Trustee gets 120 more days to certify that a non-citizen surviving spouse became a U.S. citizen, ending the special estate tax on a QDOT

Plain-English summary

When someone dies leaving property to a surviving spouse who is not a U.S. citizen, the estate normally cannot claim the unlimited marital deduction unless the property goes into a "qualified domestic trust" (QDOT). A QDOT keeps the deferred estate tax collectible: a special tax applies to distributions of principal during the spouse's life and to whatever is left when the spouse dies. That special tax goes away, however, if the surviving spouse later becomes a U.S. citizen (having stayed a U.S. resident the whole time) and the U.S. trustee notifies and certifies that fact to the IRS on a Form 706-QDT. Here the surviving spouse did become a citizen, but neither the estate's attorney nor its CPA told the trustee about the certification requirement, so no Form 706-QDT was filed. The trustee only learned of the requirement after the spouse died. The IRS granted relief under Treasury Regulation section 301.9100-3, finding the trustee acted reasonably and in good faith (both unaware of the requirement and reliant on tax professionals who failed to advise it). The trustee has 120 days from the date of the letter to file the Form 706-QDT certifying the spouse's citizenship, which frees the trust from the QDOT estate tax.

Ruling snapshot

• Question: Should the trustee get an extension under Treas. Reg. § 301.9100-3 to file the late notice and certification (Form 706-QDT) that the surviving spouse became a U.S. citizen?
• Outcome: Approved (120-day extension granted; trustee acted reasonably and relied on tax professionals)
• Key authorities: IRC §§ 2056A, 2056(d); Treas. Reg. §§ 20.2056A-10, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202244005 Third Party Communication: None
Release Date: 11/4/2022 Date of Communication: Not Applicable
Index Number: 2056A.00-00, 9100.00-00
Person To Contact:
--------------------------------- ----------------, ID No. -----------------
---------------------------- Telephone Number:
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------------------------------ Refer Reply To:
CC:PSI:4
PLR-105945-22
Re: ---------------------------------------------- Date:
------- August 12, 2022

Legend

Trustee = ----------------------------------------------------------------------------------------------
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Trust = ----------------------------------------------------------------------------------------------
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Spouse = ----------------------------------------------------------------------------------------------
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Decedent = ----------------------------------------------------------------------------------------------
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Date 1 = -----------------------
Attorney = ----------------------------------------------------------------------------------------------
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CPA = ----------------------------------------------------------------------------------------------
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Date 2 = -----------------------
Date 3 = ----------------------

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

This letter responds to a letter dated March 8, 2022, and subsequent correspondence,
submitted on behalf of Trustee of Trust, requesting an extension of time pursuant to
§ 301.9100-3 of the Procedure and Administration Regulations to file the notice and
certification required under § 20.2056A-10(a)(2) of the Estate Tax Regulations that
Spouse has become a United States citizen.

The facts and representations submitted are as follows:

Decedent died on Date 1, survived by Spouse. Spouse was not a citizen of the United
States at that time. On Schedule M of Decedent’s timely filed Form 706, United States
PLR-105945-22 2

Estate (and Generation-Skipping Transfer) Tax Return, Decedent’s estate claimed a
marital deduction for property passing to Trust, a qualified domestic trust (QDOT).
Neither Attorney nor CPA advised Spouse or Trustee, a United States citizen, of the
notice and certification requirements under § 20.2056A-10(a)(2). Consequently,
Spouse and Trustee were unaware of the necessity to file a Form 706-QDT, U.S. Estate
Tax Return for Qualified Domestic Trusts, when Spouse became a United States citizen
on Date 2.

Spouse died on Date 3, after which Trustee first learned of the requirement to file a
Form 706-QDT. Spouse continuously resided in the United States from Date 1 through
Date 2. Trustee distributed only income from Trust to Spouse from Date 1 through
Date 3.

