The Internal Revenue Service wants to formalize the system it uses to help taxpayers who say they need more time to allocate their generation-skipping transfer exemption.
The IRS is proposing to set regulations that would affect taxpayers who want to pass estates on to grandchildren, great-grandchildren or members of later generations.
In 2001, the IRS issued a notice, Notice 2001-50, which announced that transferors could seek an extension of time for allocating their generation-skipping exemption.
Many taxpayers have sought private letter rulings granting allocation exemptions, and now the IRS wants to create regulations that would replace the 2001 relief system, IRS officials write in a notice of proposed rulemaking that appears today in the Federal Register.
The IRS will consider factors such as the intent of the transferor, the occurrence of events beyond the control of the transferor, and the transferor’s lack of awareness of the need to allocate the exemption, official write.
The IRS also will consider whether granting an exemption would be against the interests of the government.
Some factors the IRS might look at when addressing that concern are whether the transferor is somehow trying to game the system or use hindsight to produce an economic advantage or other advantage that would not have been available if the exemption had been allocated on time, officials write.
Relief “will not be granted when the standard of reasonableness, good faith and lack of prejudice to the interests of the government is not met,” officials write.
Officials give a list of examples of taxpayers who would not qualify for an exemption, and they note that a request for relief will not suspend or extend the period of limitations on any estate, gift or generation-skipping tax.