Estate received more time to make a QTIP election

Plain-English summary

A decedent's trust directed property subject to a qualified terminable interest property election into a marital trust that paid all net income to the surviving spouse at least quarterly. The estate timely filed Form 706, but the accountant listed the assets as distributed directly to the spouse and did not advise the executor to make the QTIP election. The IRS concluded that the estate satisfied the regulatory relief requirements because the executor reasonably relied on the tax professional. It granted 120 days to make the section 2056(b)(7) election on an amended estate tax return. The ruling addresses only the extension and does not give broader tax conclusions.

Ruling snapshot

• Question: May the estate make a late QTIP election for property passing to the marital trust?
• Outcome: Approved, with 120 days from the ruling date to file an amended Form 706
• Key authorities: IRC §§ 2001, 2056(a), 2056(b)(7); Treas. Reg. §§ 20.2056(b)-7(b)(4)(i), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202441005 Third Party Communication: None
Release Date: 10/11/2024 Date of Communication: Not Applicable
Index Number: 9100.00-00, 2056.00-00,
2056.07-00 Person To Contact:
-------------------------- ID No. -----------------
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------------------------------------------- Telephone Number:
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Refer Reply To:
---------------------------- CC:PSI:B04
PLR-102335-24
----------------------------------------------------- Date:
July 11, 2024

Legend

Decedent = --------------------------------------------------------
Spouse = ----------------------------------------------------
Date 1 = ----------------------
Date 2 = ---------------------------
Trust = -----------------------------------------------
Marital Trust = ------------------------------------------------------------------
Accountant = ----------------------------------

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

   This letter responds to your personal representative’s letter of January 18, 2024

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 created Trust, a revocable trust. Decedent died on Date 2,

survived by Decedent’s spouse, Spouse.

    Section 2.3 of Trust provides that upon the death of Decedent, after payment of

debts and taxes and specified payments to other trusts, the balance of the trust estate is
to be held in a family trust. Any portion of the family trust to which a QTIP election is in
effect is to be held by the trustee as a separate trust, Marital Trust. The entire net
income of Marital Trust is to be paid to Spouse at least quarter-annually during
Spouse’s lifetime. The trustee is to distribute to Spouse any part or all of the principal of
Marital Trust to Spouse for health, support, or maintenance. Upon Spouse’s death, the
remaining principal of Marital Trust is to be distributed to any of Decedent’s

PLR-102335-24 2

descendants as Spouse shall appoint by a limited power of appointment. Assets in the
family trust over which a QTIP election is not made is to be held for the benefit of
Spouse and Decedent’s descendants.

   Decedent’s estate filed a timely Form 706, United States Estate (and Generation

Skipping-Transfer Tax) Return. No QTIP election was made on Form 706. The assets
of Marital Trust were incorrectly reflected on Schedule M as being distributed directly to
Spouse, instead of correctly listed as QTIP property. 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
election for the portion of the residuary estate that passed to Marital Trust.

   You have requested an extension of time under § 301.9100-3 to make a QTIP

election under § 2056(b)(7) for the property passing to Marital Trust.

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.

PLR-102335-24 3

  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 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.

    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 the property in Marital Trust.
This election should be made on an amended 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. A copy is enclosed for this
purpose.

  In accordance with the Power of Attorney on file with this office, we have sent a

copy of this letter to your authorized representatives.

PLR-102335-24 4

   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

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