Estate received 120 days to make a late QTIP election

Plain-English summary

A decedent's trust divided at death into a family trust and a marital trust intended to qualify as qualified terminable interest property. The marital trust required all income to be paid to the surviving spouse at least quarterly and allowed principal distributions for the spouse's health, support, and maintenance. Although the estate timely filed Form 706, its accountant reported the marital trust assets as other property on Schedule M and reported no QTIP property, so no election was made. New counsel later discovered the error. The IRS found that the estate reasonably relied on a qualified tax professional and granted the surviving spouse, as personal representative, 120 days to make the QTIP election on a supplemental Form 706.

Ruling snapshot

• Question: Could the estate make a late QTIP election for the marital trust after omitting it from the timely estate tax return?
• Outcome: approved, 120-day extension
• Key authorities: IRC § 2056(b)(7); Treas. Reg. §§ 20.2056(b)-7, 301.9100-1, and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202249006                                              Third Party Communication: None
 Release Date: 12/9/2022                                        Date of Communication: Not Applicable
 Index Number: 2056.00-00, 2056.07-00,
               9100.00-00                                       Person To Contact:
                                                                ---------------, ID No. -----------------
 ------------------------------------                           Telephone Number:
 ------------------------------------------------------------   --------------------
 -------------------                                            Refer Reply To:
 ----------------------------------                             CC:PSI:04
 --------------------------------                               PLR-105948-22
                                                                Date:
          Re: -------------------------------------             September 12, 2022




LEGEND

Decedent    =             --------------------------------- ---------- -------
Spouse      =             ----------------------------------------------------
Date 1      =             -----------------
Date 2      =             --------------------------
Date 3      =             -------------------------
Date 4      =             --------------------------
Date 5      =             -------------------------
Accountant =              --------------------------
Accountant Firm =         ----------------------------------------




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

This letter responds to a letter dated March 10, 2022, submitted on behalf of Decedent’s
estate, 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 (Code).

The facts and representations submitted are as follows. On Date 1, Decedent
established a revocable trust, Trust. Trust was amended on Date 2 and Date 3. Under
Decedent’s will, Decedent bequeathed certain tangible property to Spouse and the
residue to Trust. Trust became irrevocable upon Decedent’s death on Date 4.

Article III, Section 3 of Trust provides that upon the death of Decedent, the trustee shall
divide Trust into two separate trusts: Family Trust and Marital Trust. Under Article IV,
all the income of Marital Trust is required to be paid to Spouse during her lifetime in
PLR-105948-22                                 2

regular installments, not less frequently than quarter-annually. Trust further provides
that principal may be paid to or for the benefit of Spouse as the trustee considers
necessary for her health, support, and maintenance. Article IV, Section 3 is entitled
“Qualified Terminable Interest Trust” and provides that “Marital Trust is to be qualified
as a qualified terminable interest” and the trustee is instructed to cooperate with the
legal representative of Decedent’s estate in making that election in the event that the
Internal Revenue Service regulations do not allow the trustee to make the election.

Article IV provides, in relevant part, that Spouse has a limited testamentary power of
appointment to appoint the principal, or any portion thereof, to one or more or all of the
living descendants of Decedent or to any trust or organization described in § 2055 of the
Code. To the extent Spouse fails to effectively exercise the limited testamentary power
of appointment, the principal and undistributed income of Marita Trust shall be added to
the Descendants’ Trust as provided in Article VI.

Spouse, in her capacity as personal representative of the estate, retained Accountant of
Accounting Firm to prepare Form 706, United States Estate (and Generation-Skipping
Transfer) Tax Return for Decedent’s estate. On Date 5, the Form 706 was timely filed
(with extension) on behalf of the estate. The Form 706 reported Decedent’s Marital
Trust assets as “all other property” on Schedule M and reported no “QTIP property.”
Thus, no QTIP election was made with respect to Marital Trust. After Form 706 was
filed, new counsel was retained to advise Spouse in her estate planning. It was at this
time that Decedent's Form 706 was reviewed and the failure to properly report Marital
Trust on Schedule M and make the QTIP election was discovered.

You have requested an extension of time under §§ 301.9100-1 and 301.9100-3 to make
the QTIP election under § 2056(b)(7) to treat Marital Trust as QTIP property.

LAW AND ANALYSIS

Section 2001(a) of the Code 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-105948-22                                  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. 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.

Based on the facts submitted and the representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Therefore, Spouse, as the personal
representative 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 Marital Trust.

The election should be made on a supplemental Form 706 filed with the Internal
Revenue Service Center at the following address: Department of the Treasury, Internal
Revenue Service Center, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915.
A copy of this letter should be attached to the supplemental Form 706.
PLR-105948-22                                 4


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 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.

In accordance with the Power of Attorney on file with this office, we have sent a copy of
this letter to your authorized representatives.



                                        Sincerely,

                                        Associate Chief Counsel
                                        (Passthroughs & Special Industries)

                                           Karlene M. Lesho
                                  By:
                                        Karlene M. Lesho
                                        Senior Technician Reviewer, Branch 4
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)


Enclosure
      Copy for § 6110 purposes



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