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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 soyprotein 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

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DEPARTMENT OF THE TREASURY

DEPARTMENT OF THE TREASURY

Internal Revenue Service

Internal Revenue Service

26 CFR Part 1

26 CFR Parts 26 and 602
[TD 9208]

[TD 9207]

RIN 1545–BB54

Election Out of GST Deemed
Allocations

RIN 1545–AX93

Assumption of Partner Liabilities;
Correction
Internal Revenue Service (IRS),
Treasury.

AGENCY:
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.

This correction is effective on
May 26, 2005.

DATES:

FOR FURTHER INFORMATION CONTACT:
Laura Fields (202) 622–3050 (not a tollfree 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.

Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulation.
AGENCY:

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
As published, TD 9207 contains an
been reviewed and approved by the
error that may prove to be misleading
Office of Management and Budget in
and is in need of clarification.
accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
Correction of Publication
3507(d)) under control number 1545–
■ Accordingly, the publication of the
1892.
The collection of information in these
final regulations (TD 9207), that was the
subject of FR Doc. 05–10266, is corrected final regulations is in § 26.2632–
1(b)(2)(iii) and (b)(3). This information
as follows:
is required by the IRS for taxpayers who
■ On page 30337, column 3, that
elect to have the automatic allocation
paragraph heading ‘‘4. Section 752–7
rules not apply to the current transfer
Liability’’, the language ‘‘4. Section 752–
and/or to future transfers to the trust or
7 Liability’’ is corrected to read ‘‘4.
to terminate such election. This
Section 1.752–7 Liability’’.
information is also required by the IRS
for taxpayers who elect to treat trusts
Cynthia Grigsby,
described in section 2632(c)(3)(B)(i)
Acting Chief, Publications and Regulations
through (vi) as GST trusts or to
Branch, Legal Processing Division, Associate
terminate such election.
Chief Counsel (Procedure and
An agency may not conduct or
Administration).
sponsor,
and a person is not required to
[FR Doc. 05–12757 Filed 6–28–05; 8:45 am]
respond to, a collection of information
BILLING CODE 4830–01–M
unless the collection of information
displays a valid control number.
Books or records relating to this
collection of information must be
Need for Correction

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Federal Register / Vol. 70, No. 124 / Wednesday, June 29, 2005 / Rules and Regulations
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 generationskipping 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 currentyear 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.

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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

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37259

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.

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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:

■

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) * * *
PART 26—GENERATION-SKIPPING
(2) Automatic allocation to indirect
TRANSFER TAX REGULATIONS
skips made after December 31, 2000—
UNDER THE TAX REFORM ACT OF
(i) In general. An indirect skip is a
1986
transfer of property to a GST trust as
■ Paragraph 1. The authority citation for
defined in section 2632(c)(3)(B)
part 26 continues to read, in part, as
provided that the transfer is subject to
follows:
gift tax and does not qualify as a direct
skip. In the case of an indirect skip
Authority: 26 U.S.C. 7805 * * *.
made after December 31, 2000, to which
■ Par. 2. In § 26.2600–1, the entries for
§ 26.2632–1 are amended by revising the section 2642(f) (relating to transfers
subject to an estate tax inclusion period
entry for paragraph (b)(2) and adding
(ETIP)) does not apply, the transferor’s
entries for paragraphs (b)(3), (b)(4) and
unused GST exemption is automatically
(e) to read as follows:
allocated to the property transferred (but
§ 26.2600–1 Table of contents.
not in excess of the fair market value of
*
*
*
*
*
the property on the date of the transfer).
The automatic allocation pursuant to
§ 26.2632–1 Allocation of GST exemption.
this paragraph is effective whether or
*
*
*
*
*
not a Form 709 is filed reporting the
(b) * * *
transfer, and is effective as of the date
(2)Automatic allocation to indirect skips
of the transfer to which it relates. An
made after December 31, 2000.
automatic allocation is irrevocable after
(3) Election to treat trust as GST trust.
the due date of the Form 709 for the
(4) Allocation to other transfers.
calendar year in which the transfer is
*
*
*
*
*
made. In the case of an indirect skip to
(e) Effective date.
which section 2642(f) does apply, the
*
*
*
*
*
indirect skip is deemed to be made at
■ Par. 3. Section 26.2632–1 is amended
the close of the ETIP and the GST
as follows:
exemption is deemed to be allocated at
■ 1. Paragraph (b)(2) is redesignated as
that time. In either case, except as
paragraph (b)(4).
otherwise provided in paragraph
■ 2. Paragraphs (b)(2) and (b)(3) are
(b)(2)(ii) of this section, the automatic
added.
allocation of exemption applies even if
■ 3. In newly designated paragraph
an allocation of exemption is made to
(b)(4)(i), the third sentence is revised.
the indirect skip in accordance with
■ 4. In newly designated paragraph
section 2632(a).
(b)(4)(ii)(A)(1), the fourth sentence is
(ii) Prevention of automatic
revised.
allocation.
Except as otherwise
■ 5. In newly designated paragraph
provided in forms or other guidance
(b)(4)(ii)(B):
published by the Service, the transferor
■ a. All references to paragraph
may prevent the automatic allocation of
‘‘(b)(2)(ii)(A)(1)(i)’’ are removed and
‘‘(b)(4)(ii)(A)(1)(i)’’ is added in its place. GST exemption with regard to an
indirect skip (including indirect skips to
■ b. All references to paragraph
which section 2642(f) may apply) by
‘‘(b)(2)(ii)(A)(1)(ii)’’ are removed and
‘‘(b)(4)(ii)(A)(1)(ii)’’ is added in its place. making an election, as provided in
paragraph (b)(2)(iii) of this section.
■ c. All references to paragraph
Notwithstanding paragraph (b)(2)(iii)(B)
‘‘(b)(2)(ii)(A)(1)(iii)’’ are removed and
‘‘(b)(4)(ii)(A)(1)(iii)’’ is added in its place. of this section, the transferor may also
prevent the automatic allocation of GST
■ 6. Examples 1 through 5 in newly
exemption with regard to an indirect
designated paragraph (b)(4)(iii) are
skip by making an affirmative allocation
revised.
of GST exemption on a Form 709 filed
■ 7. Example 6 in newly designated
at any time on or before the due date for
paragraph (b)(4)(iii) is added.

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Federal Register / Vol. 70, No. 124 / Wednesday, June 29, 2005 / Rules and Regulations
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

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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

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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 prioryear 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

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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 timelyfiled 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.

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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 splitgift. 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

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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

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

*

*

Current OMB
control No.
*

*
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
Mine Safety and Health
Administration (MSHA), Labor.
ACTION: Technical amendment.
AGENCY:

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