Court-ordered reformation of six GST-exempt trusts to fix scrivener's errors triggers no income, gift, estate, or GST tax

Plain-English summary

A grantor set up an irrevocable trust for his six children and later, through the trustee, split it into six near-identical child-specific trusts. Because the grantor and his spouse had allocated their generation-skipping transfer (GST) tax exemption to the original trust, it was fully GST-exempt. A drafting problem crept in: just before the six new trusts were signed, the state changed its rule-against-perpetuities statute, and the new trusts failed to lock in the old (shorter) vesting period the grantor intended. A court reformed the trusts to correct that and two related scrivener's errors. The taxpayers asked the IRS to confirm the fix carried no tax cost. The IRS ruled favorably on all four questions: the court-ordered corrections are not a sale or disposition (no income or gain under §§ 61 and 1001), do not change the trusts' GST inclusion ratio (they satisfy the safe harbor in Treas. Reg. § 26.2601-1(b)(4)(i)), are not a taxable gift by the children under § 2501, and do not pull any trust property into the children's estates under §§ 2036, 2037, or 2038. The takeaway: a bona fide judicial reformation that only clarifies a grantor's original intent generally does not disturb a trust's tax-exempt GST status or create new transfer tax.

Ruling snapshot

• Question: Do a court-ordered reformation correcting scrivener's errors in six GST-exempt trusts, and the earlier transfer of assets into them, cause any income, gift, estate, or GST tax?
• Outcome: approved (all four rulings favorable to the taxpayer)
• Key authorities: IRC §§ 61, 1001, 2501, 2601, 2036, 2037, 2038; Treas. Reg. § 26.2601-1(b)(4)(i)(A), (C), (D)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202216002 Third Party Communication: None
Release Date: 4/22/2022 Date of Communication: Not Applicable
Index Number: 2601.00-00, 2501.00-00,
2036.00-00, 2038.00-00, Person To Contact:

           61.00-00, 1001.00-00                             -------------------------, ID No. ----------------
                                                            Telephone Number:

-------------------------------------- --------------------
----------------------------------------------------- Refer Reply To:
------------------------------------ CC:PSI:B04
------------------------------- PLR-115399-21
------------------------------- Date:
January 21, 2022

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

Legend

Grantor = -------------------------
Spouse = ------------------------
Trust = ----------------------------------------------------------
---------------------
Child 1 = -----------------------------------------------------
Child 2 = -----------------------------------------------------
Child 3 = -------------------------------------------
Child 4 = --------------------------------------------------
Child 5 = ----------------------------------------------------
Child 6 = ---------------------------------------------------
Trust 1 = ------------------------------------------------------------------------
-----------------------------------------------------------
Trust 2 = ------------------------------------------------------------------------
-------------------------------------
Trust 3 = ------------------------------------------------------------------------
------------------------
Trust 4 = ----------------------------------------------------
------------------------------------------------------------------
Trust 5 = ------------------------------------------------------------------------
------------------------------------------------
Trust 6 = ------------------------------------------------------------------------
---------------------------------
Trustee = ------------------------------------------
Court = --------------------------------------
State A = ------------
PLR-115399-21 2

State B = -------------
State A Statute 1 = ------------------------------------------------------------------------
State A Statute 2 = ------------------------------------------------------------------------
Date 1 = -------------------
Date 2 = -----------------------
Date 3 = -------------------------
Date 4 = --------------------------
Date 5 = ----------------------------
Date 6 = -------------------------
Year 1 = ---------
Year 2 = -------
Bank = -------------------------------------------
Individual = ----------------------------------
x = ------
y = ---
z = ---
w = -------
Case 1 = ----------------------------------------------------------
Case 2 = --------------------------------------------------------
Case 3 = -----------------------------------------------------------

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

   This letter responds to your letter, dated July 12, 2021, submitted by your

authorized representative, requesting income, gift, estate, and generation-skipping
transfer (GST) tax rulings with respect to a judicial modification of certain trusts.

