Taxpayer receives 120 days to elect GST-trust treatment for an irrevocable trust

Plain-English summary

A taxpayer created an irrevocable trust for children and later descendants and intended the transfer to be exempt from generation-skipping transfer tax. The taxpayer's accountant prepared the gift-tax return without electing to treat the trust as a GST trust and without affirmatively allocating GST exemption, so no exemption was allocated to the original transfer. A later estate-planning attorney discovered the error. The taxpayer represented that there were no other GST-taxable gifts to the trust and no taxable distribution or termination. The IRS found that the reasonable-cause and government-prejudice standards in Treas. Reg. § 26.2642-7 were met. It granted 120 days to file an amended Form 709 electing GST-trust treatment, causing the automatic-allocation rules to apply as of the original transfer date.

Ruling snapshot

• Question: May the taxpayer make a late election to treat the irrevocable trust as a GST trust so the automatic exemption-allocation rules apply to the original 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: 202632011 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
PLR-118848-25
Date:
Re: ----------------- May 12, 2026

Legend

Taxpayer = -----------------
-------------------------
Trust = ----------------------------------------
Date = ------------------
Year 1 = -------
Year 2 = -------
Attorney 1 = ---------------------------
Attorney 2 = ----------------------------
Accountant = ------------------------
x = -----------

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

This letter responds to your authorized representative’s letter dated October 16, 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:

In Year 1, Taxpayer engaged Attorney 1 for estate planning advice. Based on
Attorney 1’s advice, on Date, in Year 1, Taxpayer formed an irrevocable trust, Trust,
and made a transfer of $x to Trust. Taxpayer created Trust for the primary benefit of
Taxpayer’s children and for Taxpayer’s children’s descendants as successor
beneficiaries.

Taxpayer engaged Accountant to prepare Taxpayer’s Year 1 Form 709, United States
Gift (and Generation-Skipping Transfer) Tax Return. Prior to filing Taxpayer’s Year 1
Form 709, Attorney 1 communicated to Accountant Taxpayer’s intent that transfers to

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Trust would be exempt from GST tax. On Taxpayer’s Year 1 Form 709, as prepared by
Accountant, Taxpayer failed to elect to treat Trust as a GST trust and, alternatively,
failed to affirmatively allocate Taxpayer’s GST exemption to the Year 1 transfer.
Because of these errors, no allocation of GST exemption was applied to Taxpayer’s
Year 1 transfer of $x to Trust.

In Year 2, Taxpayer retained Attorney 2 for general estate planning services. While
reviewing Taxpayer’s file, Attorney 2 discovered the failure to either elect under
§ 2632(c)(5)(A)(ii) to treat Trust as a GST trust or affirmatively allocate GST exemption
to the Year 1 transfer.

Taxpayer represents that Taxpayer made no other gifts to Trust which are subject to the
GST tax or to which GST exemption was or should have been allocated. Further,
Taxpayer represents that no taxable distribution or taxable termination has occurred
with respect to Trust.

Taxpayer 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 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 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 any allocation by an individual of his GST exemption
under § 2631(a) may be made 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 a return is required to be filed. Section 2632(a)(2) provides
that the Secretary shall prescribe by forms or regulations the manner in which any
allocation is to be made.

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

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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 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)(ii) provides that an 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)(2), the applicable fraction is defined as a fraction,
the numerator of which is the amount of the GST exemption allocated to the trust (or in
the case of a direct skip, allocated to the property transferred in such 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)-(B) 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, and such allocation shall be effective on and after the date of such
transfer, or, in the case of an allocation deemed to have been made at the close of an
estate tax inclusion period, on and after the close of such 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

PLR-118848-25 4

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 of the need to
allocate GST exemption to the transfer, 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, Taxpayer is granted an

PLR-118848-25 5

extension of time of 120 days from the date of this letter to elect to treat Trust as a GST
trust. As a result of the election, the automatic allocation rules of § 2632(c) apply to
allocate Taxpayer’s available GST exemption to the Year 1 transfer to Trust. The
allocation will be effective as of Date, the date of Taxpayer’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.

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,



                                      _______________________________
                               By:    Melissa C. Liquerman
                                      Senior Counsel, Branch 4
                                      Office of the Associate Chief Counsel
                                      (Passthroughs, Trusts, and Estates)

Enclosure:
Copy for § 6110 purposes

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