IRS grants extra time to allocate GST exemption after a donor accidentally opted out of automatic allocation

Plain-English summary

A donor set up an irrevocable trust for a child and the child's descendants and made gifts to it. She wanted her generation-skipping transfer (GST) tax exemption applied to those gifts so the trust could benefit grandchildren and more remote descendants free of GST tax. Normally the exemption is allocated automatically to this kind of trust, but the advisory firm that prepared her gift tax return (Form 709) inadvertently checked the election under § 2632(c)(5) to opt out of automatic allocation, so no exemption was applied. She asked the IRS for an extension of time to allocate the exemption under IRC § 2642(g) and Treas. Reg. § 26.2642-7. That rule lets the IRS grant relief when the taxpayer acted reasonably and in good faith and relief will not prejudice the government, weighing factors like the donor's intent and reliance on a tax professional. The IRS found the requirements met and granted 120 days from the date of the letter to allocate the exemption on an amended Form 709. She had enough unused exemption to cover the gifts.

Ruling snapshot

• Question: Should the donor get an extension of time under § 2642(g) to allocate her GST exemption to the trust gifts after an inadvertent opt-out election?
• Outcome: Approved (120-day extension to allocate GST exemption on an amended Form 709).
• Key authorities: IRC § 2642(g); Treas. Reg. § 26.2642-7; IRC §§ 2631, 2632(c)(5), 2601.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202625016
Release Date: 6/18/2026
Index Number: 2642.07-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
-----------------, ID No. -----------------
Telephone Number:

Refer Reply To:
CC:PT&E:B04
PLR-117051-25
Date:
March 24, 2026

In Re: --------------------

LEGEND

Donor = --------------------
-------------------------
Child = -------------------------
Trust = -----------------------------------------------------------
-----------------------
Tax Advisory Firm = -------------------------
Date = -----------------------
Year = -------

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

This letter responds to your authorized representative's letter dated September 25, 2025, and subsequent correspondence, requesting an extension of time under § 2642(g) of the Internal Revenue Code and § 26.2642-7 of the Generation-Skipping Transfer (GST) Tax Regulations to allocate GST exemption to transfers to a trust.

The facts and representations submitted are as follows:

Donor established an irrevocable trust (Trust) on Date in Year and made transfers to Trust in Year. Under the terms of Trust, the trustee will, from time to time, make distributions of some or all of the net income and principal for the use or benefit of Donor's Child and his descendants. Child's trust will terminate upon Child's death. Under a testamentary non-general power of appointment, Child may appoint among individuals and entities (and not to self, Child's estate, creditors, or creditors of Child's estate). If Child does not exercise this power, the remainder is to be divided into shares and held in further trust for Child's living descendants per stirpes.

Donor engaged Tax Advisory Firm to prepare her Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, for Year. Donor attests that her intent was for transfers to Trust be held for the maximum period allowed under law and benefit her grandchildren and more remote descendants. Tax Advisory Firm prepared Donor's Year Form 709 and on the return the election under § 2632(c)(5) to opt out of automatic allocation of GST exemption was inadvertently made. Accordingly, Donor elected out of automatic allocation for transfers to Trust in Year, and GST exemption was not allocated to Donor's Trust.

It is represented that Donor had sufficient GST exemption to allocate to the Year transfers to Trust.

RULING REQUESTED

You have requested an extension of time to allocate GST exemption to the transfers made to Trust in Year.

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 2602 provides that the amount of the tax imposed by § 2601 is the taxable amount multiplied by the applicable rate.

Section 2631(a) provides that, for purposes of determining the inclusion ratio, every individual shall be allowed a GST exemption 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.

Section 2632(c)(3)(A) provides that for purposes of this subsection, 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)(5)(A)(i) provides that an individual may elect to have the automatic allocation rules not apply to (I) an indirect skip, or (II) any or all transfers made by such individual to a particular trust.

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 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(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 Internal Revenue Service 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: (i) the intent of the transferor to timely allocate GST exemption to a transfer or to timely make an election under § 2632(b)(3) or (c)(5); (ii) intervening events beyond the control of the transferor that caused the failure to allocate GST exemption to a transfer or to make an election under § 2632(b)(3) or (c)(5); (iii) lack of awareness, despite the exercise of reasonable diligence, by the transferor or the executor of the transferor's estate, taking into account the experience of the transferor or the executor of the transferor's estate and the complexity of the GST tax issue, as the cause of the failure to allocate GST exemption to a transfer or to make an election under § 2632(b)(3) or (c)(5); (iv) consistency by the transferor with regard to the allocation of the transferor's GST exemption to one or more trusts or skip persons; and (v) 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(d)(3) provides a nonexclusive list of factors that will be considered to determine whether the interests of the government would be prejudiced for purposes of § 26.2642-7, including: (i) an attempt to benefit from hindsight; (ii) the timing of the request for relief, including any delay by the transferor or the executor of the transferor's estate in the filing of the request for relief that was intended to deprive the Internal Revenue Service of a sufficient period of time in which to challenge any element of the transfer that is the subject of the request for relief; (iii) the occurrence and effect of an intervening taxable termination or taxable distribution between the time for making a timely allocation of GST exemption or a timely election described in § 2632(b)(3) or (c)(5) and the time at which the request for relief was filed; and (iv) certain circumstances involving the expiration of a period of limitations on the assessment or collection of transfer taxes.

Based on the facts submitted and the representations made, we conclude that the requirements of § 26.2642-7 have been satisfied. Therefore, Donor is granted an extension of time of 120 days from the date of this letter to allocate Donor's GST exemption to the Year transfers to Trust.

The allocation of GST exemption should be made on an amended Form 709 for Year. The Form 709 should be filed with the Internal Revenue Service at the following address: Internal Revenue Service Center, ATTN: E&G, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915.

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

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.

                                           Sincerely,

                                           Associate Chief Counsel
                                           (Passthroughs, Trusts, and Estates)




                                       By: ______________________________
                                           Leslie H. Finlow
                                           Senior Technician Reviewer, Branch 4
                                           Office of the Associate Chief Counsel
                                           (Passthroughs, Trusts, and Estates)

Enclosure:
Copy for § 6110 purposes

cc: -----------------
------------------------------
-------------------------------------------------
----------------------------
----------------------------

cc: ------------------------
------------------------------
--------------------------------------
----------------------------------
----------------------------

cc: ------------------------------------------------------------
-----------------------------------------