Widowed spouse gets 120 more days to make a missed QTIP election after the estate's accountant failed to advise it

Plain-English summary

A married person set up a revocable trust and left their whole estate to it. When they died, the trust became irrevocable and was designed to pay all its income to the surviving spouse for life, the classic setup for "qualified terminable interest property" (QTIP). Property that qualifies as QTIP can pass to the surviving spouse free of estate tax under the marital deduction, but only if the executor affirmatively elects QTIP treatment on the estate tax return (Form 706). Here the estate filed a timely Form 706, but the accountant who prepared it never listed the trust as QTIP property on Schedule M and never told the surviving spouse (who was the executor) that the election was needed, so the election was missed. The IRS granted relief under Treasury Regulation section 301.9100-3, which lets the agency extend the deadline for a missed election when the taxpayer acted reasonably and in good faith and the government is not prejudiced. Because the executor reasonably relied on a tax professional who failed to make or advise the election, the IRS gave the estate 120 days from the date of the letter to make the QTIP election on a supplemental Form 706. The practical effect is that the surviving spouse can still claim the marital deduction and defer estate tax that would otherwise have been due.

Ruling snapshot

• Question: Should the estate get an extension of time under Treas. Reg. § 301.9100-3 to make a QTIP election under section 2056(b)(7) that its accountant failed to make on the original Form 706?
• Outcome: Approved (120-day extension granted; the executor reasonably relied on a tax professional)
• Key authorities: IRC § 2056(b)(7); Treas. Reg. §§ 301.9100-1, 301.9100-3, 20.2056(b)-7

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202244007 Third Party Communication: None
Release Date: 11/4/2022 Date of Communication: Not Applicable
Index Number: 2056.07-00, 9100.00-00
Person To Contact:
---------------------------------- ---------------------, ID No. -----------------
------------------------------------ Telephone Number:
-------------------------- --------------------
---------------------------------- Refer Reply To:
----------------------------- CC:PSI:B4
PLR-107725-22
----------------------------------------- Date:
August 10, 2022

Legend

Decedent = -----------------------
-------------------------
Spouse = ---------------------
-------------------------
Date 1 = --------------------------
Date 2 = -----------------

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

This letter responds to your personal representative's letter of April 1, 2022, and
subsequent correspondence, requesting an extension of time pursuant to § 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 as follows.

On Date 1, Decedent established a revocable trust (Trust). Decedent died on Date 2,
survived by Spouse. Trust became irrevocable upon Decedent’s death. Under the
terms of Decedent’s Will, Decedent’s entire estate passed to Trust.

Article First, Section 1.6 of Trust provides that if Spouse survives Decedent, then upon
Decedent’s death, the trustee shall distribute the trust estate pursuant to the Marital
Trust Provisions found in Article First, Section 1.7 of Trust. Section 1.7(a) provides that
the trustee shall pay all of the net income of the Trust at least quarter-annually to
Spouse. Section 1.7(a) provides further that Spouse may instruct the trustee of Trust to
convert any unproductive Trust property to productive property within a reasonable time.
Section 1.7(h) states Decedent’s intention that Trust qualify for the marital deduction as
qualified terminable interest property and directs that any provisions of Trust that may
PLR-107725-22 2

appear to conflict with or defeat this intention be construed or applied so as to
accomplish this intention.
Decedent's estate filed a timely Form 706, United States Estate (and Generation
Skipping-Transfer Tax) Return. Although Trust was reported on the Form 706, Trust
was not listed as QTIP property on Schedule M. Spouse, the executor of Decedent's
estate, engaged and relied on Accountant to prepare the Form 706. Accountant did not
advise Spouse of the necessity to make the QTIP election at the time the Form 706 was
filed. Thus, Decedent's estate failed to make a valid QTIP for Trust. You have
requested an extension of time under § 301.9100-3 to make a QTIP election
under § 2056(b)(7) to treat Trust property as QTIP property.

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) defined 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)(ii) provides that the surviving spouse has a qualifying income
interest for life if: (I) the surviving spouse is entitled to all the income from the property,
payable annually or at more frequent intervals, or has a usufruct interest for life in the
property; and (II) no person has a power to appoint any part of the property to any
person other than the surviving spouse.

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
PLR-107725-22 3

imposed by § 2001. 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 six 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).

Requests for 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.

In the present case, Trust was created for the benefit of Spouse. The Form 706 filed for
Decedent’s estate, however, did not include a QTIP election for Trust property. Based
on the facts submitted and 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 under § 2056(b)(7) with respect to Trust. This election should be made on a
supplemental Form 706 filed with the Internal Revenue Service at the following address:
Department of the Treasury, Internal Revenue Service, Stop 824G, 7940 Kentucky
Drive, Florence, KY 41042-2915. A copy of this letter should be attached to the
supplemental Form 706.

Except as expressly provided herein, we neither express nor imply any opinion
concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

The ruling contained in this letter is 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 ruling, it is subject to verification on examination.
PLR-107725-22 4

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

In accordance with the Power of Attorney on file with this office, we have sent a copy
of this letter to your authorized representative.

                                  Sincerely,

                                  Associate Chief Counsel
                                  Passthroughs & Special Industries

                                  Melissa C. Liquerman
                              By: ____________________________
                                  Melissa C. Liquerman
                                  Senior Counsel, Branch 4
                                  Office of the Associate Chief Counsel
                                  (Passthroughs & Special Industries)

Enclosure
Copy for § 6110 purposes

cc: