120 days granted to elect out of automatic GST exemption allocation on gifts to children's trusts

Plain-English summary

A married couple set up three irrevocable trusts for their three children
and made gifts to them over two years. Gifts to this kind of trust are
"indirect skips" for generation-skipping transfer (GST) tax, so the law
automatically uses up part of the couple's limited GST exemption unless
they elect out. A taxpayer might want to elect out to save that exemption
for transfers more likely to actually skip a generation. The couple's
lawyers and accountants never told them they could elect out, so the
automatic allocation happened by default on both years' gift tax returns.
When the omission was found, the couple asked the IRS for an extension
under Section 2642(g), which lets the IRS grant more time for GST elections
when the taxpayer acted reasonably and in good faith (including reasonable
reliance on a tax professional) and relief would not prejudice the
government. The IRS granted 120 days to elect out by filing amended gift
tax returns (Forms 709) for both years.

Ruling snapshot

• Question: May taxpayers who never elected out of the automatic GST
  exemption allocation on gifts to trusts get an extension of time to do so?
• Outcome: Approved (120-day extension granted, via amended Forms 709)
• Key authorities: IRC § 2642(g); Treas. Reg. § 26.2642-7; IRC
  § 2632(c)(5); Treas. Reg. § 26.2632-1(b)(2)

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202614015                                             Third Party Communication: None
 Release Date: 4/3/2026                                        Date of Communication: Not Applicable
 Index Number: 2642.07-00
                                                               Person To Contact:
 ------------------------                                      ---------------- ID No. -----------------
 -------------------------                                     Telephone Number:
 ------------------------                                      ---------------------
 ----------------------------                                  Refer Reply To:
                                                               CC:PT&E:B04
 --------------------------------------                        PLR-114217-25
                                                               Date:
                                                               January 13, 2026




Legend
-
  Taxpayer                 =       ---------------------------------------------------
  Spouse                   =       -------------------------------------------------
  Trust 1                  =       --------------------------------------------------------------------------------
                                   -----------------------------------------------------------
 Trust 2                   =       --------------------------------------------------------------------------------
                                   ---------------------------------------------------------------------
 Trust 3                   =       --------------------------------------------------------------------------------
                                   ---------------------------------------------------------------------
 Child 1                   =       --------------------
 Child 2                   =       --------------------------
 Child 3                   =       -------------------------
 Law Firm                  =       -------------------
 Bank                      =       ---------------------
 Individual 1              =       -----------------------
 Individual 2              =       ------------------
 Accountant                =       -------------------
 Date 1                    =       --------------------------
 Date 2                    =       -----------------------
 Year 1                    =       -------
 Year 2                    =       ------


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

This letter responds to your authorized representative’s letter dated February 5, 2025,
and subsequent correspondence, requesting an extension of time under § 2642(g) of
the Internal Revenue Code (Code) and § 26.2642-7 of the Generation-Skipping
Transfer (GST) Tax Regulations to make an election under § 2632(c)(5) to have the
PLR-114217-25                                 2

automatic allocation rules under § 2632(c)(1) not apply with respect to certain transfers
to trusts.

The facts and representations submitted are summarized as follows:

On Date 1, a date after December 31, 2000, Taxpayer and Spouse (Taxpayers)
established Trust 1, an irrevocable trust, for the benefit of Child 1. Trust 1 has GST
potential.

On Date 2, Taxpayers established Trust 2, an irrevocable trust, for the benefit of
Child 2. Trust 2 has GST potential.

Also on Date 2, Taxpayers established Trust 3, an irrevocable trust, for the benefit of
Child 3. Trust 3 has GST potential.

In Year 1, Taxpayers made gifts of cash and other property to Trust 1, Trust 2, and
Trust 3 (Year 1 Transfers).

Several years later, in Year 2, Taxpayers made gifts of cash to Trust 2 and Trust 3
(Year 2 Transfers).

Taxpayers retained Law Firm to advise on estate planning matters, including drafting
Trust 1, Trust 2, and Trust 3. Individual 1 and Individual 2, private wealth advisors of
Bank, also supported the advice Taxpayers received regarding their wealth planning.
Individual 1 is also a CPA and prepared Taxpayers’ respective Year 1 Forms 709,
United States Gift (and Generation-Skipping Transfer) Tax Returns. Taxpayer and
Spouse elected to treat the transfers of each spouse as having been made one-half by
each spouse under § 2513. Taxpayer and Spouse timely filed their respective Forms
709 for Year 1. However, Taxpayers were not advised by Law Firm or any other tax
professional of the ability to elect out of the automatic allocation of GST exemption to
the transfers to Trust 1, Trust 2, and Trust 3. As a result, Taxpayers did not elect out of
the automatic allocation of GST exemption for the Year 1 Transfers to Trust 1, Trust 2,
and Trust 3.

Individual 1 died prior to Year 2. Taxpayers retained Accountant to prepare Taxpayers’
respective Year 2 Forms 709. Taxpayer and Spouse elected to treat the transfers of
each spouse as having been made one-half by each spouse under § 2513. Taxpayer
and Spouse timely filed their respective Forms 709 for Year 2. However, Accountant
did not advise Taxpayers of the ability to elect out of the automatic allocation of GST
exemption to the transfers made to Trust 2 and Trust 3. As a result, Taxpayers did not
elect out of the automatic allocation of GST exemption for the Year 2 Transfers to
Trust 2 and Trust 3.

Taxpayer requests an extension of time under § 2642(g) and § 26.2642-7 to elect out of
the automatic allocation of GST exemption under § 2632(c)(5)(A)(i) with respect to
PLR-114217-25                                  3

Taxpayer’s Year 1 Transfers to Trust 1, Trust 2, and Trust 3, and Year 2 Transfers to
Trust 2 and Trust 3.

LAW AND ANALYSIS

Section 2601 provides that a tax is imposed on every generation-skipping transfer
(GST). Section 2611(a) provides that the term “generation-skipping transfer” means:
(1) a taxable distribution; (2) a taxable termination; and (3) a direct skip.

Section 2602 provides that the amount of GST tax is the taxable amount multiplied by
the applicable rate. Section 2641(a) defines the applicable rate as the product of the
maximum federal estate tax rate and the inclusion ratio with respect to the transfer.

Section 2513(a)(1) provides, generally, that a gift made by one spouse to any person
other than the donor’s spouse is considered for purposes of the gift tax as made one-
half by the donor and one-half by the donor’s spouse, but only if at the time of the gift
each spouse is a citizen or resident of the United States.

Section 25.2513-1(b)(4) of the Gift Tax Regulations provides that the consent is
effective only if both spouses signify their consent to treat all gifts made to third parties
during that calendar period by both spouses while married to each other as having been
made one-half by each spouse. Such consent, if signified with respect to any calendar
period, is effective with respect to all gifts made to third parties during such calendar
period except, in part, if one spouse transferred property in part to his or her spouse and
in part to third parties, the consent is effective with respect to the interest transferred to
third parties only insofar as such interest is ascertainable at the time of the gift and
severable from the interest transferred to his or her spouse.

Section 2631(a) provides that, for purposes of determining the inclusion ratio, 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 2632(a)(2) provides that the manner in which allocations
are to be made shall be prescribed by forms or regulations issued by the Secretary.

Section 2632(c)(1) provides that if any individual makes an indirect skip during such
individual’s lifetime, any unused portion of such individual’s GST exemption shall be
allocated to the property transferred to the extent necessary to make the inclusion ratio
for such property zero. If the amount of the indirect skip exceeds such unused portion,
the entire unused portion shall be allocated to the property transferred.
PLR-114217-25                                 4


Section 2632(c)(3)(A) provides that the term “indirect skip” means any transfer of
property (other than a direct skip) subject to the tax imposed by chapter 12 made to a
GST trust. Section 2632(c)(3)(B) provides, in relevant part, that the term “GST trust”
means a trust that could have a GST with respect to the transferor unless an exception
listed in § 2632(c)(3)(B)(i)-(vi) applies.

Section 2632(c)(5)(A)(i) provides, in relevant part, that an individual may elect to have
the automatic allocation rules of § 2632(c)(1) not apply to -- (I) an indirect skip, or
(II) any or all transfers made by such individual to a particular trust. Section
2632(c)(5)(B)(ii) provides, in relevant part, that the election under § 2632(c)(5)(A)(i)(II)
may be made on a timely-filed gift tax return for the calendar year for which the election
is to become effective.

Section 26.2632-1(b)(2)(i) of the Generation-Skipping Transfer Tax Regulations
provides that in the case of an indirect skip made after December 31, 2000, to which
§ 2642(f) (relating to transfers subject to the ETIP) does not apply, the transferor’s
unused GST exemption is automatically allocated to the property transferred (but not in
excess of the fair market value of the property on the date of the transfer). This
automatic allocation is effective whether or not a Form 709 is filed reporting the transfer
and is effective as of the date of the transfer to which it relates. An automatic allocation
is irrevocable after the due date of the Form 709 for the calendar year in which the
transfer is made.

