Extension of Time for Making Certain Elections

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 201611009
Release Date: 3/11/2016
Index Number: 9100.00-00, 2642.00-00
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Re: ---
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
---, ID No. ---
Telephone Number:
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Refer Reply To:
CC:PSI:04
PLR-124449-15
Date:
November 24, 2015
Legend
Date 1 = ---
Decedent = ---
Spouse =---
Trust = ---
Year 1 = ---
Year 2 = ---
Date 2 = ---
Attorney = ---
Date 3 = ---
Dear ---:
This letter responds to your authorized representative’s letter dated July 15, 2015, and subsequent correspondence, requesting an extension of time under § 2642(g) of the Internal Revenue Code and § 301.9100-3 of the Procedure and Administration Regulations to allocate Decedent’s and Spouse’s GST exemption to a transfer to a trust.

# FACTS

The facts and representations submitted are summarized as follows:
On Date 1, in Year 1, Decedent and Spouse created Trust for the benefit of their children and more remote descendants.
PLR-124449-15 2
On Date 1, Decedent and Spouse transferred property to Trust. Attorney prepared and filed Forms 709 (United States Gift (and Generation-Skipping Transfer) Tax Return), in which Decedent and Spouse elected to split the gift under § 2513.
On each of the Forms 709, Decedent and Spouse allocated their respective available GST exemption to the transfer.
On Date 2, in Year 2, Decedent and Spouse transferred property to Trust (Year 2 Transfer). However, Attorney failed to prepare the Year 2 Forms 709 and failed to advise Decedent and Spouse that they must file a Form 709 to report the transfer for gift tax purposes and to affirmatively allocate their remaining GST exemption to the Year 2 Transfer. Accordingly, Decedent and Spouse failed to allocate their respective GST exemption to the Year 2 Transfer.
Decedent died on Date 3. During the administration of Decedent’s estate, Spouse learned of the failure to allocate Decedent’s and Spouse’s respective GST exemption to the Year 2 Transfer to Trust.
Decedent’s estate and Spouse request an extension of time pursuant to § 2642(g) and §§ 301.9100-1 and 301.9100-3 to allocate their GST exemption to the Year 2 Transfer to Trust.

# LAW AND ANALYSIS

Section 2513(a)(1) provides that a gift made by one spouse to any person other than his spouse shall be considered as made one-half by him and one-half by his spouse, but only if at the time of the gift each spouse is a citizen or resident of the United States. Under § 2513(a)(2), paragraph (a)(1) only applies if both spouses have signified their consent to the application of paragraph (a)(1) in the case of all such gifts made during the calendar year by either while married to the other.
Section 2601 imposes a tax on every generation-skipping transfer (GST).
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 2641(a) defines the term “applicable rate” with respect to any GST transfer as the product of the maximum federal estate tax rate and the inclusion ratio with respect to the transfer.
Section 2642(a)(1) provides that the inclusion ratio with respect to any property transferred in a GST is the excess (if any) of 1 over the “applicable fraction.” With respect to a GST that is not a direct skip, § 2642(a)(2) provides that the applicable PLR-124449-15 3 fraction is a fraction, the numerator of which is the amount of the GST exemption allocated to the trust, and the denominator of which is the value of the property transferred to the trust, 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 2631(a), as in effect for Year 2, provides 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) provides that any allocation by an individual of his or her 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 26.2632-1(b)(4)(i) of the Generation-Skipping Transfer Tax Regulations provides that an allocation of GST exemption to property transferred during the transferor’s lifetime, other than in a direct skip, is made on Form 709.
Section 2652(a)(2) and § 26.2652-1(a)(4) provide that, if, under § 2513, one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of the individual, then for purposes of the GST tax, each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse, regardless of the interest the electing spouse is actually deemed to have transferred under § 2513.
Section 2642(b)(1) provides, in part, 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, 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)) and such allocation shall be effective on and 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 this paragraph.
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, PLR-124449-15 4 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.
Notice 2001-50, 2001-2 C.B. 189, provides that under § 2642(g)(1)(B), the time for allocating the GST exemption to lifetime transfers and transfers at death, the time for electing out of the automatic allocation rules, and the time for electing to treat any trust as a GST trust are to be treated as if not expressly prescribed by statute. The Notice further provides that taxpayers may seek an extension of time to make an allocation described in § 2642(b)(1) or (b)(2) or an election described in § 2632(b)(3) or (c)(5) under the provisions of § 301.9100-3.
Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except in subtitles E, G, H, and I.
Section 301.9100-3(a) provides that, in general, requests for extensions of time for regulatory elections that do not meet the requirements of § 301.9100-2 must be made under the rules of § 301.9100-3.
Under § 301.9100-1(b), a regulatory election includes an election whose due date is prescribed by a notice published in the Internal Revenue Bulletin. In accordance with § 2642(g)(1)(B) and Notice 2001-50, taxpayers may seek an extension of time to make an election described in § 2642(b)(1) or (b)(2) or an election described in § 2632(b)(3) or (c)(5) under the provisions of § 301.9100-3.
Requests for relief under § 301.9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government.
Section 301.9100-3(b)(1)(v) provides that a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or to advise the taxpayer to make, the election.
Based on the facts submitted and the representations made, we conclude that the requirements of § 301.9100-3 have been satisfied. Therefore, Decedent’s estate and Spouse are granted an extension of time of 120 days from the date of this letter to allocate their available GST exemption to the Year 2 Transfer to Trust. The allocations will be effective as of the date of the transfer and the value of the transfer to Trust, as PLR-124449-15 5 determined for federal gift tax purposes, will be used in determining the amount of Decedent’s and Spouse’s GST exemption to be allocated to Trust.
The allocations should be made on original Forms 709 for Year 2, and filed with the Internal Revenue Service Center, Cincinnati, Ohio 45999. A copy of this letter should be attached to each original Form 709. A copy of this letter is enclosed for this purpose.
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. Moreover, no opinion is expressed or implied concerning the tax consequences of any modification of Trust after Year 2.
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.
In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.
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.
Sincerely,
Associate Chief Counsel
(Passthroughs & Special Industries)
By:____
Lorraine E. Gardner
Senior Counsel, Branch 4
Office of Associate Chief Counsel
(Passthroughs & Special Industries)
Enclosures (2)
Copy for section 6110 purposes
Copy of this letter