Reg-153841-02

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reference in accordance with 5 U.S.C.

552(a) and 1 CFR part 51. You may

obtain copies from the National

Academy Press, 500 Fifth St. NW.,

Washington, DC 20001 (Internet address

http://www.nap.edu). Copies may be

examined at the Center for Food Safety

and Applied Nutrition’s Library, Food

and Drug Administration, 5100 Paint

Branch Pkwy., College Park, MD 20740,

or at the National Archives and Records

Administration (NARA). For

information on the availability of this

material at NARA, call 202–741–6030,

or go to: http://www.archives.gov/

federal

_

register/

code

_

of

_

federal

_

regulations/

ibr

_

locations.html.

(c) The additive may be used as

follows:

(1) At levels not to exceed 100

International Units (IU) per 240

milliliters (mL) in 100 percent fruit

juices (as defined under § 170.3(n)(35)

of this chapter) that are fortified with

greater than or equal to 33 percent of the

reference daily intake (RDI) of calcium

per 240 mL, excluding fruit juices that

are specially formulated or processed

for infants.

(2) At levels not to exceed 100 IU per

240 mL in fruit juice drinks (as defined

under § 170.3(n)(35) of this chapter) that

are fortified with greater than or equal

to 10 percent of the RDI of calcium per

240 mL, excluding fruit juice drinks that

are specially formulated or processed

for infants.

(3) At levels not to exceed 140 IU per

240 mL (prepared beverage) in soy-

protein based meal replacement

beverages (powder or liquid) that are

represented for special dietary use in

reducing or maintaining body weight in

accordance with § 105.66 of this

chapter.

(4) At levels not to exceed 100 IU per

40 grams in meal replacement bars or

other-type bars that are represented for

special dietary use in reducing or

maintaining body weight in accordance

with § 105.66 of this chapter.

Dated: June 20, 2005.

Jeffrey Shuren,

Assistant Commissioner for Policy.

[FR Doc. 05–12699 Filed 6– 28–05; 8:45 am]

BILLING CODE 4160–01–S

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9207]

RIN 1545–AX93

Assumption of Partner Liabilities;

Correction

AGENCY

:

Internal Revenue Service (IRS),

Treasury.

ACTION

:

Correction to final regulations.

SUMMARY

:

This document corrects final

regulation (TD 9207) that were

published in the Federal Register on

Thursday, May 26, 2005 (70 FR 30334).

The final regulation relates to the

definition of liabilities under section

752 of the Internal Revenue Code.

DATES

:

This correction is effective on

May 26, 2005.

FOR FURTHER INFORMATION CONTACT

:

Laura Fields (202) 622–3050 (not a toll-

free number).

SUPPLEMENTARY INFORMATION

:

Background

The final regulations (TD 9207) that is

the subject of this correction are under

sections 358, 704, 705, 737 and 752 of

the Internal Revenue Code.

Need for Correction

As published, TD 9207 contains an

error that may prove to be misleading

and is in need of clarification.

Correction of Publication

■

Accordingly, the publication of the

final regulations (TD 9207), that was the

subject of FR Doc. 05–10266, is corrected

as follows:

■

On page 30337, column 3, that

paragraph heading ‘‘4. Section 752–7

Liability’’, the language ‘‘4. Section 752–

7 Liability’’ is corrected to read ‘‘4.

Section 1.752–7 Liability’’.

Cynthia Grigsby,

Acting Chief, Publications and Regulations

Branch, Legal Processing Division, Associate

Chief Counsel (Procedure and

Administration).

[FR Doc. 05–12757 Filed 6–28–05; 8:45 am]

BILLING CODE 4830–01–M

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 26 and 602

[TD 9208]

RIN 1545–BB54

Election Out of GST Deemed

Allocations

AGENCY

:

Internal Revenue Service (IRS),

Treasury.

ACTION

:

Final regulation.

SUMMARY

:

This document contains final

regulations providing guidance for

making the election under section

2632(c)(5)(A)(i) of the Internal Revenue

Code to not have the deemed allocation

of unused generation-skipping transfer

(GST) tax 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 final

regulations also provide guidance for

making the election under section

2632(c)(5)(A)(ii) to treat a trust as a GST

trust. The regulations primarily affect

individuals.

DATES

:

Effective Date: The regulations

are effective June 29, 2005.

Applicability Date: For dates of

applicability, see § 26.2632–1(e).

FOR FURTHER INFORMATION CONTACT

:

Mayer R. Samuels, (202) 622–3090 (not

a toll-free number).

SUPPLEMENTARY INFORMATION

:

Paperwork Reduction Act

The collection of information

contained in these final regulations has

been reviewed and approved by the

Office of Management and Budget in

accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C.

3507(d)) under control number 1545–

1892.

The collection of information in these

final regulations is in § 26.2632–

1(b)(2)(iii) and (b)(3). This information

is required by the IRS for taxpayers who

elect to have the automatic allocation

rules not apply to the current transfer

and/or to future transfers to the trust or

to terminate such election. This

information is also required by the IRS

for taxpayers who elect to treat trusts

described in section 2632(c)(3)(B)(i)

through (vi) as GST trusts or to

terminate such election.

An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information

displays a valid control number.

Books or records relating to this

collection of information must be

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retained as long as their contents may

become material in the administration

of any internal revenue law. Generally,

tax returns and tax return information

are confidential, as required by 26

U.S.C. 6103.

Background

This document contains amendments

to 26 CFR part 26 under section 2632–

1 pertaining to the election under

section 2632(c)(5)(A)(i) of the Internal

Revenue Code to not have the deemed

allocation of unused generation-

skipping transfer (GST) tax exemption

under section 2632(c)(1) apply with

regard to certain transfers to a GST trust,

as defined in section 2632(c)(3)(B) and

the election under section

2632(c)(5)(A)(ii) to treat a trust as a GST

trust.

On July 13, 2004, the IRS published

(REG–153841–02) in the Federal

Register a notice of proposed

rulemaking (69 FR 42000). The IRS

received written and oral comments

responding to the notice of proposed

rulemaking. No public hearing was

requested or held. After consideration of

all the comments, the proposed

regulations are adopted as amended by

this Treasury decision, and the

corresponding proposed regulations are

removed. The comments and revisions

to the proposed regulations are

discussed below.

Summary of Comments

The proposed regulations generally

permitted transferors only two options

for electing out of the automatic

allocation rules. Transferors could elect

out with respect to a current transfer

only, or with respect to a current-year

transfer and all future transfers to the

same trust. Several commentators

suggested that the final regulations

provide transferors additional options.

In response to these comments, the final

regulations include the options

provided in the proposed regulations

and, in addition, give transferors the

option of electing out with respect to (1)

only certain designated future transfers

to a trust, or (2) all future transfers made

by the transferor to any trust (regardless

of whether the trust exists at the time of

the election out). Under the final

regulations, the transferor may elect out

with respect to future transfers even if

the transferor has not made a current-

year transfer and is not otherwise

required to file a Federal gift tax return.

Examples have been added illustrating

language that may be used in the

election out statement to satisfy the

requirements for the various election

out options.

One commentator suggested that the

statements required by the regulations

to elect out of the automatic GST

allocation or to treat a trust as a GST

trust should not require a citation to the

specific regulation section that

authorizes the election. The final

regulations adopt this suggestion.

In response to comments, the final

regulations have been clarified to

specifically confirm that an election out

of the automatic allocation rules for

future years is limited to automatic

allocations under section 2632(c)

(automatic allocations to indirect skips

made during the transferor’s lifetime)

and has no effect on the automatic

allocation rules that apply after the

transferor’s death under section 2632(e).

One commentator recommended that

the IRS clarify whether the effective

date of an automatic allocation is

changed if the transfer is reported on a

late filed Federal gift tax return. For

indirect skips made after December 31,

2000, to which section 2642(f) does not

apply, the transferor’s unused GST

exemption is automatically allocated to

the property transferred. Section

26.2632–1(b)(1)(ii) generally provides

that in the case of direct skips, unless

the transferor elects out of the automatic

allocation rules, the automatic

allocation becomes irrevocable on the

due date for filing the Federal gift tax

return, and the allocation is effective as

of the date of the transfer. Thus, even if

the Federal gift tax return reporting the

transfer is filed late, or no Federal gift

tax return is filed, the automatic

allocation nevertheless is irrevocable on

the due date of that return and takes

effect as of the date of the transfer. The

final regulations clarify that the same

rules apply in the case of an automatic

allocation to an indirect skip under

section 2632(c). The automatic

allocation is effective as of the date of

the transfer, and becomes irrevocable on

the due date for filing the Form 709 for

the calendar year in which the transfer

is made, whether or not a gift tax return

is filed reporting the transfer.

Commentators suggested that, if a

transferor makes an indirect skip and

affirmatively allocates GST exemption

in an amount that is less than the value

of the property transferred, the

transaction should be treated as an

allocation of the amount that was

affirmatively allocated and an election

out of the automatic allocation rules for

the value of the property not covered by

the exemption amount affirmatively

allocated. Treasury and the IRS agree

with the commentators that this

treatment would give effect to the

transferor’s most likely intent to limit

the allocation of exemption to the

amount that was affirmatively allocated.

Accordingly, under the final

regulations, an affirmative partial

allocation of GST exemption is treated

as an election out of the automatic

allocation rules with regard to the

balance of that specific transfer.

In response to comments, the rules

regarding the automatic allocation to an

indirect skip subject to an estate tax

inclusion period (ETIP) have been

revised in conformance with section

2632(c)(4) to provide that the automatic

allocation to a direct skip or an indirect

skip is deemed to be made at the close

of the ETIP. Therefore, under the final

regulations, a transferor may elect out of

the automatic allocation rules for

transfers subject to an ETIP that are

either direct skips or indirect skips at

any time prior to the due date of the

Federal gift tax return for the calendar

year during which the ETIP closes.

Thus, transferors may elect out of the

automatic allocation rules on the gift tax

return reporting the transfer to the trust,

or on a gift tax return filed for any

calendar year subsequent to the year of

the transfer up to and including the

calendar year in which the ETIP closes.

It should be noted that an election out

of the automatic allocation for ‘‘all

current transfers’’ or for ‘‘all transfers in

the current year’’ includes an election

out for a transfer subject to an ETIP that

was made during that year, but an

election out of the automatic allocation

rules for ‘‘all future transfers’’ to a trust

will not apply with respect to any

previous transfer to a trust subject to an

ETIP that is to close in the future. To

apply the election out to prior-year

transfers that are subject to an ETIP, the

election out statement must specifically

describe the prior-year transfers to be

covered by the election out, state that

those transfers are subject to an ETIP,

and state that the transferor wishes to

elect out of the automatic allocation to

those prior-year transfers. Except in that

limited circumstance, the final

regulations provide that an election out

does not apply to any prior-year transfer

to a trust, including a transfer subject to

an ETIP, even if the ETIP closes after the

election has been made. It should be

noted also that, once an affirmative

allocation of GST exemption has been

made (including to a transfer subject to

an ETIP), the allocation may not be

revoked.

One commentator recommended that

transferors who made indirect skips

after December 31, 2000, and before the

proposed regulations become final,

should be allowed to elect out of the

automatic allocation rules on or before

April 15th of the calendar year after the

year in which the final regulations are

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published. The Treasury Department

and the IRS believe, however, that this

extension of the time to elect out of the

automatic allocation rules is

unnecessary. Notice 2001–50 (2001–2

C.B. 189) (see § 601.601(d)(2)(ii)(b) of

this chapter) alerted transferors that

regulations would provide that an

election under section 2632(c)(5) is to be

made on a timely filed Federal gift tax

return reporting the transfer. Further,

the preamble to the proposed

regulations provided that any election

made on or before the date of

publication of the proposed regulations

will be recognized if the election was

made on a timely filed Federal gift tax

return in a manner that provided

adequate notice to the Commissioner

that the transferor made the election.

Accordingly, this suggestion was not

adopted.

Commentators suggested that the

regulations include an example

addressing the application of the

automatic allocation rules for indirect

skips in a situation in which a trust

subject to an ETIP terminates upon the

expiration of the ETIP, at which time

the trust assets are distributed to other

trusts that may be GST trusts. The

Treasury Department and the IRS

believe, however, that this issue is

outside the scope of this regulation, and

will consider whether to address the

issue in separate guidance.

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in

Executive Order 12866. Therefore, a

regulatory assessment is not required. It

has also been determined that section

553(b) of the Administrative Procedure

Act (5 U.S.C. chapter 5) does not apply

to these regulations, and, because these

regulations do not impose on small

entities, a collection of information

requirement, the Regulatory Flexibility

Act (5 U.S.C. chapter 6), does not apply.

Therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, the Notice of Proposed

Rulemaking preceding these regulations

was submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on their

impact on small business.

Drafting Information

The principal author of these final

regulations is Mayer R. Samuels, Office

of the Associate Chief Counsel

(Passthroughs and Special Industries).

However, other personnel from the IRS

and the Treasury Department also

participated in their development.

List of Subjects

26 CFR Part 26

Estate taxes, Reporting and

recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping

requirements.

Adoption of Amendments to the

Regulations

■

Accordingly, 26 CFR parts 26 and 602

are amended as follows:

PART 26—GENERATION-SKIPPING

TRANSFER TAX REGULATIONS

UNDER THE TAX REFORM ACT OF

1986

■

Paragraph 1. The authority citation for

part 26 continues to read, in part, as

follows:

Authority: 26 U.S.C. 7805 * * *.

■

Par. 2. In § 26.2600–1, the entries for

§ 26.2632–1 are amended by revising the

entry for paragraph (b)(2) and adding

entries for paragraphs (b)(3), (b)(4) and

(e) to read as follows:

§ 26.2600–1

Table of contents.

*

*

*

*

*

§ 26.2632–1

Allocation of GST exemption.

*

*

*

*

*

(b) * * *

(2)Automatic allocation to indirect skips

made after December 31, 2000.

(3) Election to treat trust as GST trust.

(4) Allocation to other transfers.

*

*

*

*

*

(e) Effective date.

*

*

*

*

*

■

Par. 3. Section 26.2632–1 is amended

as follows:

■

1. Paragraph (b)(2) is redesignated as

paragraph (b)(4).

■

2. Paragraphs (b)(2) and (b)(3) are

added.

■

3. In newly designated paragraph

(b)(4)(i), the third sentence is revised.

■

4. In newly designated paragraph

(b)(4)(ii)(A)(1), the fourth sentence is

revised.

■

5. In newly designated paragraph

(b)(4)(ii)(B):

■

a. All references to paragraph

‘‘(b)(2)(ii)(A)(1)(i)’’ are removed and

‘‘(b)(4)(ii)(A)(1)(i)’’ is added in its place.

■

b. All references to paragraph

‘‘(b)(2)(ii)(A)(1)(ii)’’ are removed and

‘‘(b)(4)(ii)(A)(1)(ii)’’ is added in its place.

■

c. All references to paragraph

‘‘(b)(2)(ii)(A)(1)(iii)’’ are removed and

‘‘(b)(4)(ii)(A)(1)(iii)’’ is added in its place.

■

6. Examples 1 through 5 in newly

designated paragraph (b)(4)(iii) are

revised.

■

7. Example 6 in newly designated

paragraph (b)(4)(iii) is added.

■

8. Paragraph (b)(4)(iv) is added.

■

9. Paragraph (c)(1) is redesignated as

paragraph (c)(1)(i) and revised.

■

10. Paragraphs (c)(1)(ii) and (c)(1)(iii)

are added.

■

11. Example 5 in paragraph (c)(5) is

added.

■

12. In paragraph (d)(1), the fourth

sentence is revised.

■

13. Paragraph (e) is added.

The additions and revisions read as

follows:

§ 26.2632–1

Allocation of GST exemption.

*

*

*

*

*

(b) * * *

(2) Automatic allocation to indirect

skips made after December 31, 2000—

(i) In general. An indirect skip is a

transfer of property to a GST trust as

defined in section 2632(c)(3)(B)

provided that the transfer is subject to

gift tax and does not qualify as a direct

skip. In the case of an indirect skip

made after December 31, 2000, to which

section 2642(f) (relating to transfers

subject to an estate tax inclusion period

(ETIP)) does not apply, the transferor’s

unused GST exemption is automatically

allocated to the property transferred (but

not in excess of the fair market value of

the property on the date of the transfer).

The automatic allocation pursuant to

this paragraph is effective whether or

not a Form 709 is filed reporting the

transfer, and is effective as of the date

of the transfer to which it relates. An

automatic allocation is irrevocable after

the due date of the Form 709 for the

calendar year in which the transfer is

made. In the case of an indirect skip to

which section 2642(f) does apply, the

indirect skip is deemed to be made at

the close of the ETIP and the GST

exemption is deemed to be allocated at

that time. In either case, except as

otherwise provided in paragraph

(b)(2)(ii) of this section, the automatic

allocation of exemption applies even if

an allocation of exemption is made to

the indirect skip in accordance with

section 2632(a).

(ii) Prevention of automatic

allocation. Except as otherwise

provided in forms or other guidance

published by the Service, 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) by

making an election, as provided in

paragraph (b)(2)(iii) of this section.

Notwithstanding paragraph (b)(2)(iii)(B)

of this section, the transferor may also

prevent the automatic allocation of GST

exemption with regard to an indirect

skip by making an affirmative allocation

of GST exemption on a Form 709 filed

at any time on or before the due date for

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timely filing (within the meaning of

paragraph (b)(1)(ii) of this section) of an

amount that is less than (but not equal

to) the value of the property transferred

as reported on that return, in accordance

with the provisions of paragraph (b)(4)

of this section. See paragraph (b)(4)(iii)

Example 6 of this section. Any election

out of the automatic allocation rules

under this section has no effect on the

application of the automatic allocation

rules applicable after the transferor’s

death under section 2632(e) and

paragraph (d) of this section.

(iii) Election to have automatic

allocation rules not apply—(A) In

general. A transferor may prevent the

automatic allocation of GST exemption

(elect out) with respect to any transfer

or transfers constituting an indirect skip

made to a trust or to one or more

separate shares that are treated as

separate trusts under § 26.2654–1(a)(1)

(collectively referred to hereinafter as a

trust). In the case of a transfer treated

under section 2513 as made one-half by

the transferor and one-half by the

transferor’s spouse, each spouse shall be

treated as a separate transferor who

must satisfy separately the requirements

of paragraph (b)(2)(iii)(B) to elect out

with respect to the transfer. A transferor

may elect out with respect to—

(1) One or more prior-year transfers

subject to section 2642(f) (regarding

ETIPs) made by the transferor to a

specified trust or trusts;

(2) One or more (or all) current-year

transfers made by the transferor to a

specified trust or trusts;

(3) One or more (or all) future

transfers made by the transferor to a

specified trust or trusts;

(4) All future transfers made by the

transferor to all trusts (whether or not in

existence at the time of the election out);

or

(5) Any combination of paragraphs

(b)(2)(iii)(A)(1) through (4) of this

section.

(B) Manner of making an election out.

