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On May 3, 2024, the Treasury Department finalized regulations for the extension of time to make certain elections pertaining to the Generation Skipping Tax (GST) including elections for exemption allocations under section 2642(g). The regulations were first proposed in 2008 to identify how the IRS will determine whether to grant an extension of time to make elections for not having the automatic allocation of GST exemption apply to a direct skip, to an indirect skip or transfers to a particular trust, and to treat any trust as a GST trust. The proposed regulations also included procedural requirements for establishing eligibility for the requested relief, including identification of various persons from whom affidavits are required.

The final regulations clarify that not all of the factors indicating whether the taxpayer acted reasonably and in good faith may be relevant in a particular situation and that the determination of reasonableness and good faith for an extension of time will be made based on all of the facts and circumstances. The regulations reiterate that consistency will be a key factor in determining whether the taxpayer has acted reasonably and in good faith. The unavailability of an affiant based on death or disability shall be considered under the final regulations when determining whether the taxpayer acted reasonably and in good faith. Finally, the regulations acknowledge that the elections are not irrevocable and provide for relief to revoke such elections.

Despite several comments indicating that the user fee for seeking a Private Letter Ruling (PLR) would be unduly burdensome for taxpayers, the IRS determined that the PLR system remains the most effective way for the government to evaluate requests for extension of time without creating an undue burden for the IRS. However, the regulations do indicate that the IRS is prepared to issue additional revenue procedures or other guidance when Treasury identifies situations for which simplified or automatic relief under section 2642(g)(1) would be appropriate. But for now, taxpayers must continue to pay the full PLR user fee to seek an extension of time for making GST elections.

For further questions regarding this topic, contact Liskow attorneys Leon Rittenberg III, John Rouchell, and Kevin Naccari, Jr. and visit our Tax practice page.

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