   On Date 1, Grantor created an irrevocable trust, Trust, for the benefit of his

children, Child 1 through Child 6, and their descendants. In Years 1 and 2, Grantor and
his spouse, Spouse, made gifts to Trust and allocated their respective GST exemption
to those gifts, resulting in an inclusion ratio of x. No additional contributions were made
to Trust. Years 1 and 2 are years after September 25, 1985.

    Article 2.01(a) of Trust provides that the trustee may distribute the net income

and principal to Grantor’s descendants, at such times and in such amounts, shares and
interests as the trustee determines.

  Article 2.03(a) provides that Trust will terminate on the earlier of (1) the

exhaustion of the trust estate, or (2) the later of y years after Date 1 or the date of
Grantor’s death.

    Article 2.03(b) provides that as soon as practical following termination of Trust,

the trustee shall distribute any property remaining in the trust estate to Grantor’s then
living descendants. If none of Grantor’s descendants is then living, the trustee shall
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distribute the trust estate to one or more qualified charities selected by the trustee, in
such amounts, shares and interests as the trustee shall determine.

    Article 3.01 and 3.03 provides that if upon termination of Trust property is

distributable to a person which is incapacitated, notwithstanding the provision under
which such property is distributable, the trustee shall hold such property in trust for the
beneficiary. Such trust shall terminate on the earlier of (1) the exhaustion of the trust
estate, (2) the earliest on which the beneficiary is no longer incapacitated or (3) the date
of the beneficiary’s death.

    Article 4.07 provides that the trustee’s discretionary power to make outright

distributions of principal to a beneficiary of a trust includes the power to make
distributions in further trust for the beneficiary on such terms as the trustee determines.
The trustee may not exercise the foregoing power in a way that violates the applicable
rules against perpetuities or similar rules, and any attempt to do so shall be ineffectual.

    Article 6.02(p) provides that the trustee has the power to divide any trust into two

or more separate trusts with terms identical to those of the original trust. With respect to
the separate trusts, the trustee may make tax elections differently, exercise
discretionary powers differently, and invest the property comprising the trusts differently.

   At the time Trust was executed, State A Statute 1 provided that when a

nonvested property interest is created, the interest must vest or terminate no later than
twenty-one years after the death of an individual then alive; or vest or terminate within
ninety years after its creation.

    On Date 2, the trustee of Trust entered into six new irrevocable trust agreements,

creating six new trusts, Trusts 1 through 6. The provisions of the six new trusts are
substantially the same as Trust, except that each separate trust agreement is for the
benefit of one of the six children of Grantor (Child 1 through Child 6) and the child’s
descendants. On Date 2, the trustee exercised the power conferred upon him pursuant
to Article 4.07 of Trust and distributed nearly all of the assets of Trust, in equal shares,
to the respective trustees of Trusts 1 through 6. Trusts 1 through 6 are funded solely
with assets from Trust and these trusts have not received any additional funding.

 Article 2.11(h) of each new trust agreement grants Trust Protector the power to

remove any trustee of any trust created under the trust agreement.

   Article 2.11(k) of each new trust agreement grants Trust Protector the power to

modify the trusts agreements to “[c]orrect ambiguities, including scrivener’s errors, that
might otherwise require court construction or reformation.”

    Article 3.04 provides that the trustee of each new trust, other than an Interested

Trustee, may distribute to the Primary Beneficiary (one of the six children for whom the
trust is created) and any one or more of the Primary Beneficiary’s descendants, as
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much of the net income and principal of his or her trust as the trustee may determine is
advisable for any purpose.

    Article 3.10 provides that each new trust will terminate at the time provided in

Article 8.01. Upon termination, if directed by the exercise of a testamentary limited
power of appointment, the trustee shall divide the trust into a charitable portion and
noncharitable portion. The charitable portion shall be distributed to the charities named
in the power of appointment in the proportions allocated. The trustee shall divide the
remaining trust property into equal shares for the then living descendants of the Child,
per stirpes. The share for any beneficiary that has attained the age of z shall be
distributed outright to that beneficiary. The shares for all other beneficiaries shall be
held in trust under the same terms and conditions of the new trust until the beneficiary
attains the age of z, at which time the remaining principal and accumulated income shall
be distributed outright to the beneficiary.

  Article 5 of each new trust provides terms for administration of trusts for

underage and incapacitated beneficiaries.

     Article 8.01 of each new trust agreement provides that, notwithstanding any

other provision of the trust agreement, unless terminated earlier under other provisions
of the agreement, each trust created under the agreement will terminate upon the
earlier of: (a) the latter of the date twelve months after the date a controlling interest of
Bank or its successor is sold by the descendants of Grantor and Spouse or the date
seventy-five years after the date of the death of Child, or (b) the expiration of the longest
period that property may be held in trust under this agreement without violating the
applicable rule against perpetuities. The trustee may also extend the period provided in
subsection (a) by a period of twenty-five years if it determines that it is in the best
interests of the beneficiaries to do so. If the applicable rule against perpetuities for
trusts is determined by reference to the death of the last to die among a group of
individuals living on the date of this agreement is signed, the group of individuals shall
consist of the descendants of the paternal and maternal grandparents of the respective
child and the descendants of Individual, who are living at the time the trust agreement is
signed. At that time, the remaining trust property shall vest in and be distributed in
accordance with the provisions of Article 3.06.

   Article 8.04 provides that Trust Protector may, at any time, remove all or any part

of the property or the situs of administration of the trust from one jurisdiction to another.

   Article 8.06(d) provides that the new trust agreement shall be governed,

construed and administered according to the laws of State A.

   A few months prior to the execution of Trusts 1 through 6, State A modified State

A Statute 1 to provide that interests must vest w years from the date of its creation.
State A Statute 2.
PLR-115399-21 5

   Grantor died on Date 3, survived by all of his six children.

    On Date 4, Trust Protector exercised his power to remove the trustee and

replaced the trustee with the predecessor of the current trustee, Trustee, located in
State B. Trust Protector also exercised his power to change the situs of administration
of the trusts from State A to State B. However, State A law continued to govern the
validity of the trusts, including the issue of whether the trusts violate a rule against
perpetuities.

   On the same date, Trust Protector also exercised his power to correct Article

8.01 of the new trusts. Article 8.01 specifically referenced death of the last to die among
a group of individuals living on the “date of this agreement is signed” and identifies a
class of individuals “who are living at the time this agreement is signed.” Trust was
modified to provide that the rule against perpetuities for the trusts is determined by
reference to the death of the last to die among a group of individuals living on a date an
interest is created and the group of individuals consist of descendants of the respective
child and Individual who were living on Date 1, the date Trust was created.

    On Date 5, Trustee petitioned Court to reform Trusts 1 through 6 so that each

new trust is consistent with Grantor’s intent in creating Trust and that each new trust is
subject to State A Statute 1, which was in effect when Trust was created. Trustee
expressed concern that if the “applicable rule against perpetuities” referenced in Article
8.01(a) is construed to mean the State A Statute 2, rather than State A Statute 1, the
trusts would last longer than Grantor intended and the validity of the trusts could be
brought into question. It is represented that Grantor intended that the interests of the
beneficiaries vest no later than a period provided by State A Statute 1, which is
comparable to the period allowed for extending the vesting of interests in a GST exempt
trust under § 26.2601-1(b)(4)(i)(A). Trustee asserts that the scrivener made a mistake
by not adding a phrase providing that the new trusts are subject to the rule against
perpetuities in existence at the time that Trust was created.

    Trustee also asserts that there is an ambiguity in Article 3.10, which requires the

trusts to terminate according to the termination provisions of Article 8.01 of Trust.
However, Article 3.10 includes conflicting language providing that any share for a
beneficiary who is under age z is to be held in trust until he or she reaches that age.
The conflicting language which extends the trusts for beneficiaries under age z is
inconsistent with the intent of the Grantor and the draftsman that the interests of the
beneficiaries vest no later than a period provided by the State A Statute 1 in effect when
Trust was created. Accordingly, Trustee asserts that the continuation of property in
trust for persons under age z in Article 3.10 was a scrivener’s error.

   Finally, Trustee asserts that a scrivener’s error resulted in an incorrect cross

reference at the end of Article 8.01 of each trust agreement. Article 8.01 states that
upon the trust’s termination, the trust property shall vest in and be distributed in
accordance with the provisions of Article 3.06. However, section 3.10, not Article 3.06,
PLR-115399-21 6

is the provision pertaining to the distribution of trust property upon its termination.
Article 3.10 appropriately cross references Article 8.01.

    Under State B law, Court has the authority to reform a trust under common law if

there is clear and convincing proof that there was a mistake in the drafting of the trust
instrument and that the parties’ actual agreement was not accurately reflected in their
executed agreement. See Cases 1, 2, and 3.

    On Date 6, Court ordered that Article 8.01 of Trusts 1 through 6 be reformed to

provide that each trust, if not earlier terminated, must terminate upon the earlier of: (a)
the latter of the date twelve months after the date a controlling interest of Bank or its
successor is sold by the descendants of Grantor and Spouse, or the date seventy -five
years after the death of Child, or (b) the date which is immediately prior to the expiration
of 21 years after the death of the last to die among the descendants of the paternal and
maternal grandparents of Child and the descendants of Individual, who were living on
Date 1, which is the date Trust was created. At that time, the remaining trust property
will vest in and be distributed in accordance with section 3.10. The last two sentences
of Article 3, section 3.10 are removed and replaced with the following new sentence:
The share for each individual shall be distributed outright to the beneficiary, subject only
to Article 5.

   You have requested the following rulings:

   1. The reformation of Trusts 1 through 6 to correct scrivener’s errors pursuant to
      Court order does not give rise to any taxable income or cause Child 1 through
      6 or Trusts 1 through 6 to recognize gain or loss on the sale or disposition of
      any trust property.

   2. The transfer of Trust assets to Trusts 1 through 6 and the reformation of
      Trusts 1 through 6 to correct scrivener’s errors pursuant to Court order does
      not alter the inclusion ratio of Trust or Trusts 1 through 6.

   3. The reformation of Trusts 1 through 6 will not result in Child 1 through 6
      making a taxable gift.

   4. The reformation of Trusts 1 through 6 to correct scrivener’s errors pursuant to
      Court order will not cause any portion of Trusts 1 through 6 to be included in
      Child 1 through 6’s gross estate prior to the termination of Trusts 1 through 6.

Law and Analysis

   Ruling #1

PLR-115399-21 7

   Section 61(a)(3) of the Internal Revenue Code provides that gross income

includes all income from whatever source derived, including gains derived from dealings
in property and under § 61(a)(15), from an interest in a trust.

   Section 1001(a) provides that the gain from the sale or other disposition of

property shall be the excess of the amount realized over the adjusted basis provided in
§ 1011 for determining gain, and the loss shall be the excess of the adjusted basis
provided in § 1011 for determining loss over the amount realized.

   Section 1001(b) provides that the amount realized from the sale or other

disposition of property shall be the sum of any money received plus the fair market
value of the property (other than money) received. Under § 1001(c) the entire amount of
gain or loss on the sale or exchange of property shall be recognized, except as
otherwise provided.

   Section 1.1001-1(a) of the Income Tax Regulations provides that except as

otherwise provided in subtitle A of the Code, the gain or loss realized from the exchange
of property for other property differing materially either in kind or in extent, is treated as
income or as loss sustained.

