Estate granted 120 days to make QTIP election

Plain-English summary

A decedent's revocable trust became irrevocable at death and divided into marital and family trusts. The marital trust required income distributions to the surviving spouse and permitted principal distributions for the spouse's health, maintenance, and support. The estate hired a tax professional to prepare its Form 706 and make necessary elections, but the return reported the marital-trust assets as other property and did not make a qualified terminable interest property election. New counsel later discovered the omission. Because the estate reasonably relied on a qualified tax professional and otherwise met the regulatory standards for relief, the IRS granted 120 days to make the QTIP election on an amended Form 706.

Ruling snapshot

• Question: Could the estate receive additional time to make a QTIP election for the marital trust after its preparer omitted the election from a timely Form 706?
• Outcome: approved
• Key authorities: IRC §§ 2001, 2056(b)(7); Treas. Reg. §§ 20.2056(b)-7, 301.9100-1, 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202403011                                             Third Party Communication: None
 Release Date: 1/19/2024                                       Date of Communication: Not Applicable
 Index Number: 2056.00-00, 2056.07-00,
               9100.00-00                                      Person To Contact:
                                                               ---------------, ID No. -----------------
 -------------------------------                               Telephone Number:
 ----------------------------                                  --------------------
 -------------------------------                               Refer Reply To:
 ------------------------                                      CC:PSI:04
 ------------------------------------------                    PLR-112120-23
 ------------------------------                                Date:
                                                               October 23, 2023
          Re: --------------------------------




LEGEND

Decedent                  =        ---------------------------------------------
Spouse                    =        -------------------------------------------
Child                     =        ---------------
Trust                     =        ------------------------------------------
Date 1                    =        ----------------------
Date 2                    =        ------------------
Date 3                    =        -------------------------
Accountant                =        -------------------------------
Accountant Firm           =        ------------------------------------


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

This letter responds to a letter dated May 31, 2023, submitted on behalf of Decedent’s
estate, 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 (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.

Part II, Section 2 of Trust provides that upon the death of Decedent, the trustee shall
divide Trust into two separate trusts, Marital Trust and Family Trust. Under Section 3,
trustee shall annually or more often pay to Spouse or for her benefit all of the net
income of Marital Trust. Trust further provides that principal may be paid to or for the
benefit of Spouse as the trustee determines necessary for her health, maintenance and

PLR-112120-23                                  2

support in reasonable comfort. Part IV, Section 6 states Settlor’s intention that the
value of the property held by the trustee of any Marital Trust shall be available for the
marital deduction allowable by the federal and state estate tax laws applicable to
Decedent’s estate.

Child is the executor of Decedent’s estate. Accountant of Accounting Firm was
engaged to prepare and timely file Form 706, United States Estate (and Generation-
Skipping Transfer) Tax Return and to make any necessary elections, including making a
QTIP election, for Decedent’s estate. On Date 3, the Form 706 was timely filed (under
extension) on behalf of the estate. The Form 706 reported Decedent’s Marital Trust
assets as “all other property” on Schedule M and reported no “QTIP property.” Thus, no
QTIP election was made with respect to Marital Trust. After Form 706 was filed, the
executor requested new counsel to review the filing to ensure it conformed with the
intended estate planning. It was at this time that Decedent's Form 706 was reviewed
and the failure to properly report Marital Trust on Schedule M and make the QTIP
election was discovered.

You have requested an extension of time under §§ 301.9100-1 and 301.9100-3 to make
the QTIP election under § 2056(b)(7) to treat Marital Trust as QTIP property.

LAW AND ANALYSIS

Section 2001(a) of the Code 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.

PLR-112120-23                                 3


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. 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 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, as the personal
representative 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 Marital Trust.

The election should be made on an amended Form 706 filed with the Internal Revenue
Service Center at the following address: Department of the Treasury, Internal Revenue
Service Center, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915. A copy of
this letter should be attached to the amended Form 706.

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

PLR-112120-23                                              4

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.

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



                                                 Sincerely,

                                                 Associate Chief Counsel
                                                 (Passthroughs & Special Industries)

                                                       Leslie H. Finlow
                                           By:
                                                 Leslie H. Finlow
                                                 Senior Technician Reviewer, Branch 4
                                                 Office of the Associate Chief Counsel
                                                 (Passthroughs & Special Industries)




Enclosure
      Copy for § 6110 purposes



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