Grantor receives 120 days to elect GST-trust treatment after a return-preparation error

Plain-English summary

A grantor created an irrevocable trust primarily for a spouse, with descendants as later beneficiaries, and intended the transfer to be exempt from generation-skipping transfer tax. An attorney's planning memorandum expressly described the trust as GST exempt, but the accounting firm preparing the gift-tax return neither elected GST-trust treatment nor affirmatively allocated GST exemption. A successor accounting firm found the errors during a later estate and gift tax review. The grantor represented that there were no other GST-taxable gifts and no taxable distribution or termination involving the trust. The IRS found that the standards in Treas. Reg. § 26.2642-7 were met and granted 120 days to file an amended Form 709 electing GST-trust treatment. The automatic-allocation rules will then apply to the original transfer using its gift-tax value.

Ruling snapshot

• Question: May the grantor make a late GST-trust election so available GST exemption is automatically allocated to the original trust transfer?
• Outcome: Approved
• Key authorities: IRC §§ 2632(c)(5)(A)(ii) and 2642(g); Treas. Reg. § 26.2642-7

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202632009 Third Party Communication: None
Release Date: 8/7/2026 Date of Communication: Not Applicable
Index Number: 2642.07-00
Person To Contact:
------------------- -------------------------- ID No. -----------------
-------------------------------------------------- -----------------------------------------------------
-------------------------- Telephone Number:
--------------------
--------------------------- Refer Reply To:
CC:PT&E:B04
In Re: -------------------- PLR-117872-25
Date:
May 08, 2026

Legend

Grantor = ----------------------------------------------
Spouse = ----------------------
Son = --------------------
Trust = --------------------------------------------------------
-----------------------
Accounting Firm 1 = -----------------------------
Accounting Firm 2 = ---------------------------
Attorney = ----------------------
Date 1 = --------------------------
Date 2 = --------------------------
Year 1 = -------
Year 2 = -------

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

  This letter responds to your authorized representative’s letter received on

September 30, 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 make an election under
§ 2632(c)(5)(A)(ii).

    The facts and representations submitted are as follows:

   Grantor established an irrevocable trust (Trust) on Date 1 in Year 1 for the

primary benefit of Spouse and made a transfer to Trust on Date 2 of Year 1. Son is the
trustee of Trust. Trust provides that during Spouse’s life, the trustee may distribute all
or any part of the net income and/or principal of Trust to Spouse, at the discretion of the

PLR-117872-25 2

trustee. Trust provides Spouse with a limited power to appoint the assets of Trust to
any one or more of the descendants of Grantor.

   Upon the death of Spouse, the unappointed portion of the remaining trust estate

of Trust is to be allocated to Grantor’s son, Son, if Son survives Spouse. If Son does
not survive Spouse, then per stirpes among the descendants of Son who survive
Spouse. Any part of the remaining Trust estate that is allocated to a descendant of
Grantor is to be retained in a separate trust for the primary benefit of that descendant. It
was Grantor’s express intent that the transfer to Trust would be exempt from GST tax,
as evidenced by a memorandum from Attorney to Grantor in which Attorney expressly
states that Trust is intended to be “GST Exempt.”

   Grantor hired Accounting Firm 1 to prepare his Form 709, United States Gift (and

Generation-Skipping Transfer) Tax Return, for Year 1. Accounting Firm 1 received
Attorney’s memorandum stating that Trust was intended to be GST exempt. Accounting
Firm 1 assigned one of its accountants to prepare Grantor’s Form 709 for Year 1.
Grantor timely filed a Year 1 Form 709 but failed to elect to treat Trust as a GST trust
and, alternatively, failed to affirmatively allocate GST exemption to the Year 1 transfer.
Because of these errors, no allocation of GST exemption was applied to Grantor’s Year
1 transfer to Trust.

   In the following year, Accounting Firm 1 merged into Accounting Firm 2. In

Year 2, Accounting Firm 2 conducted an estate and gift tax review of Grantor’s records
and discovered the errors made on Grantor’s Year 1 Form 709.

    Grantor represents that Grantor made no other gifts that are subject to the GST

tax or to which GST exemption was or should have been allocated. Further, Grantor
represents that no taxable distribution or taxable termination has occurred with respect
to Trust.

   Grantor requests an extension of time pursuant to § 2642(g) and § 26.2642-7 to

elect under § 2632(c)(5)(A)(ii) to treat Trust as a GST trust.

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

PLR-117872-25 3

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)(3)(B)(iv) provides that the term “GST trust” means a trust that

could have a generation-skipping transfer with respect to the transferor unless the trust
is a trust any portion of which would be included in the gross estate of a non-skip
person (other than the transferor) if such person died immediately after the
transfer. The value of transferred property shall not be considered to be includible in
the gross estate of a non-skip person or subject to a right of withdrawal by reason of
such person holding a right to withdraw so much of such property as does not exceed
the amount referred to in § 2503(b) with respect to any transferor.

  Section 2632(c)(5)(A)(ii) provides that any individual may elect to treat any trust

as a GST trust for purposes of this subsection with respect to any or all transfers made
by such individual to such trust.

   Section 2642(a)(1) provides that the inclusion ratio with respect to any property

transferred in a generation-skipping transfer is the excess (if any) of one over the
“applicable fraction.” Under 2642(a)(1), the applicable fraction is defined as a fraction
the numerator of which is the amount of the GST exemption allocated to the trust (or to
property transferred in a direct skip), and the denominator of which is the value of the
property transferred to the trust (or involved in the direct skip), reduced by the sum of
any federal estate tax or state death tax actually recovered from the trust attributable to
such property and any charitable deduction allowed under § 2055 or 2522 with respect
to such property.

   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

PLR-117872-25 4

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

PLR-117872-25 5

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, Grantor is granted an
extension of time of 120 days from the date of this letter to treat Trust as a GST trust.
As a result of the election, the automatic allocation rules of § 2632(c) apply to allocate
Grantor’s available GST exemption to the Year 1 transfer to Trust. The allocation will
be effective as of Date 2, the date of Grantor’s transfer to Trust, and the value of the
transfer as determined for federal gift tax purposes will be used in determining the
amount of GST exemption to be allocated to Trust.

   The election to treat Trust as a GST trust should be made on an amended Form

709 for Year 1. 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. You should attach a copy of this letter to the
amended Form 709.

  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.

PLR-117872-25 6

  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.

                                             Sincerely,


                                             Leslie H. Finlow
                                             ________________________
                                             [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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