Except as otherwise provided in forms

or other guidance published by the IRS,

an election out is made as described in

this paragraph (b)(2)(iii)(B). To elect out,

the transferor must attach a statement

(election out statement) to a Form 709

filed within the time period provided in

paragraph (b)(2)(iii)(C) of this section

(whether or not any transfer was made

in the calendar year for which the Form

709 was filed, and whether or not a

Form 709 otherwise would be required

to be filed for that year). See paragraph

(b)(4)(iv) Example 7 of this section. The

election out statement must identify the

trust (except for an election out under

paragraph (b)(2)(iii)(A)(4) of this

section), and specifically must provide

that the transferor is electing out of the

automatic allocation of GST exemption

with respect to the described transfer or

transfers. Prior-year transfers that are

subject to section 2642(f), and to which

the election out is to apply, must be

specifically described or otherwise

identified in the election out statement.

Further, unless the election out is made

for all transfers made to the trust in the

current year and/or in all future years,

the current-year transfers and/or future

transfers to which the election out is to

apply must be specifically described or

otherwise identified in the election out

statement.

(C) Time for making an election out.

To elect out, the Form 709 with the

attached election out statement must be

filed on or before the due date for timely

filing (within the meaning of paragraph

(b)(1)(ii) of this section) of the Form 709

for the calendar year in which—

(1) For a transfer subject to section

2642(f), the ETIP closes; or

(2) For all other elections out, the first

transfer to be covered by the election

out was made.

(D) Effect of election out. An election

out does not affect the automatic

allocation of GST exemption to any

transfer not covered by the election out

statement. Except for elections out for

transfers described in paragraph

(b)(2)(iii)(A)(1) of this section that are

specifically described in an election out

statement, an election out does not

apply to any prior-year transfer to a

trust, including any transfer subject to

an ETIP (even if the ETIP closes after the

election is made). An election out does

not prevent the transferor from

allocating the transferor’s available GST

exemption to any transfer covered by

the election out, either on a timely filed

Form 709 reporting the transfer or at a

later date in accordance with the

provisions of paragraph (b)(4) of this

section. An election out with respect to

future transfers remains in effect unless

and until terminated. Once an election

out with respect to future transfers is

made, a transferor need not file a Form

709 in future years solely to prevent the

automatic allocation of the GST

exemption to any future transfer

covered by the election out.

(E) Termination of election out.

Except as otherwise provided in forms

or other guidance published by the IRS,

an election out may be terminated as

described in this paragraph (b)(2)(iii)(E).

Pursuant to this section, a transferor

may terminate an election out made on

a Form 709 for a prior year, to the extent

that election out applied to future

transfers or to a transfer subject to

section 2642(f). To terminate an election

out, the transferor must attach a

statement (termination statement) to a

Form 709 filed on or before the due date

of the Form 709 for the calendar year in

which is made the first transfer to which

the election out is not to apply (whether

or not any transfer was made in the

calendar year for which the Form 709

was filed, and whether or not a Form

709 otherwise would be required to be

filed for that year). The termination

statement must identify the trust (if

applicable), describe the prior election

out that is being terminated, specifically

provide that the prior election out is

being terminated, and either describe

the extent to which the prior election

out is being terminated or describe any

current-year transfers to which the

election out is not to apply.

Consequently, the automatic allocation

rules contained in section 2632(c)(1)

will apply to any current-year transfer

described on the termination statement

and, except as otherwise provided in

this paragraph, to all future transfers

that otherwise would have been covered

by the election out. The termination of

an election out does not affect any

transfer, or any election out, that is not

described in the termination statement.

The termination of an election out will

not revoke the election out for any prior-

year transfer, except for a prior-year

transfer subject to section 2642(f) for

which the election out is revoked on a

timely filed Form 709 for the calendar

year in which the ETIP closes or for any

prior calendar year. The termination of

an election out does not preclude the

transferor from making another election

out in the same or any subsequent year.

(3) Election to treat trust as a GST

trust—(i) In general. A transferor may

elect to treat any trust as a GST trust

(GST trust election), without regard to

whether the trust is subject to section

2642(f), with respect to—

(A) Any current-year transfer (or any

or all current-year transfers) by the

electing transferor to the trust;

(B) Any selected future transfers by

the electing transferor to the trust;

(C) All future transfers by the electing

transferor to the trust; or

(D) Any combination of paragraphs

(b)(3)(i)(A) through (C) of this section.

(ii) Time and manner of making GST

trust election. Except as otherwise

provided in forms or other guidance

published by the Internal Revenue

Service, a GST trust election is made as

described in this paragraph (b)(3)(ii). To

make a GST trust election, the transferor

must attach a statement (GST trust

election statement) to a Form 709 filed

on or before the due date for timely

filing (within the meaning of paragraph

(b)(1)(ii) of this section) of the Form 709

for the calendar year in which the first

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transfer to be covered by the GST trust

election is made (whether or not any

transfer was made in the calendar year

for which the Form 709 was filed, and

whether or not a Form 709 otherwise

would be required to be filed for that

year). The GST trust election statement

must identify the trust, specifically

describe or otherwise clearly identify

the transfers to be covered by the

election, and specifically provide that

the transferor is electing to have the

trust treated as a GST trust with respect

to the covered transfers.

(iii) Effect of GST trust election.

Except as otherwise provided in this

paragraph, a GST trust election will

cause all transfers made by the electing

transferor to the trust that are subject to

the election to be deemed to be made to

a GST trust as defined in section

2632(c)(3)(B). Thus, the electing

transferor’s unused GST exemption may

be allocated automatically to such

transfers in accordance with paragraph

(b)(2) of this section. A transferor may

prevent the automatic allocation of GST

exemption to future transfers to the trust

either by terminating the GST trust

election in accordance with paragraph

(b)(3)(iv) of this section (in the case of

trusts that would not otherwise be

treated as GST trusts) or by electing out

of the automatic allocation of GST

exemption in accordance with

paragraph (b)(2) of this section.

(iv) Termination of GST trust election.

Except as otherwise provided in forms

or other guidance published by the

Service, a GST trust election may be

terminated as described in this

paragraph (b)(3)(iv). A transferor may

terminate a GST trust election made on

a Form 709 for a prior year, to the extent

that election applied to future transfers

or to a transfer subject to section 2642(f).

To terminate a GST trust election, the

transferor must attach a statement

(termination statement) to a Form 709

filed on or before the due date for timely

filing (within the meaning of paragraph

(b)(1)(ii) of this section) a Form 709 for

the calendar year: in which is made the

electing transferor’s first transfer to

which the GST trust election is not to

apply; or that is the first calendar year

for which the GST trust election is not

to apply, even if no transfer is made to

the trust during that year. The

termination statement must identify the

trust, describe the current-year transfer

(if any), and provide that the prior GST

trust election is terminated.

Accordingly, if the trust otherwise does

not satisfy the definition of a GST trust,

the automatic allocation rules contained

in section 2632(c)(1) will not apply to

the described current-year transfer or to

any future transfers made by the

transferor to the trust, unless and until

another election under this paragraph

(b)(3) is made.

(4) * * * (i) * * * See paragraph

(b)(4)(ii) of this section. * * *

(ii) * * * (A) * * * (1) * * * For

purposes of this paragraph (b)(4)(ii), the

Form 709 is deemed filed on the date it

is postmarked to the Internal Revenue

Service address as directed in forms or

other guidance published by the

Service. * * *

*

*

*

*

*

(iii) Examples. The following

examples illustrate the provisions of

this paragraph (b):

Example 1. Modification of allocation of

GST exemption. On December 1, 2003, T

transfers $100,000 to an irrevocable GST trust

described in section 2632(c)(3)(B). The

transfer to the trust is not a direct skip. The

date prescribed for filing the gift tax return

reporting the taxable gift is April 15, 2004.

On February 10, 2004, T files a Form 709 on

which T properly elects out of the automatic

allocation rules contained in section

2632(c)(1) with respect to the transfer in

accordance with paragraph (b)(2)(iii) of this

section, and allocates $50,000 of GST

exemption to the trust. On April 13th of the

same year, T files an additional Form 709 on

which T confirms the election out of the

automatic allocation rules contained in

section 2632(c)(1) and allocates $100,000 of

GST exemption to the trust in a manner that

clearly indicates the intention to modify and

supersede the prior allocation with respect to

the 2003 transfer. The allocation made on the

April 13 return supersedes the prior

allocation because it is made on a timely-

filed Form 709 that clearly identifies the trust

and the nature and extent of the modification

of GST exemption allocation. The allocation

of $100,000 of GST exemption to the trust is

effective as of December 1, 2003. The result

would be the same if the amended Form 709

decreased the amount of the GST exemption

allocated to the trust.

Example 2. Modification of allocation of

GST exemption. The facts are the same as in

Example 1 except, on July 8, 2004, T files a

Form 709 attempting to reduce the earlier

allocation. The return filed on July 8, 2004,

is not a timely filed return. The $100,000

GST exemption allocated to the trust, as

amended on April 13, 2004, remains in effect

because an allocation, once made, is

irrevocable and may not be modified after the

last date on which a timely filed Form 709

may be filed.

Example 3. Effective date of late allocation

of GST exemption. On November 15, 2003,

T transfers $100,000 to an irrevocable GST

trust described in section 2632(c)(3)(B). The

transfer to the trust is not a direct skip. The

date prescribed for filing the gift tax return

reporting the taxable gift is April 15, 2004.

On February 10, 2004, T files a Form 709 on

which T properly elects out of the automatic

allocation rules contained in section

2632(c)(1) in accordance with paragraph

(b)(2)(iii) of this section with respect to that

transfer. On December 1, 2004, T files a Form

709 and allocates $50,000 to the trust. The

allocation is effective as of December 1, 2004.

Example 4. Effective date of late allocation

of GST exemption. T transfers $100,000 to an

irrevocable GST trust on December 1, 2003,

in a transfer that is not a direct skip. On April

15, 2004, T files a Form 709 on which T

properly elects out of the automatic

allocation rules contained in section

2632(c)(1) with respect to the entire transfer

in accordance with paragraph (b)(2)(iii) of

this section and T does not make an

allocation of any GST exemption on the Form

709. On September 1, 2004, the trustee makes

a taxable distribution from the trust to T’s

grandchild in the amount of $30,000.

Immediately prior to the distribution, the

value of the trust assets was $150,000. On the

same date, T allocates GST exemption to the

trust in the amount of $50,000. The

allocation of GST exemption on the date of

the transfer is treated as preceding in point

of time the taxable distribution. At the time

of the GST, the trust has an inclusion ratio

of .6667 (1—(50,000/150,000)).

Example 5. Automatic allocation to split-

gift. On December 1, 2003, T transfers

$50,000 to an irrevocable GST Trust

described in section 2632(c)(3)(B). The

transfer to the trust is not a direct skip. On

April 30, 2004, T and T’s spouse, S, each files

an initial gift tax return for 2003, on which

they consent, pursuant to section 2513, to

have the gift treated as if one-half had been

made by each. In spite of being made on a

late-filed gift tax return for 2003, the election

under section 2513 is valid because neither

spouse had filed a timely gift tax return for

that year. Previously, neither T nor S filed a

timely gift tax return electing out of the

automatic allocation rules contained in

section 2632(c)(1). As a result of the election

under section 2513, which is retroactive to

the date of T’s transfer, T and S are each

treated as the transferor of one-half of the

property transferred in the indirect skip.

Thus, $25,000 of T’s unused GST exemption

and $25,000 of S’s unused GST exemption is

automatically allocated to the trust. Both

allocations are effective on and after the date

that T made the transfer. The result would be

the same if T’s transfer constituted a direct

skip subject to the automatic allocation rules

contained in section 2632(b).

Example 6. Partial allocation of GST

exemption. On December 1, 2003, T transfers

$100,000 to an irrevocable GST trust

described in section 2632(c)(3)(B). The

transfer to the trust is not a direct skip. The

date prescribed for filing the gift tax return

reporting the taxable gift is April 15, 2004.

On February 10, 2004, T files a Form 709 on

which T allocates $40,000 of GST exemption

to the trust. By filing a timely Form 709 on

which a partial allocation is made of $40,000,

T effectively elected out of the automatic

allocation rules for the remaining value of the

transfer for which T did not allocate GST

exemption.

(iv) Example. The following example

illustrates language that may be used in

the statement required under paragraph

(b)(2)(iii) of this section to elect out of

the automatic allocation rules under

various scenarios:

Example 1. On March 1, 2006, T transfers

$100,000 to Trust B, a GST trust described in

section 2632(c)(3)(B). Subsequently, on

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September 15, 2006, T transfers an additional

$75,000 to Trust B. No other transfers are

made to Trust B in 2006. T attaches an

election out statement to a timely filed Form

709 for calendar year 2006. Except with

regard to paragraph (v) of this Example 1, the

election out statement identifies Trust B as

required under paragraph (b)(2)(iii)(B) of this

section, and contains the following

alternative election statements:

(i) ‘‘T hereby elects that the automatic

allocation rules will not apply to the

$100,000 transferred to Trust B on March 1,

2006.’’ The election out of the automatic

allocation rules will be effective only for T’s

March 1, 2006, transfer and will not apply to

T’s $75,000 transfer made on September 15,

2006.

(ii) ‘‘Thereby elects that the automatic

allocation rules will not apply to any

transfers to Trust B in 2006.’’ The election

out of the automatic allocation rules will be

effective for T’s transfers to Trust B made on

March 1, 2006, and September 15, 2006.

(iii) ‘‘Thereby elects that the automatic

allocation rules will not apply to any

transfers to Trust B made by T in 2006 or to

any additional transfers T may make to Trust

B in subsequent years.’’ The election out of

the automatic allocation rules will be

effective for T’s transfers to Trust B in 2006

and for all future transfers to be made by T

to Trust B, unless and until T terminates the

election out of the automatic allocation rules.

(iv) ‘‘Thereby elects that the automatic

allocation rules will not apply to any

transfers T has made or will make to Trust

B in the years 2006 through 2008.’’ The

election out of the automatic allocation rules

will be effective for T’s transfers to Trust B

in 2006 through 2008. T’s transfers to Trust

B after 2008 will be subject to the automatic

allocation rules, unless T elects out of those

rules for one or more years after 2008. T may

terminate the election out of the automatic

allocation rules for 2007, 2008, or both in

accordance with the termination rules of

paragraph (b)(2)(iii)(E) of this section. T may

terminate the election out for one or more of

the transfers made in 2006 only on a later but

still timely filed Form 709 for calendar year

2006.

(v) ‘‘Thereby elects that the automatic

allocation rules will not apply to any current

or future transfer that T may make to any

trust.’’ The election out of the automatic

allocation rules will be effective for all of T’s

transfers (current-year and future) to Trust B

and to any and all other trusts (whether such

trusts exist in 2006 or are created in a later

year), unless and until T terminates the

election out of the automatic allocation rules.

T may terminate the election out with regard

to one or more (or all) of the transfers covered

by the election out in accordance with the

termination rules of paragraph (b)(2)(iii)(E) of

this section.

(c) Special rules during an estate tax

inclusion period—(1) In general—(i)

Automatic allocations with respect to

direct skips and indirect skips. A direct

skip or an indirect skip that is subject

to an estate tax inclusion period (ETIP)

is deemed to have been made only at the

close of the ETIP. The transferor may

prevent the automatic allocation of GST

exemption to a direct skip or an indirect

skip by electing out of the automatic

allocation rules at any time prior to the

due date of the Form 709 for the

calendar year in which the close of the

ETIP occurs (whether or not any transfer

was made in the calendar year for which

the Form 709 was filed, and whether or

not a Form 709 otherwise would be

required to be filed for that year). See

paragraph (b)(2)(i) of this section

regarding the automatic allocation of

GST exemption to an indirect skip

subject to an ETIP.

(ii) Other allocations. An affirmative

allocation of GST exemption cannot be

revoked, but becomes effective as of

(and no earlier than) the date of the

close of the ETIP with respect to the

trust. If an allocation has not been made

prior to the close of the ETIP, an

allocation of exemption is effective as of

the close of the ETIP during the

transferor’s lifetime if made by the due

date for filing the Form 709 for the

calendar year in which the close of the

ETIP occurs (timely ETIP return). An

allocation of exemption is effective in

the case of the close of the ETIP by

reason of the death of the transferor as

provided in paragraph (d) of this

section.

(iii) Portion of trust subject to ETIP. If

any part of a trust is subject to an ETIP,

the entire trust is subject to the ETIP.

See § 26.2642–1(b)(2) for rules

determining the inclusion ratio

applicable in the case of GSTs during an

ETIP.

*

*

*

*

*

(5) * * *

Example 5. Election out of automatic

allocation of GST exemption for trust subject

to an ETIP. On December 1, 2003, T transfers

$100,000 to Trust A, an irrevocable GST trust

described in section 2632(c)(3) that is subject

to an estate tax inclusion period (ETIP). T

made no other gifts in 2003. The ETIP

terminates on December 31, 2008. T timely

files a gift tax return (Form 709) reporting the

gift on April 15, 2004. On May 15, 2006, T

files a Form 709 on which T properly elects

out of the automatic allocation rules

contained in section 2632(c)(1) with respect

to the December 1, 2003, transfer to Trust A

in accordance with paragraph (b)(2)(iii) of

this section. Because the indirect skip is not

deemed to occur until December 31, 2008,

T’s election out of automatic GST allocation

filed on May 15, 2006, is timely, and will be

effective as of December 31, 2008 (unless

revoked on a Form 709 filed on or before the

due date of a Form 709 for calendar year

2008).

(d) * * * (1) * * * A late allocation

of GST exemption by an executor, other

than an allocation that is deemed to be

made under section 2632(b)(1) or (c)(1),

with respect to a lifetime transfer of

property is made on Form 706, Form

706NA, or Form 709 (filed on or before

the due date of the transferor’s estate tax

return) and applies as of the date the

allocation is filed. * * *

*

*

*

*

*

(e) Effective dates. This section is

applicable as provided in § 26.2601–

1(c), with the following exceptions:

(1) Paragraphs (b)(2) and (b)(3), the

third sentence of paragraph (b)(4)(i), the

fourth sentence of paragraph

(b)(4)(ii)(A)(1), paragraphs (b)(4)(iii) and

(b)(4)(iv), and the fourth sentence of

paragraph (d)(1) of this section, which

will apply to elections made on or after

July 13, 2004; and

(2) Paragraph (c)(1), and Example 5 of

paragraph (c)(5), which will apply to

elections made on or after June 29, 2005.

PART 602—OMB CONTROL NUMBERS

UNDER THE PAPERWORK

REDUCTION ACT

■

Par. 4. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

■

Par. 5. In § 602.101, paragraph (b) is

amended by adding an entry in

numerical order to the table to read as

follows:

§ 602.101

OMB Control numbers.

*

*

*

*

*

(b) * * *

CFR part or section where

identified and described

Current OMB

control No.

*

*

*

*

*

26.2632–1 .............................

1545–1892

*

*

*

*

*

Mark E. Matthews,

Deputy Commissioner for Services and

Enforcement.

Approved: June 21, 2005.

Eric Solomon,

Acting Deputy Assistant Secretary for Tax

Policy.

[FR Doc. 05–12759 Filed 6–28–05; 8:45 am]

BILLING CODE 4830–01–P

DEPARTMENT OF LABOR

Mine Safety and Health Administration

30 CFR Part 3

OMB Control Numbers Under the

Paperwork Reduction Act

AGENCY

:

Mine Safety and Health

Administration (MSHA), Labor.

ACTION

:

Technical amendment.

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