Trustee requests an extension of time under § 301.9100-3 to file a Form 706-QDT
notifying and certifying to the Internal Revenue Service that Spouse has become a
United States citizen, as required by § 20.2056A-10(a)(2).

LAW AND ANALYSIS

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 2056(a) provides that, for purposes of the tax imposed by § 2001, the value of
the taxable estate is determined by deducting from the value of the gross estate an
amount equal to the value of any interest in property that passes or has passed from the
decedent to the surviving spouse.

Section 2056(d)(1)(A) and 2056(d)(2)(A) provides that if the surviving spouse of the
decedent is not a United States citizen, no marital deduction is allowed under § 2056(a)
unless the property passes to the surviving spouse in a QDOT.

Under § 2056A(a), a QDOT is any trust in which (1) the trust instrument requires that at
least one trustee of the trust is an individual citizen of the United States or a domestic
corporation, and provides that no distribution (other than income) may be made from the
trust unless a United States trustee or domestic corporation has the right to withhold
from such distribution the tax imposed on such distribution; (2) the trust meets the
requirements as the Secretary may by regulations prescribe to ensure collection of the
tax imposed by § 2056A(b); and (3) an election is made by the executor of the decedent
with respect to the trust.

Under § 2056A(b)(1)(A), an estate tax is imposed on any distributions of principal from
the qualified domestic trust (other than on account of hardship) before the date of death
of the surviving spouse. In addition, under § 2056A(b)(1)(B), an estate tax is imposed
on the value of the property remaining in the qualified domestic trust on the date of the
death of the surviving spouse.
PLR-105945-22 3

Under § 2056A(b)(12) and § 20.2056A-10(a)(1) and (2), a QDOT is no longer subject to
the estate tax imposed under § 2056A(b) if the surviving spouse becomes a citizen of
the United States, the spouse was a resident of the United States at all times after the
death of the decedent and before becoming a United States citizen, and the U.S.
trustee of the QDOT notifies the Internal Revenue Service and certifies in writing that
the surviving spouse has become a United States citizen. Notice is to be made by filing
a final Form 706-QDT on or before April 15th of the calendar year following the year that
the surviving spouse becomes a citizen, unless an extension of time for filing is granted
under § 6081.

Under § 301.9100-1(c), the Commissioner may grant an 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 Code except subtitles E, G, H, and I.

Section 301.9100-2 provides an automatic extension of time for making certain
elections.

Section 301.9100-3(a) provides the standards used to determine whether to grant an
extension of time to make an election whose due date is prescribed by regulation (and
not expressly provided by statute). The time for filing the notice required under
§ 20.2056A-10(a)(2) is not expressly prescribed by statute. Accordingly, the trustee
may seek an extension of time to file with the Internal Revenue Service the required
notice and certification that Spouse became a United States citizen.

Requests for relief subject to § 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 the grant of relief will not prejudice the interests of the
government.

Under § 301.9100-3(b)(1), a taxpayer is deemed to have acted reasonably and in good
faith if the taxpayer (iii) failed to make the election because, after exercising reasonable
diligence (taking into account the taxpayer's experience and the complexity of the return
or issue), the taxpayer was unaware of the necessity for the election or (v) 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 upon the facts submitted and representations made, we conclude that the
requirements of § 301.9100-3 have been met. Therefore, Trustee is granted an
extension of time of 120 days from the date of this letter to file with the Internal Revenue
Service the required notice and certification that Spouse became a citizen of the United
States. The required notice and certification should be made on Form 706-QDT. The
Form 706-QDT should be filed with the Department of the Treasury, Internal Revenue
PLR-105945-22 4

Service Center, Kansas City, MO 64999. A copy of this letter should be attached to the
Form 706-QDT.

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.

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.

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.

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

                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                                By:      Melissa C. Liquerman
                                      Melissa C. Liquerman
                                      Senior Counsel, Branch 4
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)

Enclosure
Copy for § 6110 purposes

cc: