With drafting assistance from our Washington University School of Law extern, Alexander Fersa.
PLR 201536002 is a reminder that the Treasury Regs (specifically Treas. Reg. § 301.9100-3) offer relief to correct certain failures to make regulatory elections. Here, the decedent’s trust created Trust A and Trust B. Trust B provided for all income to be paid to the surviving spouse, so that Trust B otherwise qualified for the qualified terminable interest property (QTIP) election (if you need a refresher on what type of trusts qualify for the gift and estate tax marital deduction, click here). However, the attorney who prepared and timely filed the estate tax return failed to make the QTIP election for Trust B.
A QTIP election is to be made on the estate tax return and once made, the election is irrevocable. The regulations state the election is to be made on the last return filed prior to the due date of the return, including extensions, or on the first return filed after the due date of the return.
Requests for extension of regulatory, as opposed to statutory, election periods are authorized in the Regs. In order to obtain such relief, the taxpayer must provide evidence, through affidavits or otherwise, showing the “taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the interests of the Government.” The taxpayer will be deemed to have acted reasonably and in good faith if the taxpayer reasonably relied on a qualified tax professional who was competent to render advice as to the election and had knowledge of all of the relevant facts.
Since the timeframe for making a QTIP election is regulatory and since the taxpayer’s surviving spouse relied on a qualified tax professional to file the estate tax return and make the election, the Service granted 120 days after the issuance of the PLR to file a supplemental estate tax return to make the QTIP election for Trust B.