PLR 1020002: IRS granted extra time to make a QTIP election

Plain-English summary

The IRS granted an executor an extension of time to make a qualified terminable interest property election under IRC § 2056(b)(7). The executor had filed the decedent's estate tax return and reported property passing to the surviving spouse, but no QTIP election was made or deemed made for the property. After the surviving spouse learned of stock that the decedent and spouse had owned, the IRS found that the requirements for relief under the regulations were satisfied. The executor was given 60 days from the ruling date to make the election on a supplemental Form 706.

Ruling snapshot

• Question: Could the executor receive additional time to make a QTIP election for property passing to the surviving spouse?
• Outcome: Approved
• Key authorities: IRC §§ 2001(a), 2056(a), and 2056(b)(7); Treas. Reg. §§ 20.2056(b)-7(b)(4)(i), 301.9100-1(c), and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201020002 Third Party Communication: None
Release Date: 5/21/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.00-00, 2056.07-00 ------------------, ID No. -------------
Telephone Number:
---------------------
------------------------------------- Refer Reply To:
--------------------------- CC:PSI:B04
--------------------------- PLR-134373-09
Date:
January 17, 2010

Re: ------------------------------------

Legend
Decedent = ------------------------------------------
Spouse = ------------------------------------------
Trust = -------------------------------
Date 1 = -----------------
Date 2 = -------------------
Date 3 = ------------------
Executor = ------------------------

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

This letter responds to a letter from your authorized representative dated July 17, 2009, 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.

The facts and representations submitted are summarized as follows: On Date 1, Decedent and Spouse created a revocable trust, Trust. Trust was amended on Date 2. Decedent died testate on Date 3, survived by Spouse.

Article IV of Trust provides that upon the death of the first grantor, Trust is to be divided into three separate trusts: a Survivor’s Trust, the Unified Credit Trust, and the Marital Deduction Trust. The Survivor’s Trust and the Unified Credit Trust were established, but Decedent’s gross estate lacked sufficient assets to create the Marital Deduction Trust.

The Executor filed Decedent’s Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. On Schedule M, all of Decedent’s property passing to Spouse was reported. No QTIP election was made or deemed to be made with respect to any property. Thereafter, Spouse received a letter forwarded to her from a previous address advising her that Decedent and Spouse owned stock in a company for which Decedent had worked early in his career. Spouse believed the stock had been sold years earlier.

You now request an extension of time to make the QTIP election under § 2056(b)(7).

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) 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.

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 (or § 2101). 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 6 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.

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)(ii) provides that a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer failed to make the election because of intervening events beyond the taxpayer’s control.

Based on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Therefore, Decedent’s Executor is granted an extension of time until sixty (60) days from the date of this letter to make a QTIP election with respect to Trust. The election should be made on a Supplemental Form 706 filed with the Internal Revenue Service Center, Cincinnati, OH 45999. A copy of this letter should be attached to the form.

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.

PLR-134373-09 4

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

                                           Sincerely,

                                          Curt G. Wilson
                                          Associate Chief Counsel
                                          (Passthroughs and Special Industries)

Enclosures
Copy for section 6110 purposes
Copy of this letter

cc: