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Monday February 19, 2018

Private Letter Ruling

Service Grants GSTT Allocation Extension

GiftLaw Note:
Decedent established Trust for the benefit of Decedent's children and their descendants in Year 1, which was prior to December 31, 2000. Decedent later died, survived by Spouse and his children. Decedent and Spouse elected to gift split. Decedent did not allocate any generation skipping transfer (GST) tax exemption to the year the trust was funded. Attorney discovered the error in Year 2. Executor requested an extension of time under Sec. 2642(g)(1) and Reg. 301.9100-3 to file to allocate the GST exemption to the transfer to the trust.

Under Sec. 2513(a)(1), a gift from one spouse to another person will be considered made one-half by each spouse so long as each spouse is a citizen or resident of the United States. Section 2601 imposes a tax on every GST. According to Sec. 2611(a), a GST is defined as a taxable distribution, a taxable termination or a direct skip. Section 2631(a), in effect in Year 1, provided for a $1 million GST exemption amount. Regulation 26.2632-1(b)(4)(i) requires the allocation of GST exemption for a transfer during life, other than a direct skip, to be made on Form 709. Regulation 301.9100-1 gives the Commissioner discretion to grant a reasonable extension of time to make a regulatory election or a statutory election. Regulation 301.9100-3 allows a taxpayer to seek an extension of time to make an election as long as the taxpayer can show that he or she acted in good faith and that granting relief will not prejudice the interests of the government. Under Reg. 301.9100-3(b)(1)(v), a taxpayer is deemed to have acted reasonably and in good faith if he or she reasonably relied on a tax professional who failed to make or advise the taxpayer to make the election. Here, the Service found that the taxpayer met the requirements of Reg. 301.9100-3 and granted an extension of 120 days.
PLR 201806006 Service Grants GSTT Allocation Extension

2/9/2018 (11/13/2017)

Dear * * *:

This responds to your personal representative's letter of May 16, 2017, requesting an extension of time under § 301.9100 of the Procedure and Administration Regulations and § 2642(g) of the Internal Revenue Code to allocate generation-skipping transfer (GST) exemption to a trust.


The facts and representations submitted are summarized as follows: Decedent established Trust, an irrevocable trust, on Date 1, in Year 1. Trust was created and funded for the benefit of Decedents's children and their descendants. Date 1 is prior to December 31, 2000. Decedent died on Date 2, survived by spouse, Spouse, and his children.

Accountant prepared the Forms 709 United States Gift (and Generation-Skipping Transfer) Tax Return for Year 1 reporting the transfer to Trust. Decedent and Spouse elected to gift split on the Forms 709. However, Decedent failed to allocate any of their GST exemption to the Year 1 transfer to Trust. The error was discovered in Year 2 when Attorney discovered that no GST exemption had been allocated to the Year 1 transfer to Trust on Decedent's Year 1 Form 709. Decedent has sufficient GST exemption in Year 1 to allocate to the transfer to Trust.

Executor requests an extension of time under § 2642(g)(1) and § 301.9100-3 to allocate Decedent's GST exemption to the Year 1 transfer to Trust.

Law and Analysis

Section 2513(a)(1), provides that a gift made by one spouse to any person other than his spouse shall be considered as made one-half by him and one-half by his spouse, but only if at the time of the gift each spouse is a citizen or resident of the United States. Section 2513(a)(1) only applies if both spouses have signified their consent to the application of this section in the case of all such gifts made during the calendar year by either while married to the other.

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 2631(a), as in effect in Year 1, provided that, for purposes of determining the GST tax, every individual shall be allowed a GST exemption amount of $1 million 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 26.2632-1(b)(4)(i) of the Generation-Skipping Transfer Tax Regulations provides that an allocation of GST exemption to property transferred during the transferor's lifetime, other than in a direct skip, is made on Form 709.

Section 2642(b)(1) 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, 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)).

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 this paragraph.

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.

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 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 6 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). In accordance with § 2642(g)(1)(B) and Notice 2001-50, taxpayers may seek an extension of time to make an allocation described in § 2642(b)(1) or (b)(2) or an election described in § 2632(b)(3) or (c)(5) under the provisions of § 301.9100-3.

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, Executor is granted an extension of time of 120 days from the date of this letter to allocate Decedent's available GST exemption to the Year 1 transfer to Trust. The allocation will be effective as of the respective date of the transfer to Trust and the value of the transfer to Trust as determined for federal gift tax purposes will be used in determining the amount of Decedent's GST exemption to be allocated to Trust.

This allocation should be made on a supplemental Form709 and filed with the Cincinnati Service Center at the following address: Internal Revenue Service, Cincinnati Service Center — Stop 82, Cincinnati, OH 45999. A copy of this letter should be attached to the supplemental Forms 709.

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.

Except as specifically ruled herein, we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the Code.

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.


Associate Chief Counsel
(Passthroughs & Special Industries)

By: Lorraine E. Gardner
Senior Counsel, Branch 4
Office of the Associate Chief Counsel
(Passthroughs and Special Industries)


Published February 16, 2018
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