internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc dom corp-plr-117859-00 date date number release date index number distributing x shareholder shareholder employee employee state a a dear this is in reply to a letter dated date in which rulings were requested as to the federal_income_tax consequences of a proposed transaction additional information was submitted in separate letters the facts submitted for considered are substantially as set forth below distributing is a state a corporation that has elected to be treated as a subchapter_s_corporation under sec_1361 distributing is engaged in the business of operating x franchises in state shareholder and his wife shareholder together the shareholders each own of distributing’s outstanding_stock financial information has been received indicating that distributing has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years the x franchiser requires that the franchisee be an individual shareholder individually is the franchisee for the franchises operated by distributing the franchise agreement does not allow the franchise agreement to be assigned except for assignments qualifying under the terms of the franchise agreement and subject_to the approval by the franchiser excepted in limited situations such as the situation described below the franchiser only allows the franchisee to operate the business in corporate form where the shares of the corporation are wholly owned and controlled by the franchisee employee the shareholder’s son and employee the shareholder’s daughter currently own their own x franchises in shareholders’ market trade area each are approved by the franchiser to obtain additional franchises in their respective trade area franchiser has a policy not to grant a franchise right to an individual in another franchisee’s trade area because part of the franchises operated by distributing are within the same trade area as employee employee could and would object to the franchiser granting the franchises to another individual likewise because the other franchises operated by distributing are within the same trade area as employee employee could and would object to the franchiser granting the x franchises to another individual due to shareholder 1’s serious health conditions and the shareholders advanced age shareholder cannot continue to fulfil his obligations under the franchise agreement the franchiser has agreed to allow shareholder to retain the franchises provided that employee and employee a conduct the business of each of the franchises in their respective trade area in accordance with the terms and conditions of the franchise agreement b currently obtain equity interests in a corporation operating the business in their respective trade area and c will subsequently receive all of the remaining equity_interest in the respective corporations to satisfy the franchiser’s requirements and retain the franchises the shareholders and distributing propose the following transactions i ii iii distributing will transfer the assets and liabilities associated with the franchises located in employee 2's trade area the transferred property to a newly formed corporation controlled in exchange for all of controlled’s stock distributing will distribute all of the newly acquired controlled stock to distributing’s shareholders shareholder and shareholder shareholder and shareholder will then transfer by gift up to approximately a of the distributing stock to employee and up to approximately a of the controlled stock to employee in connection with the proposed transaction it has been represented that a b no part of the consideration to be distributed by distributing will be received by any person as a creditor employee or in any capacity other than that of a shareholder of the corporation the five years of financial information submitted on behalf of distributing is representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted following the distribution distributing and controlled each will continue the active_conduct of its respective businesses independently and with its separate employees the distribution of the stock of controlled is carried out for the corporate business_purpose of providing an equity_interest in each corporation distributing and controlled to the prospective key_employee of each corporation there is no plan or intention by the shareholders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in either distributing or controlled after the transaction except for the proposed gifting of shares to employee and employee there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business the total adjusted bases and the fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of the liabilities assumed by controlled plus any liabilities to which the transferred assets are subject the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution of controlled stock payments made in connection with all continuing transaction if any between distributing and controlled will be for fair_market_value based on c d e f g h i j k l m n o terms and conditions arrived at by the parties bargaining at arm’s length neither distributing nor controlled is an investment_company as defined in sec_368 and iv distributing is an s_corporation within the meaning of sec_1361 controlled will elect to be an s_corporation pursuant to sec_1361 on the first available date after the distribution and there is no plan or intent to revoke or otherwise terminate the s_corporation_election of either distributing or controlled the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled sec_1361 defines s_corporation as with respect to any taxable_year a small_business_corporation that has an effective sec_1362 election a small_business_corporation may make a sec_1362 election for any taxable_year at any time during the preceding tax_year or at any time during the tax_year on or before the 15th day of the third month of the tax_year sec_1362 if the corporation makes an election on or before the 15th day of the third month of the tax_year that election is treated as made for the next taxable_year if the corporation did not meet the definition of a small_business_corporation for the entire tax_year before the date of the election sec_1362 sec_1361 defines small_business_corporation as a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b have as a shareholder a person other than an estate certain trusts and certain organizations who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1362 states that a sec_1362 election is terminated whenever at any time on or after the first day of the first tax_year for which the corporation is an s_corporation the corporation ceases to be a small_business_corporation sec_1_1368-2 of the income_tax regulations provides that if an s_corporation with accumulated_earnings_and_profits transfers a part of its assets constituting an active trade_or_business to another corporation in a transaction to which sec_368 applies and immediately thereafter the stock and securities of the controlled_corporation are distributed in a distribution or exchange to which sec_355 or so much of sec_356 as relates to sec_355 applies the aaa of the distributing_corporation immediately before the transaction is allocated between the distributing_corporation and the controlled_corporation in a manner similar to the manner in which the earnings_and_profits of the distributing_corporation are allocated under sec_312 see sec_1_312-10 based solely on