    Accordingly, based on the information submitted and the representations made,

we conclude that there will be no sale or other disposition because there will be no
transfer of money or property. In accordance with Court’s order, the changes to Trusts
1 through 6 clarify Grantor’s original intent. If Court determines that a trust agreement
contains ambiguities or mistakes and resolves those ambiguities or mistakes in a way
that effectuates the testator’s intentions, there is no disposition event for purposes of
§ 1001. Therefore, neither Trusts 1 through 6 nor Child 1 through 6 will recognize gain
or loss under § 1001 upon reformation in accordance with Court’s Order. The
amendments to Trusts 1 through 6 will not cause Child 1 through 6 or Trusts 1 through
6 to recognize any gain or loss from sale or other disposition of property under §§ 61
and 1001.

   Ruling #2

    Section 2601 imposes a tax on every generation-skipping transfer (GST), which

is defined under § 2611 as a taxable distribution, a taxable termination, and a direct
skip.

  Section 2631 provides that every individual is allowed a GST exemption amount

which may be allocated by the individual or the individual’s executor to any property with
respect to which the individual is the transferor.

   Section 1433(a) of the Tax Reform Act of 1986 (Act) and § 26.2601-1(b)(1) of the

Generation-Skipping Transfer Tax Regulations provide that the GST tax is not
applicable to any GST under a trust that was irrevocable on September 25, 1985, but
PLR-115399-21 8

shall apply to the extent that the transfer is not made out of corpus added to the trust
after September 25, 1985 (or out of income attributable to corpus so added).

    Trust and Trusts 1 through 6 became irrevocable after September 25, 1985.

Grantor and Spouse each allocated his/her respective GST exemption to create an
inclusion ratio of x in Trust. No guidance has been issued concerning judicial
modifications that may affect the status of trusts that are exempt from GST tax because
sufficient GST exemption was allocated to the trust to create an inclusion ratio, as
opposed to obtaining a GST exempt status under the Act and § 26.2601-1(b)(1). At a
minimum, a modification that would not affect the GST status of a trust that was
irrevocable on September 25, 1985, should similarly not affect the exempt status of
such a trust. Accordingly, the following regulations are applied to determine whether
the transfer of assets from Trust to Trusts 1 through 6 and the reformation of Trusts 1
through 6 pursuant to Court order will not cause a change in the inclusion ratio in Trust
and Trusts 1 through 6.

    Section 26.2601-1(b)(1)(v) provides, in relevant part, that where any portion of a

trust remains in the trust after the post-September 25, 1985 release, exercise, or lapse
of a power of appointment over the portion of the trust, and the release, exercise, or
lapse is treated to any extent as a taxable transfer under chapter 11 or chapter 12, the
value of the entire portion of the trust subject to the power that was released, exercised,
or lapsed is treated as if that portion had been withdrawn and immediately retransferred
to the trust at the time of the release, exercise, or lapse.

    Section 26.2601-1(b)(4)(i) provides rules for determining when a modification,

judicial construction, settlement agreement, or trustee action with respect to a trust that
is exempt from the GST tax under § 26.2601-1(b)(1), (b)(2), or (b)(3), will not cause the
trust to lose its exempt status. The rules of § 26.2601-1(b)(4)(i) are applicable only for
purposes of determining whether an exempt trust retains its exempt status for GST tax
purposes. Thus (unless specifically noted), the rules do not apply in determining, for
example, whether the transaction results in a gift subject to gift tax or may cause the
trust to be included in the gross estate of any beneficiary, or may result in the realization
of gain for purposes of § 1001.

