Extension to Allocate GSTT Exemption Granted

Published May 15, 2026

GiftLaw Note: Grantor established an irrevocable trust for the benefit of Grantor’s children. The trust provides for the division of trust principal into two equal shares, Trust A and Trust B (Trusts). Grantor hired an attorney to provide advice with respect to estate planning, including the GST planning and to draft the Trusts. Grantor hired an accountant to prepare Form 709, United States Gift (and Generation-Skipping Transfer) Tax Returns. Accountant prepared Form 709 reflecting the transfer of assets into Trusts but does not have record of filing the form despite being instructed to do so by Grantor. As such, Grantor did not elect out of automatic allocation of GST exemption. Grantor requests an extension of time under Section 2642(g) and Section 26.2642-7 to allocate GST exemption with respect to transfers made by Grantor to Trusts.
 
Section 2601 imposes a tax on every GST made by a transferor to a skip person. Section 2611(a) defines GST as a taxable distribution, a taxable termination or a direct skip. Section 2631(a) allows each individual to allocate a GST exemption to property transferred by the individual. Under Sec. 2631(b), the Sec. 2631(a) exemption allocation is irrevocable. Section 2632(a)(1) states that a GST exemption can be allocated on or before the date prescribed for filing the estate tax return. Section 2632(a)(2) provides that the allocations are to be made are to be prescribed by forms or regulations provided by the Secretary. Under Sec. 2642(b)(1), an individual may allocate the GST exemption based on the value of the property as determined for gift tax purposes if the allocation of the GST exemption is made on a gift tax return filed on or before the date prescribed by Sec. 6075(b). If the allocation is not made on a timely-filed return, the Service may grant an extension of time to make the allocation. Sec. 2642(g)(1)(A). Section 2642(g)(1)(B) states that all relevant circumstances, including evidence of intent in the trust or transfer instrument, will be considered when determining whether to grant relief. Section 26.2642-7 outlines the procedures and criteria for requesting an extension of time to allocate GST exemption or make related elections, including consideration of whether the transferor or executor reasonably relied on a qualified tax professional’s advice. Here, the Service determined that the requirements of Sec. 26.2642-7 were met and granted an extension of 120 days to allocate Grantor’s GST exemption to the transfers into Trusts.

PLR 202618003                                                           Extension to Allocate GSTT Exemption Granted

5/1/26 (2/2/26)

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 §26.2642-7of 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

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:

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