the information submitted and the representations set forth above we rule as follows the transfer by distributing to controlled of the transferred property to newly created controlled in exchange for controlled common_stock and the assumption by controlled of certain related liabilities followed by a distribution of the controlled common_stock by distributing as described above will be a reorganization within the meaning of sec_368 of the code and distributing and controlled will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing upon the transfer of the transferred property to controlled in exchange for controlled common_stock sec_361 and sec_357 of the code no gain_or_loss will be recognized by controlled upon receipt of the transferred property from distributing in exchange for controlled common_stock sec_1032 of the code the basis of the transferred property received by controlled will be the same as the basis of such property in the hands of distributing immediately prior to the transfer sec_362 of the code the holding_period of the transferred property received by controlled will include the period during which such property was held by distributing sec_1223 of the code no gain_or_loss will be recognized to and no amount shall be includible in the income of the shareholders upon receipt of the controlled stock in the distribution described above sec_355 of the code see revrul_75_337 1975_2_cb_124 no gain_or_loss will be recognized by distributing upon the distribution of all of its stock of controlled as described above sec_361 of the code the aggregate basis of the controlled and distributing common_stock in the hands of the shareholders immediately after the distribution of controlled stock to the shareholders will equal the aggregate basis of the distributing common_stock held by the shareholders immediately prior to such distribution allocated in proportion to the fair_market_value of each in accordance with sec_358 and c of the code and the regulations promulgated thereunder the holding_period of the controlled stock received by the shareholders in the transaction will include their holding_period of the distributing stock provided that such stock is held as a capital_asset on the date of the distribution sec_1223 of the code as provided in sec_312 proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 of the regulations distributing’s aaa immediately before the transaction will be allocated between distributing and controlled in a manner similar to the manner in which distributing's earnings_and_profits will be allocated under sec_312 provided that distributing immediately distributes the stock of controlled distributing’s momentary ownership of controlled’s stock as part of a divisive_reorganization under sec_368 will not cause controlled to have an ineligible shareholder under sec_1361 therefore controlled will be eligible to make an s_corporation_election under sec_1362 for its first taxable_year provided that controlled otherwise meets the requirements under sec_1361 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express no opinion as to whether distributing's s_corporation_election is otherwise valid or whether an election of s_corporation treatment by controlled will be otherwise valid moreover we express no opinion on the estate and gift_tax consequences of any part of the transaction this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely jasper l cummings associate chief_counsel by lewis k brickates assistant to the branch chief


internal_revenue_service number release date index number ------------------------------ ------------------------ ------------- --------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b07 plr-146405-11 date march company ----------------------------------------------------------------------------------------------- ------------------------ program ------------------------------------------------------------- type a travel type b travel ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- --------------------- ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- ------- x ----------------------------------------------------- dear -------------- this letter responds to a letter dated date requesting a ruling under sec_4261 of the internal_revenue_code code the facts submitted state that company is a passenger airline that provides scheduled air transportation in the united_states and to some international markets company plans to adopt the program pursuant to which company will award employees with reward points for outstanding attendance levels recognition productivity and performance and achievement of corporate goals and safety plr-146405-11 company will administer the program with assistance from a third party vendor vendor company will award non-transferable reward points to employees in accordance with the program reward points will be credited to individual record- keeping accounts maintained by vendor on behalf of employees participating employees may redeem accumulated reward points for type a travel type b travel merchandise or gift cards vendor will process redemptions of reward points at the request of the employee company will not allow an employee or vendor to purchase from company or borrow from another employee’s account any reward points in connection with a redemption transaction company will cover all of the administrative costs associated with the services provided by vendor if an employee upon redemption selects either type a travel or type b travel company will fulfill the employee’s request at no charge to the employee vendor will not purchase x from company vendor’s only involvement will be to process the exchange which includes notifying company of the redemption of reward points and debiting the employee’s reward points account accordingly an employee like any passenger may incur service charges or fees in connection with air transportation all such costs are incurred outside the program and are the employee’s separate responsibility if an employee upon redemption selects merchandise or a gift card vendor will process the exchange which includes providing the merchandise or gift card to the employee at a predetermined cost to company and debiting the employee’s reward points account accordingly you request a ruling that the air transportation excise_taxes imposed by sec_4261 do not apply to the reward points under the program specifically you request rulings that the reward points redeemed by an employee in exchange for type a travel or type b travel are not subject_to the air transportation excise_tax imposed by sec_4261 because no amount is paid for air transportation the reward points awarded to an employee are not subject_to the air transportation excise_tax imposed by sec_4261 when the points are granted to the employees sec_4261 imposes a percent tax on amounts paid for taxable_transportation of any person taxable_transportation is defined in sec_4262 to include transportation by air that begins and ends in the continental_united_states sec_4261 provides that any amount_paid and the value of any other benefit provided to an air carrier or any related_person for the right to provide mileage awards for or other reductions in the cost of any transportation of persons by air is be plr-146405-11 treated for purposes of sec_4261 as an amount_paid for taxable_transportation and such amount is taxable under sec_4261 sec_49_4261-2 of the facilities and services excise_tax regulations provides