    Section 26.2601-1(b)(4)(i)(A) provides, in part, that the distribution of trust

principal from an exempt trust to a new trust or retention of trust principal in a continuing
trust will not cause the new trust or continuing trust to be subject to the provisions of
chapter 13, if (1) the terms of the governing instrument of the exempt trust authorize
distributions to the new trust or the retention of trust principal in a continuing trust,
without the consent or approval of any beneficiary or court; and (2) the terms of the
governing instrument of the new or continuing trust do not extend the time for vesting of
any beneficial interest in the trust in a manner that may postpone or suspend the
vesting, absolute ownership, or power of alienation of an interest in property for a
period, measured from the date the original trust became irrevocable, extending beyond
PLR-115399-21 9

any life in being at the date the original trust became irrevocable plus a period of 21
years, plus if necessary, a reasonable period of gestation.

     Section 26.2601-1(b)(4)(i)(C) provides that a judicial construction of a governing

instrument to resolve an ambiguity in the terms of the instrument or to correct a
scrivener’s error will not cause an exempt trust to be subject to the provisions of chapter
13, if the judicial action involves a bona fide issue; and the construction is consistent
with applicable state law that would be applied by the highest court of the state.

    Section 26.2601-1(b)(4)(i)(D) provides that a modification of the governing

instrument of an exempt trust (including a trustee distribution, settlement, or
construction that does not satisfy paragraph (b)(4)(i)(A), (B), or (C) of this section) by
judicial reformation, or nonjudicial reformation that is valid under applicable state law,
will not cause an exempt trust to be subject to the provisions of chapter 13, if the
modification does not shift a beneficial interest in the trust to any beneficiary who
occupies a lower generation (as defined in § 2651) than the person or persons who held
the beneficial interest prior to the modification, and the modification does not extend the
time for vesting of any beneficial interest in the trust beyond the period provided for in
the original trust.

    In this case, pursuant to Article 4.07 of Trust, the trustee exercised its

discretionary authority to transfer the assets of Trust to Trusts 1 through 6. This
exercise satisfies the requirement of § 26.2601-1(b)(4)(i)(A)(1). The exercise of such
authority must also satisfy § 26.2601-1(b)(4)(i)(A)(2) which requires Trusts 1 through 6
to retain the same perpetuities period as set forth in Trust. In this case, Article 8.01,
Perpetuities Termination Provision, of Trusts 1 through 6 could be interpreted to extend
the period for vesting of interests in the property of Trusts 1 through 6 for a period
longer than allowed under § 26.2601-1(b)(4)(i)(A)(2). When Trust was executed, State
A Statute 1 met the requirements of this subparagraph. However, immediately prior to
the execution of Trusts 1 through 6, State A Statute 1 was modified and replaced with
State A Statute 2, which is at odds with the requirements of subparagraph (2). The
failure of Trusts 1 through 6 to expressly provide that State A Statute 1 continued to
apply created ambiguities. As such the language in Trusts 1 through 6 could be
interpreted to provide for a rule against perpetuities that extends beyond the
requirements under § 26.2601-1(b)(4)(i)(A)(2). It is represented that Grantor and
Spouse never intended Trusts 1 through 6 to extend the time for vesting beyond the
period in Trust. It is represented that Grantor intended that the “applicable rule against
perpetuities” of Article 8.01 of Trusts 1 through 6 would satisfy subparagraph (2). Court
Order reforms Article 8.01 and Article 3.10 to conform to the requirements of § 26.2601-
1(b)(4)(i)(A)(2). Accordingly, the reformation of Trusts 1 through 6 pursuant to Court
order satisfies the requirements of subparagraph (2). Accordingly, based upon the facts
submitted and representations made, we conclude that the transfer and subsequent
reformation of Trusts 1 through 6 satisfy the requirements of § 26.2601-1(b)(4)(i)(A).
Therefore, we conclude that the transfer of Trust assets to Trusts 1 through 6 and the
reformation of Trusts 1 through 6 will not alter the inclusion ratio of the trusts.
PLR-115399-21 10

   Ruling #3

    Section 2501 imposes a tax for each calendar year on the transfer of property by

gift during such calendar year by any individual, resident or nonresident.

