What You Need to Know
- The GST tax can take 40% of asset transfers to grandchildren and some other recipients.
- The exclusion is $13.61 million for an individual and $27.22 million for a couple.
- For now, a client who wants an extension will have to pay at least $3,000 to to ask for one.
The Internal Revenue Service has taken 16 years to complete regulations that may help wealthy clients fix failures to declare how they would use their generation-skipping transfer exemption.
The IRS published the final rule — “Relief Provisions Respecting Timely Allocation of GST Exemption and Certain GST Elections” — Monday in the Federal Register, an official government regulatory publication.
IRS officials note that they published the draft regulations in April 2008, received five comments at the time, and decided against providing a new public comment period.
“The issuance of a new notice of proposed rulemaking or a reopening of the comment period would further delay, and in some cases prevent, the grant of needed relief to taxpayers,” IRS officials say.
About 45 million Americans have died since the IRS posted the 2008 draft regulations.
What it means: IRS regulation drafters face challenges of their own with meeting deadlines.
Generation-skipping transfer taxes: The U.S. federal government imposes a 40% generation-skipping transfer tax on efforts by individuals or couples to pass large amounts of cash or other assets to grandchildren, great-grandchildren and certain other people in younger generations.
The 2024 GST exemption is $13.61 million for an individual taxpayer and $27.22 million for a married couple.
A taxpayer can notify the IRS about intent to use the GST exemption to shield transfers of assets to two or more people from federal estate and gift taxes.
Congress included a provision changing the rules in the Economic Growth and Tax Relief Reconciliation Act of 2001.
The IRS issued one set of rules for asking for a GST tax allocation time extension in 2001, then provided a simpler strategy in 2004.