the
“QTIP property” section of Schedule M. Thus, no QTIP election was made with respect
to the GST Marital Trust or the Non-GST Marital Trust.
PLR-119271-21 3

  You have requested an extension of time to make the QTIP election under

§ 2056(b)(7) with respect to the GST Marital Trust and the Non-GST Marital Trust.

LAW AND ANALYSIS

 Section 2001(a) imposes a tax on the transfer of the taxable estate of every

decedent who is a citizen or resident of the United States.

   Section 2056(a) provides that, for purposes of the tax imposed by § 2001, the

value of the taxable estate shall, except as limited by § 2056(b), be determined by
deducting from the value of the gross estate an amount equal to the value of any
interest in property which passes or has passed from the decedent to the surviving
spouse, but only to the extent that such interest is included in determining the value of
the gross estate.

   Section 2056(b)(7)(A) provides that, in the case of qualified terminable interest

property, for purposes of § 2056(a), such property shall be treated as passing to the
surviving spouse, and for purposes of § 2056(b)(1)(A), no part of such property shall be
treated as passing to any person other than the surviving spouse.

   Section 2056(b)(7)(B)(i) defines the term "qualified terminable interest property"

as property: (I) which passes from the decedent; (II) in which the surviving spouse has
a qualifying income interest for life as defined in § 2056(b)(7)(B)(ii); and (III) to which an
election under § 2056(b)(7) applies.

  Section 2056(b)(7)(B)(v) provides that an election under § 2056(b)(7) with

respect to any property shall be made by the executor on the return of tax imposed by
§ 2001. Such an election, once made, shall be irrevocable.

    Section 20.2056(b)-7(b)(4)(i) of the Estate Tax Regulations provides that, in

general, the election referred to in § 2056(b)(7)(B)(i)(III) and (v) is made on the return of
tax imposed by § 2001 (or § 2101). For purposes of this paragraph, the term "return of
tax imposed by § 2001" means the last estate tax return filed by the executor on or
before the due date of the return, including extensions or, if a timely return is not filed,
the first estate tax return filed by the executor after the due date.

    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 Internal Revenue
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 date is prescribed by a regulation (and
not expressly provided by statute).
PLR-119271-21 4

   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, the executor of
Decedent’s estate is granted an extension of time of 120 days from the date of this letter
to make a QTIP election with respect to the three Marital Trusts. The election should be
made on a supplemental Form 706 with the Internal Revenue Service Center at the
following address: Internal Revenue Service Center, Attn: E&G, Stop 824G, 7940
Kentucky Drive, Florence, KY 41042-2915. A copy of this letter should be attached to
the supplemental Form 706.

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your authorized representatives.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

  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.

   The rulings in this letter pertaining to the federal estate and/or

generation-skipping transfer tax apply only to the extent that the relevant sections of the
Internal Revenue Code are in effect during the period at issue.
PLR-119271-21 5

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 and Special Industries




                                         Melissa C. Liquerman
                                        _____________________________
                                By:     [Melissa C. Liquerman]
                                        Chief, Branch 4
                                        Office of the Associate Chief Counsel
                                        (Passthroughs and Special Industries)

     Enclosure:
           Copy for § 6110 purposes

cc: -------------------------------

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