Estate gets more time to allocate the decedent's generation-skipping tax exemption after the executor missed it on Form 706

Plain-English summary

When someone dies leaving property to trusts that may benefit grandchildren or
later generations, the executor can allocate the decedent's generation-skipping
transfer (GST) tax exemption to those trusts so they are sheltered from GST tax.
Here the executor filed the estate tax return (Form 706) on time but failed to
allocate the GST exemption to three of the family trusts. The estate asked the
IRS for an extension under Section 2642(g) and the Section 301.9100-3 relief
rules. Because a regulation (via Notice 2001-50) treats the GST allocation
deadline as not fixed by statute, the IRS can grant more time when the taxpayer
acted reasonably and in good faith. A special rule deems that standard met when a
taxpayer reasonably relied on a tax professional who failed to make the election,
which fit here. The IRS granted a 120-day extension to allocate the exemption to
the three trusts, effective as of the date of death, using date-of-death values.

Ruling snapshot

• Question: Should the estate get an extension under Section 2642(g) and
  Section 301.9100-3 to allocate the decedent's GST exemption to trusts the
  executor omitted on the timely Form 706?
• Outcome: Approved (120-day extension to allocate GST exemption)
• Key authorities: IRC §§ 2631, 2632, 2642(g); Treas. Reg. § 301.9100-3;
  Notice 2001-50

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202210011                                              Third Party Communication: None
Release Date: 3/11/2022                                        Date of Communication: Not Applicable
Index Number: 9100.00-00, 2632.00-00,
              2642.00-00                                       Person To Contact:
                                                               -------------------------- ID No. ---------------
------------------------------------------------------------   Telephone Number:
--------------------                                           --------------------
--------------------------                                     Refer Reply To:
--------------------                                           CC:PSI:B04
-------------------------                                      PLR-113840-21
---------------------------                                    Date:
                                                               December 16, 2021
------------------------------------------------




Legend

Decedent                                       ----------------------------------------------------
Date 1                                         -----------------------
Date 2                                         -------------------
Date 3                                         ------------------
Date 4                                         -------------------------
Date 5                                         -----------------------
Attorney                                       ----------------------------
Trust                                          ---------------------------------------------------------
Son                                            ------------------------------
Daughter 1                                     ------------------------
Daughter 2                                     ------------------------
Trust A                                        ------------------------------------------------------------------
                                               ------------------------------
Trust B                                        ------------------------------------------------------------------
                                               ------------------------
Trust C                                        ------------------------------------------------------------------
                                               ------------------------
Trust D                                        ------------------------------------------------------------------
                                               ------------------------------
Trust E                                        ------------------------------------------------------------------
                                               ----------------
Trust F                                        ------------------------------------------------------------------
                                               ------------------------
Trust X                                        ---------------------------------------
Trust Y                                        ---------------------
a                                              ------------
b                                              ----------------
PLR-113840-21                                2



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

      This letter responds to your authorized representative's letter dated
June 17, 2021, and subsequent correspondence, requesting an extension of time under
§ 2642(g) of the Internal Revenue Code (Code) and § 301.9100-3 of the Procedure and
Administration Regulations to allocate Decedent's generation-skipping transfer (GST)
exemption to trusts.

        The facts and representations submitted are summarized as follows:

        Decedent established Trust, a revocable trust for the benefit of his family on
Date 1. Trust was most recently amended on Date 2. The terms of Trust provide that
the trustees are to hold trust property equal to a of Decedent's available GST exemption
in a trust to be known as Trust A for Decedent's son, Son, and Son's issue. The terms
of Trust also provide that the trustees are to hold trust property equal to b of Decedent's
available GST exemption in a trust to be known as Trust X for Decedent's two
daughters, Daughter 1 and Daughter 2, and their issue. Trust X was divided into Trust
B for the benefit of Daughter 1 and her issue and Trust C for the benefit of Daughter 2
and her issue.

       The trustees were directed to hold certain other property and the residue of the
estate in a trust to be known as Trust Y. Trust Y is to be divided into three trusts: Trust
D for the benefit of Son and his issue, Trust E for the benefit of Daughter 1 and her
issue, and Trust F for the benefit of Daughter 2 and her issue. Trusts A through F all
have GST potential.

        Decedent died on Date 3. Trust became irrevocable upon Decedent's death.
Attorney was appointed as personal representative of Decedent's estate on Date 4.
Attorney, in her role as personal representative of Decedent's estate, prepared and
timely filed the estate's Form 706, United States Estate (and Generation-Skipping
Transfer) Tax Return on Date 5, before the extended deadline. On Form 706, Attorney
failed to allocate Decedent's available GST exemption to Trust A, Trust B, and Trust C.

       You have requested an extension of time under § 2642(g) and § 301.9100-3 to
allocate Decedent's GST exemption to Family Trust.

LAW AND ANALYSIS

        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.
PLR-113840-21                                 3

       Section 2602 provides that the amount of the tax imposed by § 2601 is the
taxable amount multiplied by the applicable rate.

       Section 2631(a) provides that, for purposes of determining the GST tax, every
individual shall be allowed a GST exemption amount 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 2632(a)(1) provides that an individual's GST exemption may be allocated
at any time on or before the date prescribed for filing the estate tax return for such
individual's estate (determined with regard to extensions), regardless of whether such
return is required to be filed.

      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
§ 2642(g).

       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. See Notice 2001-50,
2001-2 C.B. 189.

        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 and transfers at death, 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 six 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). Requests for relief under § 301.9100-3 will be
granted when the taxpayer provides the evidence to establish to the satisfaction of the
PLR-113840-21                                4

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 allocate Decedent's available GST exemption to Trust A, Trust B, and Trust C. The
allocation will be effective as of Decedent's date of death and the value of the transfer
as determined for federal estate tax purposes will be used in determining the amount of
GST exemption to be allocated to Trust A, Trust B, and Trust C.

      The allocation should be made on a supplemental Form 706. The Form 706
should be filed with the Internal Revenue Service at the following address: Internal
Revenue Service Center, Attn: E&G, Stop 824G, 7940 Kentucky Drive, Florence, KY
41042-2915.

      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.
PLR-113840-21                                5

      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

                                         Leslie H. Finlow
                                         _________________________
                                  By:    [Leslie H. Finlow]
                                         Senior Technician Reviewer, Branch 4
                                         Office of the Associate Chief Counsel
                                         (Passthroughs and Special Industries)


      Enclosure
            Copy for § 6110 purposes



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