Estate gets 120 days to make late QTIP election

Plain-English summary

A decedent's will funded a marital trust that paid all net income to the surviving spouse at least quarterly and permitted principal distributions for the spouse's health, maintenance, or support. The estate's Form 706 listed the trust property on Schedule M but treated it as non-QTIP property and did not make the marital-deduction election. The estate requested relief after relying on the attorney who prepared the return. The IRS concluded that the requirements of Treasury Regulation section 301.9100-3 were satisfied. It gave the executor 120 days to file a supplemental Form 706 electing QTIP treatment for the marital trust.

Ruling snapshot

• Question: May the executor make a late QTIP election for the marital trust?
• Outcome: Approved, with 120 days to file a supplemental Form 706.
• Key authorities: IRC § 2056(b)(7); Treas. Reg. §§ 20.2056(b)-7 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201923004                                              Third Party Communication: None
Release Date: 6/7/2019                                         Date of Communication: Not Applicable
Index Number: 2056.00-00, 2056.07-00,
              2056.07-01, 9100.00-00                           Person To Contact:
                                                               ------------------------, ID No. --------------
---------------------------------                              Telephone Number:
----------------------------------                             ----------------------
---------------------------                                    Refer Reply To:
                                                               CC:PSI:04
In Re: ---------------------------------------                 PLR-119741-18
       --------------------------------------                  Date:
                                                               December 17, 2018


LEGEND:
Decedent                   =        --------------------------
Spouse                     =        ----------------------------
Date 1                     =        --------------------
Date 2                     =        --------------------
Will                       =        -----------------------------------------------------------------
Trust                      =        ---------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Marital Trust              =        ----------------------------------------------------------
x                          =        ------------------
Foundation                 =        ----------------------------------------
Child                      =        -----------------------------
A                          =        --------------------
Attorney                   =        --------------------------------------------------------------------------------------------


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

This letter responds to your authorized representative’s letter of June13, 2018,
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 as follows. Decedent died on Date 1
survived by Spouse.

Pursuant to Article III of Decedent’s will, all of Decedent’s estate passed to Trust.
Spouse is designated as the Personal Representative of the estate.
PLR-119741-18                                  2



Under Section 3.C(3) of Trust, a trust (Marital Trust) is to be established for the lifetime
benefit of Spouse. All of the net income of the Marital Trust is to be paid to Spouse at
least quarterly. In addition, the co-trustees may pay or expend for Spouse so much or
all of the Marital Trust principal as the co-trustees may deem advisable for Spouse’s
health, maintenance, or support. On Spouse’s death, $x of the Marital Trust property is
to be distributed to Foundation. The Marital Trust will then terminate, and the remaining
property will be distributed to Child or Child’s issue, by right of representation. Spouse
and A are the co-trustees of Trust and the Marital Trust.

Under Section 3.C(3)(e) of Trust, the Personal Representative and/or Successor Co-
Trustees are authorized to elect to claim the marital deduction under § 2056(b)(7) with
respect to part, all, or none of the property that passes to Marital Trust.

Attorney was engaged to prepare the Form 706, United States Estate (and Generation-
Skipping Transfer) Tax Return for Decedent’s estate. On Schedule M, the value of the
property passing to the Marital Trust was listed as property other than QTIP property,
and for which no QTIP election was made.

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 the Marital Trust property 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 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.
PLR-119741-18                                 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)(lll) 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 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.

In the present case, the Marital Trust was created for the benefit of Spouse. Although it
was identified on Schedule M, the return did not include a QTIP election for the Marital
Trust property.

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 the Marital Trust.

The election should be made on a supplemental Form 706 filed with the Cincinnati
PLR-119741-18                                  4

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.

 The ruling contained in this letter is 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 ruling, it is subject to verification on examination.

Except as specifically ruled herein, we express 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 who requested 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
                                  Melissa C. Liquerman
                                  Chief, Branch 4
                                  Office of Associate Chief Counsel
                                  (Passthroughs and Special Industries)

Enclosure
  Copy of letter for 6110 purposes


cc: