Estate gets more time to make a missed QTIP marital-deduction election

Plain-English summary

When someone dies leaving property to a surviving spouse in a certain kind of trust, the estate can elect "QTIP" treatment under section 2056(b)(7) so that property qualifies for the unlimited estate-tax marital deduction (deferring estate tax until the second spouse dies). Here the decedent's trust split into a marital (QTIP) trust and an exemption trust, but the attorney who prepared the estate tax return (Form 706) reported the marital trust assets as ordinary property and never made the QTIP election. The mistake surfaced only when the return was picked for audit. The estate asked the IRS for more time under the § 301.9100-3 regulations, which allow a late election when the taxpayer acted reasonably and in good faith (including reasonable reliance on a tax professional) and relief does not prejudice the government. The IRS granted 60 days to make the QTIP election on a supplemental Form 706. This is a common fix that preserves a large marital deduction lost through a preparer's oversight.

Ruling snapshot

• Question: Should an estate get more time to make a late QTIP election under section 2056(b)(7)?
• Outcome: approved
• Key authorities: IRC § 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: 202451016                                             Third Party Communication: None
 Release Date: 12/20/2024                                      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:B04
 ----------------------------                                  PLR-111620-24
                                                               Date:
 In Re: -----------------------------------                    September 19, 2024


LEGEND

Decedent         =        --------------------------------------------
Spouse           =        ----------------------------------------------
Trust            =        ------------------------------------------------------------------------------------------
                 ---------------------------------------------------------------------------------------------------
                 ------------------
Attorney         =        -------------------------
Date 1           =        ----------------------
Date 2           =        -------------------
Date 3           =        -------------------------


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

This letter responds to your authorized representative’s letter of June 18, 2024, and
additional correspondence, 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), which was amended and
restated on Date 2. Trust became irrevocable upon Decedent’s death on Date 3.

The terms of Trust provide, in relevant part, that upon the death of Decedent, the
trustee shall divide the Trust into two trusts, one of which is intended to qualify for the
unlimited marital deduction from estate tax as a QTIP trust under § 2056(b)(7)(B)
(Marital Trust), and the other of which is intended not to qualify for the unlimited marital
deduction from estate tax (Exemption Trust).


Marital Trust is to be administered as follows: all the net income of Marital Trust is to be
paid to or for the benefit of Spouse in installments, not less often than annually; the
trustee is required to pay all the income to Spouse; and, the trustee may pay to or for
the benefit of Spouse such amounts of principal as the trustee deems necessary for the
health, maintenance and support of Spouse. Upon the death of Spouse, Trust directs
the trustee to distribute the remaining property of Marital Trust outright to named
beneficiaries.

Trustee, in its capacity as personal representative of Decedent’s estate, retained
Attorney to prepare the estate’s Form 706 (United States Estate (and Generation-
Skipping Transfer) Tax Return) and to make any necessary elections, including the
QTIP election. Decedent’s Form 706 was timely filed on behalf of Decedent’s 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.

Thereafter, Decedent's Form 706 was selected for examination, and it was at this time
that the trustee discovered the failure to properly report the assets of Marital Trust on
Schedule M and to make the QTIP election.

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

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 is determined, except as limited by §2056(b), by deducting from the
value of the gross estate an amount equal to the value of any interest in property that
passes or has passed from the decedent to the surviving spouse but only to the extent
that such interest in 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), the property shall be treated as passing to the surviving
spouse, and for purposes of § 2056(b)(1)(A), no part of the 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; and (III) to which an election under § 2056(b)(7)(B)(b)
applies.

Section 2056(b)(7)(B)(v) provides that an election under § 2056(b)(7) with respect to
any property is to be made by the executor on the return of tax imposed by § 2001.
Such an election, once made, is 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) of the Procedure and Administration Regulations 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 subject to § 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 the grant of 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, the trustee, as the personal
representative of Decedent’s estate, is granted an extension of time of 60 days from the
date of this letter to make a QTIP election with respect to Marital Trust under
§ 2056(b)(7).


The election should be made on a supplemental Form 706 filed with the Internal
Revenue Service Center at the following address: Department of Treasury, Internal
Revenue Service, Attn: E&G, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-
2915. A copy of this letter should be attached to the supplemental 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, including any issues pertaining to the Form 706 as filed.

The ruling contained in this letter is based upon information and representations
submitted on behalf of the taxpayer’s estate 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 ruling, it is subject to verification on
examination.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

                                       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




cc: