In a letter submitted to the U.S. Department of the Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) provided comments on the section 2642(g) final regulations (Treas. Reg. § 26.2642-7), which provide relief provisions respecting timely allocation of generation-skipping-transfer (GST) exemption and certain GST elections. These relief provisions are designed to provide a safety net for taxpayers, ensuring that their estate planning and tax strategies can be effectively implemented even if initial errors are made.
The AICPA’s letter is in response to the recent GST final regulations in which Treasury and the IRS stated that they are prepared to issue further revenue procedures or other guidance when they identify situations for which simplified or automatic relief under section 2642(g)(1) would be appropriate and administrable.
The AICPA suggested that Treasury and IRS:
- Extend the relief provided by Rev. Proc. 2004-46 to tax years 2001 and later.
- Provide a similar revenue procedure to Rev. Proc. 2004-46 for situations in which the donor’s GST exemption has been automatically allocated to a prior transfer, but the donor either did not intend for GST exemption to be allocated or the donor was not aware that GST exemption was allocated to the transfer.
The administrative burden on both taxpayers and the IRS to process private letter rulings (PLRs) for small amounts is disproportionate to the amounts involved. Extending the relief provided by Rev. Proc. 2004-46 to tax years 2001 and later would streamline the process for taxpayers seeking to allocate their GST exemption to post-2000 transfers, thereby reducing the administrative burdens and costs associated with PLRs for both taxpayers and the government.
Extending relief to tax years 2001 and later would help taxpayers who didn’t file gift tax returns for certain gifts to trusts. This would allow them to make informed decisions and correct past mistakes, ensuring their GST exemptions match their tax planning goals.
“While the final regulations offer a safety net for missed GST elections, the high cost and complexity make the Private Letter Ruling approach impractical for many taxpayers,” says Eileen Sherr, AICPA Director of Tax Policy and Advocacy. “The AICPA’s suggestions will help taxpayers effectively utilize their GST exemptions and reduce unnecessary administrative burdens on taxpayers and the IRS.”
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