Section 26.2632-1(b)(2)(ii) provides that, except as otherwise provided, the transferor
may prevent the automatic allocation of GST exemption with regard to an indirect skip
by making an election as provided in § 26.2632-1(b)(2)(iii).

Section 26.2632-1(b)(2)(iii)(A) provides, in relevant part, that a transferor may prevent
the automatic allocation of GST exemption (elect out) with respect to any transfer or
transfers constituting an indirect skip made to a trust or to one or more separate shares
that are treated as separate trusts under § 26.2654-1(a)(1). A transferor may elect out
with respect to: (1) one or more prior-year transfers subject to § 2642(f) (regarding
ETIPs) made by the transferor to a specified trust or trusts; (2) one or more (or all)
current-year transfers made by the transferor to a specified trust or trusts; (3) one or
more (or all) future transfers made by the transferor to a specified trust or trusts; and
(4) all future transfers made by the transferor to all trusts (whether or not in existence at
the time of the election out); or (5) any combination of (1) through (4).

Section 26.2632-1(b)(2)(iii)(B) provides that to elect out, the transferor must attach an
election out statement to a Form 709 filed within the time period provided in § 26.2632-
1(b)(2)(iii)(C). In general, the election out statement must identify the trust, and
specifically must provide that the transferor is electing out of the automatic allocation of
GST exemption with respect to the described transfer or transfers. Under § 26.2632-
1(b)(2)(iii)(C), to elect out, the Form 709 with the attached election out statement must
PLR-114217-25                                 5

be filed on or before the due date for timely filing the Form 709 for the calendar year in
which: (1) for a transfer subject to § 2642(f), the ETIP closes; or (2) for all other
elections out, the first transfer to be covered by the election out was made.

Section 2642(b)(1)(A) provides that, except as provided in § 2642(f), if the allocation of
the GST exemption to any transfers of property is made on a gift tax return filed on or
before the date prescribed by § 6075(b) for such transfer or is deemed to be made
under § 2632(b)(1) or (c)(1), the value of such property for purposes of § 2642(a) shall
be its value as finally determined for purposes of chapter 12 (within the meaning of
§ 2001(f)(2)), or, in the case of an allocation deemed to have been made at the close of
an estate tax inclusion period, its value at the time of the close of the estate tax
inclusion period.

Section 2642(g)(1)(A) provides, generally, 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).

Section 2642(g)(1)(B) provides that in determining whether to grant relief under
§ 2642(g)(1), 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, the time for making the allocation (or election) shall be treated as if not
expressly prescribed by statute.

Section 26.2642-7 sets forth the procedures for requesting an extension of time to make
an allocation of GST exemption described in § 2642(b)(1) or (2), and an election under
§ 2632(b)(3) or (c)(5), and the standards used to determine whether relief may be
granted.

Section 26.2642-7(d)(1) provides that requests for relief will be granted when and to the
extent that the transferor or the executor of the transferor’s estate provides evidence
establishing to the satisfaction of the IRS that the transferor or the executor of the
transferor’s estate acted reasonably and in good faith, and that the grant of relief will not
prejudice the interests of the government.

Section 26.2642-7(d)(2) provides a nonexclusive list of factors that will be considered in
determining whether the transferor or the executor of the transferor’s estate acted
reasonably and in good faith for purposes of § 26.2642-7, including reasonable reliance
by the transferor or the executor of the transferor’s estate on the advice of a qualified
tax professional.

Based upon the facts submitted and the representations made, we conclude that the
requirements of § 26.2642-7 have been satisfied. Accordingly, Taxpayer is granted an
extension of time of 120 days from the date of this letter to elect out of the automatic
PLR-114217-25                                    6

allocation rules under § 2632(c)(5)(A)(i) for Taxpayer’s Year 1 Transfers to Trust 1,
Trust 2, and Trust 3, and Year 2 Transfers to Trust 2 and Trust 3. The election should
be made on amended Forms 709 for Year 1 and Year 2. The amended Forms 709
should be filed with the Internal Revenue Service Center at the following address:
Internal Revenue Service Center, Attn: E&G, Stop 824G, 7940 Kentucky Drive,
Florence, KY 41042-2915. You should attach a copy of this letter to the amended
Forms 709.

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

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.


                                    Sincerely,

                                           Karlene M. Lesho
                                    ______________________________
                                    Karlene M. Lesho
                                    Chief, Branch 4
                                    Office of the Associate Chief Counsel
                                    (Passthroughs, Trusts, and Estates)


Enclosure:
      Copy for § 6110 purposes
PLR-114217-25                                               7

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