Estate receives 120 days to complete GST exemption allocation to trust

Plain-English summary

A decedent's will created separate residuary trusts for three children. The
estate's attorney intended to allocate all available generation-skipping
transfer tax exemption to one trust on Form 706, but an administrative error
caused only part of the exemption to be allocated. The estate requested more
time to allocate the remaining exemption to that trust. The IRS considered the
decedent's intent and found that the regulatory relief requirements were
satisfied. It granted the estate 120 days to make the allocation on a
supplemental Form 706. The allocation would be effective as of the date of
death, using the transfer value determined for federal estate tax purposes.

Ruling snapshot

• Question: May an estate make a late allocation of the decedent's remaining
  GST exemption to the intended residuary trust?
• Outcome: Approved. The estate received a 120-day extension.
• Key authorities: IRC §§ 2601, 2611, 2631, 2632(a), and 2642(g);
  Treas. Reg. §§ 26.2632-1(d)(1), 301.9100-1, and 301.9100-3; Notice
  2001-50.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202313004 Third Party Communication: None
Release Date: 3/31/2023 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-114094-22
In Re: ------------------------------------ Date:
January 03, 2023

Legend

Decedent --------------------------------------------------------
Date 1 ----------------
Date 2 ------------------
Child 1 --------------------
Child 2 --------------------
Child 3 ----------------------
Attorney -------------------
Trust 1 -----------------------------------------------------------------
Trust 2 ------------------------------------------
Trust 3 ----------------------------------------------------

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

  This letter responds to your authorized representative’s letter dated July

18, 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 executed a will on Date 1. Article Fourth of the will sets aside the

residue of the Decedent’s estate in separate trusts for the benefit of his three children,
Child 1, Child 2, and Child 3.

   Article Fifth of the will directs the trustees to distribute a unitrust amount to each

of the children, and the trustees also have discretion to make distributions of principal
for medical expenses and certain other limited circumstances. Upon the death of a

PLR-114094-22 2

child, the trustees of the child’s trust are required to pay the principal of the trust,
together with all net income accrued but not yet collected or collected but still on hand,
per stirpes, to the child’s then-living descendants, or if there are no such surviving
descendants, to the then-living descendants of Child 1.

   Decedent died on Date 2. In accordance with the terms of Decedent’s will, three

residuary trusts were created: Trust 1 for the benefit of Child 1, Trust 2 for the benefit of
Child 2, and Trust 3 for the benefit of Child 3.

   Attorney was appointed as the co-executor of Decedent’s estate. Attorney also

prepared Form 706, United States Estate (and Generation-Skipping Transfer) Tax
Return, for the estate. Attorney intended to allocate all of Decedent’s GST exemption to
Trust 1, in accordance with Decedent’s intent. However, due to an administrative error,
only a portion of Decedent’s GST exemption was allocated to Trust 1.

   You have requested an extension of time under § 2642(g) and § 301.9100-3 to

allocate Decedent’s remaining available 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 2632(a)(2) provides that the manner in which
allocations are to be made shall be prescribed by forms or regulations issued by the
Secretary.

     Section 26.2632-1(d)(1) of the Generation-Skipping Transfer Tax Regulations

provides that an allocation of decedent's unused GST exemption by the executor of the
decedent's estate is made on the Form 706, filed on or before the date prescribed for
filing the return by § 6075(a) (including any extensions actually granted).

PLR-114094-22 3

  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
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 death, and the value of the transfer as determined for

PLR-114094-22 4

federal estate tax purposes will be used in determining the amount of GST exemption to
be allocated to Trust 1.

  The allocation should be made on a supplemental Form 706. The Form 706

should be filed with the Internal Revenue Service at the following address: Internal
Revenue Service Center, ATTN: E&G, Stop 824G, 7940 Kentucky Drive, Florence, KY
41042-2915.

  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: