Estate receives 120 days to make omitted QTIP election

Plain-English summary

A decedent's revocable trust created a marital trust that paid all net income to the surviving spouse for life. The estate timely filed Form 706, but its attorney mistakenly omitted the trust from Schedule M and therefore failed to make the QTIP election. The IRS found that the estate satisfied the regulatory-relief requirements. It granted 120 days to file a supplemental Form 706 electing qualified terminable interest property treatment for the marital trust.

Ruling snapshot

• Question: May the estate make a late QTIP election for the marital trust omitted from its timely estate tax return?
• Outcome: Approved
• Key authorities: IRC § 2056(b)(7); Treas. Reg. §§ 20.2056(b)-7(b)(4), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201536002 Third Party Communication: None
Release Date: 9/4/2015 Date of Communication: Not Applicable
Index Number: 2056.07-00, 9100.00-00
Person To Contact:
--------------------------------- ------------------------- ---------------------------
---------------------- ----------------------------------------------------
----------------------------------- Telephone Number:
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Refer Reply To:
CC:PSI:B04
--------------------------------------- PLR-103791-15
Date:
May 13, 2015

Legend

Decedent --------------------------------------------
Spouse -------------------
Trust -----------------------------------------------
Attorney --------------------
Date 1 ------------------------
Date 2 -----------------
Date 3 ----------------------
Date 4 ------------------------
Child 1 ---------------
Child 2 -------------------
Child 3 ----------------------------------
Child 4 ---------------------------

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

   This letter responds to a letter from your authorized representative dated

January 7, 2015 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 executed a revocable trust, Trust. Decedent

and Spouse transferred community property and separate property into Trust. Trust
was most recently amended on Date 2. Decedent died on Date 3, survived by Spouse.

 Article V.A. of Trust provides that on Decedent’s death, the trustee is to distribute

Decedent’s separate property to Child 1 and Child 2. Article V.A. provides that the
PLR-103791-15 2

trustee is to divide the remaining trust estate into two separate trusts, Trust A and
Trust B.

    After funding Trust A, Trust B is to consist of the balance of Decedent’s interest

in Decedent’s and Spouse’s community property. Article V.E.4 provides that the
trustee is to pay to or apply for the benefit of Spouse during her lifetime all of the net
income of Trust B in monthly or in other convenient installments, but in no event not less
often than annually. If at any time in the discretion of the trustee Spouse should be in
need of additional funds for her proper health, education, maintenance, and support and
if Trust A is entirely exhausted, then the trustee, in his discretion, is to pay to or apply
for the benefit of Spouse such amounts from the principal of Trust B as the trustee from
time to time deems advisable.

    Article V.F.5 provides that upon the death of Spouse, the remaining trust estate

is to be divided into two equal shares. One share is to be distributed in equal shares to
Child 3 and Child 4. The other share is to be distributed in equal shares to Child 1 and
Child 2.

  Spouse, as executor of Decedent’s estate, hired Attorney to prepare Decedent's

Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. On
Date 4, the Form 706 was timely filed on behalf of the estate. On Schedule M, Attorney
mistakenly did not include Trust B as property subject to the QTIP election. Thus, no
QTIP election was made with respect to Trust B.

  You have requested 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.
PLR-103791-15 3

   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.

  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 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, 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 with respect to Trust B. The election should be made on a
supplemental Form 706 filed with the Cincinnati Service Center at the following address:
Internal Revenue Service Center, Cincinnati, OH 45999. A copy of this letter should be
attached to the supplemental Form 706. A copy is enclosed for this purpose.
PLR-103791-15 4

  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.

  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




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



  Enclosures
        Copy for § 6110 purposes
        Copy of this letter

  cc: