The AICPA submitted a letter to the IRS in which it recommended two changes to final regulations regarding the generation-skipping transfer (GST) exemption and certain elections to make it easier and less expensive for taxpayers to leave assets to younger generations.
The Sec. 2642(g) final regulations, which provide relief provisions respecting timely allocation of the GST exemption and certain GST elections, are included in T.D. 9996, Relief Provisions Respecting Timely Allocation of GST Exemption and Certain GST Elections. The regulations were issued April 17, 2024, and are effective for requests for relief filed on or after May 6, 2024, for taxpayers seeking to correct mistakes in GST exemption allocations and elections.
Even though the regulations are meant as “a safety net for missed GST elections,” the IRS can still improve them because their “high cost and complexity make the private letter ruling approach impractical for many taxpayers,” Eileen Sherr, CPA, CGMA, director–Tax Policy & Advocacy for the AICPA, said in a news release.
In the letter, sent April 2, the AICPA recommended that the IRS:
“streamline the process for taxpayers seeking to allocate their GST exemption to post-2000 transfers, thereby reducing the administrative burdens and costs associated with [private letter rulings] for both taxpayers and the government,” the AICPA said.
- 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 a GST exemption to be allocated or the donor was not aware that a GST exemption was allocated to the transfer.
The GST, which is not the same as the estate tax, applies when a taxpayer transfers assets to people in generations two or more below them, such as grandchildren or great-grandchildren, thus “skipping” their children.
“Taxpayers frequently make small present interest gifts to trusts that are shielded from gift tax consequences due to the annual gift tax exclusion, and, as a result, taxpayers are not required to file Forms 709,” the AICPA said in the letter. “Unfortunately, the potential generation-skipping transfer tax impact is often overlooked, and taxpayers inadvertently are subject to the automatic allocation rules that might not align with their intended tax planning.”
Although the regulations are final, the IRS said it could issue further guidance if it found situations for which simplified or automatic relief would be appropriate and administrable.
— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.