    Section 2511(a) provides that the gift tax shall apply whether the transfer is in

trust or otherwise, whether the gift is direct or indirect, and whether the property is real
or personal, tangible or intangible.

   Section 25.2511-1(c) provides that any transaction in which an interest in

property is gratuitously passed or conferred upon another, regardless of the means or
device employed, constitutes a gift subject to tax.

   Section 2512(a) provides that if the gift is made in property, the value thereof at

the date of the gift is considered the amount of the gift.

   Section 2512(b) provides that where property is transferred for less than

adequate and full consideration in money or money’s worth, then the amount by which
the value of the property exceeded the value of the consideration is deemed to be a gift,
and is included in computing the amount of gifts made during the calendar year.

   In this case, the reformation of Trusts 1 through 6 by Court order will not change

the beneficial interests of Child 1 through Child 6 in Trusts 1 through 6, respectively.
Accordingly, based upon the facts submitted and representations made, we conclude
that the reformation of Trusts 1 through 6 pursuant to Court order will not cause Child 1
through 6 to make gifts for purposes of § 2501.

   Ruling #4

  Section 2001 imposes a tax on the transfer of the taxable estate of every

decedent who is a citizen or resident of the United States.

   Section 2033 provides that the value of the gross estate includes the value of all

property to the extent of the interest therein of the decedent at the time of his or her
death.

   Section 2036(a) provides that the value of the gross estate shall include the

value of all property to the extent of any interest therein of which the decedent has at
any time made a transfer (except in the case of a bona fide sale for an adequate and full
consideration in money or money’s worth), by trust or otherwise, under which the
decedent has retained for life or for any period not ascertainable without reference to
the decedent’s death or for any period that does not in fact end before the death the
possession or enjoyment of, or the right to the income from, the property, or the right,
PLR-115399-21 11

either alone or in conjunction with any persons, to designate the persons who shall
possess or enjoy the property or the income therefrom.

    Section 2037 provides, generally, that the value of the gross estate shall include

the value of all property to the extent of any interest therein of which the decedent has
at any time made a transfer (except in case of a bona fide sale for an adequate and full
consideration in money or money’s worth), by trust or otherwise, where the enjoyment
thereof was subject at the date of his death to any change through the exercise of a
power (without regard to when or from what source the decedent acquired such power),
to alter, amend, revoke, or terminate, or where any such power is relinquished during
the 3-year period ending on the date of the decedent’s death.

   Section 2038(a) provides that the value of the gross estate shall include the

value of all property to the extent of any interest therein of which the dec edent has at
any time made a transfer (except in case of a bona fide sale for an adequate and full
consideration in money or money’s worth), by trust or otherwise, where the enjoyment
thereof was subject at the date of death to any change through the exerc ise of a power
(in whatever capacity exercisable) by the decedent alone or by the decedent in
conjunction with any other person (without regard to when or from what source the
decedent acquired such power) to alter, amend, revoke, or terminate, or when any such
power is relinquished during the 3-year period ending on the date of the decedent’s
death.

   For §§ 2036, 2037, or 2038 to apply, a decedent must have made a transfer of

property of any interest therein (except in case of a bona fide sale for adequate and full
consideration in money or money’s worth) under which the decedent retained an
interest in, or power over, the income or corpus of the transferred property.

   In this case, the reformation of Trusts 1 through 6 pursuant to Court order does

not constitute a transfer within the meaning of §§ 2036, 2037, or 2038. Accordingly,
based upon the facts submitted and representations made, we conclude that the
property of Trusts 1 through 6 will not be included in the respective gross estates of
Child 1 through Child 6 by reason of the order.

  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, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.
PLR-115399-21 12

   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 rulings, it is subject to verification on examination.

                                  Sincerely,



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

Enclosure:
Copy for § 6110 purpose

cc: