Estate receives more time to allocate GST exemption to a trust

Plain-English summary

A decedent and spouse created separate irrevocable trusts and made gifts to them in the same year. Their attorney drafted the trusts but did not adequately advise them to file gift and generation-skipping transfer tax returns for the transfers. After the decedent died, the omission was discovered while information was being gathered for the estate tax return. The estate asked for more time to allocate the decedent’s generation-skipping transfer tax exemption to the decedent’s trust. The IRS granted 120 days to make the allocation on Form 709, effective as of the original transfer date and using the transfer’s value for federal gift tax purposes.

Ruling snapshot

• Question: Could the estate receive additional time to allocate the decedent’s GST exemption to an irrevocable trust?
• Outcome: approved
• Key authorities: IRC §§ 2631, 2632, 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: 202247007                                              Third Party Communication: None
Release Date: 11/25/2022                                       Date of Communication: Not Applicable
Index Number: 9100.00-00, 2632.00-00,
              2642.00-00                                       Person To Contact:
                                                                -------------------------- ID No. -----------------
------------------------------------------------------------   -----------------------------------------------------
--------------------                                           Telephone Number:
-------------------------------------------------              --------------------
------------------------------------------                     Refer Reply To:
---------------------------------------                        CC:PSI:B04
---------------------------                                    PLR-106343-22
                                                                Date:
In Re: ----------------------------------------                September 1, 2022

Legend

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

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

      This letter responds to your authorized representative’s letter dated
March 17, 2022, and subsequent correspondence, requesting an extension of time
under § 2642(g) of the Internal Revenue Code (Code) and § 301.9100-3 of the
Procedure and Administration Regulations to allocate Decedent’s generation-skipping
transfer (GST) exemption to trusts.

       The facts and representations submitted are summarized as follows:

    Decedent established Trust 1, an irrevocable trust for the benefit of his spouse,
Spouse, and their descendants on Date 1 (in Year 1). On Date 2 (in Year 1), Decedent
made a gift of cash and marketable securities to Trust 1.

PLR-106343-22                                2

      Spouse established Trust 2, an irrevocable trust for the benefit of her
descendants on Date 1. On Date 3 (in Year 1), Spouse made a gift of cash, marketable
securities, and real estate with an estimated value of $a to Trust 2.

       Decedent and Spouse (collectively, the Taxpayers) hired Attorney to advise them
with regard to the gifts made during Year 1. Attorney drafted the Trust 1 and Trust 2
documents. However, Attorney failed to adequately advise Taxpayers of their need to
file Forms 709, United States Gift (and Generation-Skipping Transfer) Tax Returns, for
the transfers made during Year 1.

     Decedent died on Date 4, in Year 2. Spouse was appointed as the personal
representative for Decedent’s estate. Spouse retained Attorney to assist with the
administration of the estate. While preparing to gather information to prepare
Decedent’s Form 706, United States Estate (and Generation-Skipping Transfer) Tax
Return, it was discovered that neither Decedent nor Spouse filed Forms 709 for their
Year 1 transfers nor made allocations of GST exemption to their Trusts.

      You have requested an extension of time under § 2642(g) and § 301.9100-3 to
allocate Decedent’s GST exemption to Trust 1.

LAW AND ANALYSIS

       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 2602 provides that the amount of the tax imposed by § 2601 is the
taxable amount multiplied by the applicable rate.

      Section 2631(a) provides that, for purposes of determining the GST tax, every
individual shall be allowed a GST exemption amount 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 2632(a)(1) provides that an individual's GST exemption may be allocated
at any time on or before the date prescribed for filing the estate tax return for such
individual's estate (determined with regard to extensions), regardless of whether such
return is required to be filed.

     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 § 2632(b)(3) or (c)(5). Such regulations shall include procedures for requesting

PLR-106343-22                                3

comparable relief with respect to transfers made before the date of the enactment of
§ 2642(g).

      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. See Notice 2001-50,
2001-2 C.B. 189.

       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 and transfers at death, 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 six 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). 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, Decedent’s estate is
granted an extension of time of 120 days from the date of this letter to allocate
Decedent’s available GST exemption to Trust 1. The allocation will be effective as of
Date 2, the date of Decedent’s transfer of assets to Trust 1, and the value of the transfer
as determined for federal gift tax purposes will be used in determining the amount of
GST exemption to be allocated to Trust 1.

PLR-106343-22                                4

      The allocation should be made on a Form 709. The Form 709 should be filed
with the Internal Revenue Service at the following address: Department of Treasury,
Internal Revenue Service Center, Kansas City, MO 64999.

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

      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 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.

     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]
                                        Senior Counsel, Branch 4
                                        Office of the Associate Chief Counsel
                                        (Passthroughs and Special Industries)

     Enclosure
           Copy for § 6110 purposes

     cc: