Late GST exemption allocation allowed

Plain-English summary

A married couple created trusts with generation-skipping transfer tax potential before 2001. Their accountant failed to prepare the required gift tax returns for either spouse, so the wife's GST exemption was not allocated to the trust she funded. After both spouses died, the wife's estate discovered the omission and requested relief. Because the request was filed before May 6, 2024, the IRS applied the section 301.9100-3 procedures and found their requirements satisfied. It granted the wife's estate 120 days to file an amended Form 709 allocating her available GST exemption to the trust, effective as of the original transfer date.

Ruling snapshot

• Question: May the wife's estate make a late allocation of her GST exemption to a trust created before 2001?
• Outcome: Approved, with 120 days to file an amended Form 709
• Key authorities: IRC §§ 2631, 2632, 2642(g); Treas. Reg. §§ 26.2642-7, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202434010 Third Party Communication: None
Release Date: 8/23/2024 Date of Communication: Not Applicable
Index Number: 9100.00-00, 2632.00-00,
2642.00-00 Person To Contact:
-------------------------- ID No. -----------------
------------------------------------------------------------ -----------------------------------------------------
-------------------------------------- Telephone Number:
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------------------------------ Refer Reply To:
--------------------------- CC:PSI:B04
PLR-124337-23
In Re: -------------------------------------- Date:
May 22, 2024

Husband = -------------------------------------------
Wife = ---------------------------------------------------
Date 1 = --------------------------
Date 2 = ------------------
Date 3 = -------------------------
Date 4 = --------------------------
Year 1 = -------
Year 2 = -------
Accountant = -------------------
Attorney = --------------------------
Trust 1 = ------------------------------------------------------------------------------------------
-----------------------
Trust 2 = -----------------------------------------------------------------------------------
Trust 3 = -------------------------------------------------------
Trust 3A = ---------------------------------------------------------------------------------
Trust 3B = ----------------------------------------------------------------------------------
Trust 3C = ------------------------------------------------------------------------------------------
-

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

  This letter responds to your authorized representative’s letter dated December 7,

2023, 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 Wife’s generation-skipping transfer (GST)
exemption to trusts.

    The facts and representations submitted are summarized as follows:

PLR-124337-23 2

   Husband created and funded Trust 1 on Date 1, in Year 1 (before 2001). Wife,

Husband’s spouse, created and funded Trust 2 on Date 1. Husband also created and
funded Trust 3 on Date 2, in Year 2, and made additional transfers to that trust later in
Year 2 (before 2001). Trust 3 was later divided into three trusts, Trust 3A, Trust 3B, and
Trust 3C, each trust for the benefit of one of Husband’s children.

  The trusts provide lifetime interests for the children of Husband and after their

deaths to more remote issue. The trusts have GST potential.

  Husband and Wife hired Accountant for tax advice and to prepare their

Forms 709, United States Gift (and Generation-Skipping Transfer) Tax Returns, for
Year 1 and Year 2. However, Accountant failed to prepare Forms 709 for Year 1 and
Year 2 for Husband and Wife.

   Husband died on Date 3. Wife died on Date 4. The executors of the respective

estates of Husband and Wife represent that had the GST exemption been properly
allocated in Year 1 and Year 2, there would be sufficient GST exemption available for all
subsequent lifetime and testamentary transfers made by Husband and Wife that were
subject to the GST tax.

   After the death of Wife, Attorney, the attorney for Wife’s estate, discovered that

no Form 709 was filed with the Internal Revenue Service for Year 1 and Year 2 by
either Husband or Wife.

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

allocate Wife’s remaining available GST exemption to Trust 2.

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), as in effect for the years at issue in the present case, provided

that, for purposes of determining the inclusion ratio, every individual shall be allowed a
GST exemption of $ 1,000,000 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
PLR-124337-23 3

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 2642(b)(1)(A) provides that, except as provided in § 2642(f), if the

allocation of the GST exemption to any transfers of property is made on a gift tax return
filed on or before the date prescribed by § 6075(b) for such transfer or is deemed to be
made under § 2632(b)(1) or (c)(1) the value of such property for purposes of § 2642(a)
shall be its value as finally determined for purposes of chapter 12 (within the meaning of
§ 2001(f)(2)), or, in the case of an allocation deemed to have been made at the close of
an estate tax inclusion period, its value at the time of the close of the estate tax
inclusion period.

  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.

    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.
PLR-124337-23 4

   Under § 301.9100-3(g)(1), the procedures set forth in § 301.9100-3 do not apply

to requests for relief under § 2642(g)(1) that are filed on or after May 6, 2024,
regardless of the date of the transfer. Since this ruling request was filed with the
Internal Revenue Service prior to May 6, 2024, the procedures set forth in § 301.9100-3
may still be applied to grant relief under § 2642(g)(1). For requests for relief under
§ 2642(g)(1), see § 26.2642-7 of the Generation-Skipping Transfer Tax Regulations.

   Based on the facts submitted and the representations made, we conclude that

the requirements of § 301.9100-3 have been satisfied. Therefore, Wife’s estate is
granted an extension of time of 120 days from the date of this letter to allocate Wife’s
available GST exemption to Trust 2. The allocation of GST exemption to the trusts will
be effective as of the date of transfer. The allocation of GST exemption to the trusts,
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 2.

    The allocation should be made on an amended Form 709. The Form 709 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.
PLR-124337-23 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

                                             Daniel J. Gespass
                                             _________________________
                                    By:      [Daniel J. Gespass]
                                             Senior Technician Reviewer, Branch 4
                                             Office of the Associate Chief Counsel
                                             (Passthroughs and Special Industries)


  Enclosure
        Copy for § 6110 purposes
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