November 10, 2004
The Honorable Mark W. Everson
Commissioner
Internal Revenue Service
CC:PA:LPD:PR (REG–153841–02)
Room 5203
PO Box 7604
Ben Franklin Station
Washington, D.C. 20044
Hand Delivered to Courier's Desk
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, D.C. 20044
Delivered Electronically to www.irs.gov/regs
RE: Comments on Proposed Regulations (REG-153841-02) Regarding Electing Out of GST Deemed Allocations Under Section 2632(c)(5)(A)(i), issued July 13, 2004
Dear Commissioner Everson:
Enclosed are the American Institute of Certified Public Accountants (AICPA) comments regarding proposed regulations on electing out of GST deemed allocations under section 2632(c). The proposed regulations provide guidance for making the election under section 2632(c)(5)(A)(i) to not have the deemed allocation of unused GST exemption under section 2632(c)(1) apply with regard to certain transfers to a GST trust, as defined in section 2632(c)(3)(B). The proposed regulations also provide guidance for making the election under section 2632(c)(5)(A)(ii) to treat a trust as a GST trust.
We recommend removing the language "(including an automatic allocation to a direct skip, but not an indirect skip)" from the final version of reg. section 26.2632-1(c)(1) regulations. This would eliminate any confusion about the deemed allocation of a GST exemption to direct and indirect skips. The section 2632(b)(1) deemed allocation rules apply only after the estate tax inclusion period (ETIP) terminates, under current reg. section 2632-1(c)(4) for direct skips, and prop. reg. section 26.2632-1(b)(2)(i) for indirect skips.
We also recommend expanding the last sentence of prop. reg. section 26.2632-1(b)(2)(i) to clarify its application. The final section 26.2632-1(b)(2)(i) regulations should read: "The transferor may prevent the automatic allocation of GST exemption with regard to an indirect skip (including indirect skips to which section 2642(f) may apply), as provided in paragraphs (b)(2)(ii) and (iii) of this section."
We also recommend that the final regulations contain one or two examples addressing the application of the deemed allocation rules for indirect skips to situations in which trusts subject to an ETIP terminate upon the expiration of an ETIP and distribute its assets to other trusts that may be GST trusts.
We welcome the opportunity to discuss our comments further with you or others at the IRS. Please contact me at (402) 280-2062; or Roby Sawyers, Chair of the AICPA Trust, Estate, and Gift Tax Technical Resource Panel, at (919) 515-4443; or Justin R. Ransome, Chair of the GST Deemed Allocation Regs Task Force, at (202) 533-4184; or Eileen Sherr, AICPA Technical Manager at (202) 434-9256.
Sincerely,
Thomas J. Purcell, III
Chair, AICPA Tax Executive Committee
cc: Mayer R. Samuels, Internal Revenue Service
Catherine V. Hughes, Treasury Department
View the Comments