Extra time granted to make a late GST-exemption allocation after the return went unfiled
Plain-English summary
A taxpayer set up a trust before 2001 that split into two equal shares, one for
each of the taxpayer's two children, with lifetime interests passing to more
remote descendants. Those trusts could trigger the generation-skipping transfer
(GST) tax, a separate tax on gifts that skip down to grandchildren and later
generations. The taxpayer made gifts to the two sub-trusts and intended to
allocate the GST exemption to shield those gifts from the GST tax. The
accountant prepared the Form 709 gift tax return that would have made the
allocation, but never actually filed it, and the taxpayer only discovered this
years later. The taxpayer asked the IRS for an extension of time under Section
2642(g) and Regulation 26.2642-7 to make the allocation late. Because the
taxpayer reasonably relied on tax professionals and acted in good faith, and
relief would not prejudice the government, the IRS granted 120 days to make the
allocation on a Form 709 for that year. This matters because a missed GST
allocation can leave transfers exposed to a 40% GST tax, and 2642(g) relief is
the standard cure when a professional dropped the ball.
Ruling snapshot
- Question: Should the taxpayer get an extension of time under § 2642(g) to allocate GST exemption to gifts made in a year when the gift tax return was never filed?
- Outcome: Approved (120 days from the date of the letter)
- Key authorities: IRC § 2642(g); Treas. Reg. § 26.2642-7; IRC §§ 2631, 2632
Full text (IRS public release)
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202618003 Third Party Communication: None
Release Date: 5/1/2026 Date of Communication: Not Applicable
Index Number: 2632.00-00, 2642.00-00,
2642.07-00 Person To Contact:
---------------- ID No. -----------------
------------------------- Telephone Number:
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------------------------ Refer Reply To:
---------------------------- CC:PT&E:B04
PLR-112066-25
In Re: ------------------------- Date:
February 02, 2026
LEGEND
Taxpayer = ----------------------------------------------------
Child A = -----------------------------------
Child B = ----------------------------------------
Date 1 = -------------------
Year 1 = -------
Year 2 =
Accountant = -------------------------
Attorney = ----------------------
Trust = ------------------------------------------------------------------------------------------
-----------
Trust A = ----------------------------------------------------
Trust B = ---------------------------------------------------------
Dear ---------------:
This letter responds to your authorized representative's letter dated June 3,
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) Regulations to allocate GST exemption to transfers to trusts.
The facts and representations submitted are summarized as follows:
On Date 1, in Year 1 (a date prior to December 31, 2001), Taxpayer created
Trust for the benefit of Taxpayer's children and descendants. Trust provides for the
division of trust principal into two equal shares, one for each of Taxpayer's children:
Trust A for the benefit of Child A and Trust B for the benefit of Child B. The trusts
provide lifetime interests for each child and after death to more remote issue. The trusts
have GST potential.
During Year 1, Taxpayer made gifts of cash and securities in various amounts to
Trust A and Trust B (Year 1 Transfers).
Taxpayer retained Attorney to provide advice with respect to estate planning,
including GST planning, and to prepare Trust. Taxpayer and Attorney had
contemporaneous communications supporting Taxpayer's intention to allocate
Taxpayer's GST exemption to the Year 1 Transfers. Taxpayer retained Accountant to
prepare and file Form 709, United States Gift (and Generation-Skipping Transfer) Tax
Return, for Year 1. Accountant prepared the Year 1 Form 709 reflecting the Year 1
Transfers; however Accountant does not have any record of having filed the Year 1
Form 709 as he had been instructed to by Taxpayer. Several years later in Year 2,
Taxpayer verified with the IRS that the Year 1 Form 709 had not been filed.
You have requested an extension of time under § 2642(g) and § 26.2642-7 to
allocate Taxpayer's GST exemption to the Year 1 Transfers to Trust A and Trust B.
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.
Section 2631(a), in effect at the time of the transfer, provided that, for purposes
of determining the inclusion ratio, every individual shall be allowed a GST exemption of
$1,000,000 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 allocations are to be
made as prescribed by forms or regulations issued by the Secretary.
Section 2642(b)(1), as in effect at the time of the transfer, provides, in part, that,
except as provided under § 2642(f), if the allocation of the GST exemption to any
property is made on a gift tax return filed on or before the date prescribed by § 6075(b),
(A) the value of such property for purposes of § 2642(a) shall be its value for purposes
of chapter 12 and (B) such allocation shall be effective on or after the date of such
transfer.
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.
Section 26.2642-7 of the Generation-Skipping Transfer Tax Regulations 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(c) provides, in part, that the amount of GST exemption that
may be allocated to a transfer as the result of relief granted under this section in no
event may exceed the amount of the transferor's unused GST exemption under
§ 2631(c) as of the date of the transfer.
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.
Section 26.2642-7(e)(2)(i) provides, in part, that relief will not be granted to the
extent that it would decrease or revoke an affirmative (but not automatic) allocation of
GST exemption under § 2632(a) or 2642(b) that was made on a Federal gift or estate
tax return, regardless of whether the transfer or the allocation of exemption was made
during the transferor's life or upon the transferor's death.
Section 26.2642-7(e)(2)(ii) provides the three narrow exceptions to the rule that
relief is not available to decrease or revoke an affirmative allocation of GST exemption
under § 2632(a) or § 2642(b): (A) an allocation of GST exemption is void to the extent
that the amount exceeds the amount needed to obtain an inclusion ratio of zero; (B) an
allocation is void if made to a trust, which at the time of allocation, has no GST potential;
and (C) a late allocation of GST exemption to a transfer or to a trust for certain transfers
made prior to December 31, 2000 is void to allow for relief to make a timely allocation of
GST exemption.
Based solely on the facts submitted and the representations made, we conclude
that the requirements of § 26.2642-7 have been satisfied. Taxpayer is granted an
extension of time of 120 days from the date of this letter to allocate Taxpayer's GST
exemption to the Year 1 Transfers to Trust A and Trust B.
The allocation of GST exemption should be made on a Form 709 for Year 1. The
Form 709 should be filed with the Internal Revenue Service at the following address:
Internal Revenue Service Center, Kansas City, MO 64999.
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.
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, Trusts, and Estates
Leslie H. Finlow
_________________________
By: Leslie H. Finlow
Senior Technician Reviewer, Branch 4
Office of the Associate Chief Counsel
(Passthroughs, Trusts, and Estates)
Enclosure
Copy for § 6110 purposes
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