that the tax is measured by the total amount_paid the concept of an amount_paid is well developed in the facilities and services excise_tax area revrul_54_332 1954_2_cb_417 holds that where a telephone company furnishes telephone service to certain employees free of charge no tax attaches the revenue_ruling further holds that where telephone service is furnished to employees at a reduced_rate the tax applies to the amount actually paid for such services revrul_70_515 1970_2_cb_270 holds that amounts paid for travel cards which entitle certain classes of individuals to reduced fares are not subject_to the tax imposed by sec_4261 revrul_70_515 reasons that the amounts paid for the travel cards do not entitle the holders to transportation the cards merely identify the holders as being entitled to purchase transportation at a specified reduction from the fare regularly charged by the airline similarly revrul_72_245 1972_1_cb_347 holds that where an airline furnishes an employee the use of its international air travel facilities entirely free of charge the dollar_figure tax imposed by sec_4261 use of international travel facilities does not apply because there is no amount_paid for transportation within the meaning of sec_4261 also revrul_84_12 1984_1_cb_211 holds that the tax imposed by sec_4261 does not apply to free bonus tickets issued by an airline company to customers who have already satisfied all requirements to qualify for the bonus however the tax applies to any amount the customer subsequently pays because of not fully qualifying for the free bonus ticket revrul_84_12 reasons that if no amount is paid the tax does not apply if payment is made at a reduced_rate however then the reduced_amount is an amount_paid for air transportation within the meaning of sec_4261 because the amount subject_to tax is the actual amount_paid for taxable_transportation based on the facts submitted and representations made we conclude that the air transportation excise_taxes imposed by sec_4261 do not apply to the reward points under the program specifically we conclude that the reward points redeemed by an employee in exchange for type a travel or type b travel are not subject_to the air transportation excise_tax imposed by sec_4261 because no amount is paid for air transportation the reward points awarded to an employee are not subject_to the air transportation excise_tax imposed by sec_4261 when the points are granted to the employees because no amount is paid for air transportation plr-146405-11 however any amounts paid_by an employee for service charges or fees in connection with air transportation awarded through the program that are the employee’s separate responsibility and that meet the definition of taxable_transportation and are otherwise not exempt from tax are subject_to the air transportation excise_tax imposed by sec_4261 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically you did not request and we do not provide a ruling on the federal income or employment_tax consequences of awarding or redeeming reward points under the program this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely stephanie n bland stephanie n bland senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number -------------------- ------ ----------------------------- ---------------- ------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-132233-09 date date legend company -------------------------------------------------- ---------------------------- date1 date2 state ----------------- ---------------------- ---------- dear ------------- this responds to a letter dated date and subsequent information submitted on behalf of company requesting a ruling under sec_1362 of the internal_revenue_code facts company incorporated in state on date1 company intended to file form_2553 election by a small_business_corporation effective date2 due to inadvertence company never filed the election law and analysis sec_1362 provides in general that a small_business_corporation may elect to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding plr-132233-09 taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for that taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat such an election as timely made for that taxable_year conclusion based solely on the facts submitted and representations made we conclude that company has established reasonable_cause for failing to make a timely s_corporation_election thus we conclude that company is eligible for relief under sec_1362 accordingly if company makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 effective date2 within days following the date of this letter the election shall be treated as timely made a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether company is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination plr-132233-09 pursuant to a power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative sincerely s tara p volungis senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ----------------------------------------------------- ---------------------- ----------------------------------------- ------------------------------------ --------------------------------------- ----------------------------- in re ------------------------------ department of the treasury washington dc third party communication date of communication month dd yyyy person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b09 plr-134221-04 date date ---------------------- ------------------ ---------------------------------------- ------------- ---------------- -------------------------- --------------------- legend decedent spouse trust state date date date dear ------------ this is in response to your letter dated date and subsequent correspondence in which you requested an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make a qualified_terminable_interest_property qtip_election for a_trust under sec_2056 of the internal_revenue_code to sever the trust into an exempt and non-exempt trust for purposes of the generation- skipping transfer gst tax and to make a reverse_qtip_election under sec_2652 for the exempt trust the facts and representations submitted are summarized as follows decedent executed trust on date upon her death after the payment of specific bequests trust is to be the marital trust for spouse marital trust has gst potential decedent died testate on date survived by spouse a corporate attorney spouse as executor of decedent’s estate prepared the form_706 united_states estate and generation-skipping_transfer_tax return for decedent’s estate spouse failed to make the qtip_election for marital trust failed to sever marital trust into a gst exempt and non-exempt marital trust and failed to make the reverse_qtip_election for the gst plr-134221-04 exempt marital trust it has been represented that all of decedent’s gst_exemption is available for allocation spouse died on date spouse’s failure to make the qtip_election sever marital trust and to make the reverse_qtip_election was discovered shortly after spouse’s death the trustees of the marital trust filed a petition with state court requesting that the trust be severed into a exempt and non-exempt marital trust in a manner consistent with sec_26_2654-1 of the generation-skipping_transfer_tax regulations the trustees are requesting an extension of time under sec_301_9100-1 and sec_3 to make the qtip_election for trust to sever trust into a gst exempt marital trust and a gst non- exempt marital trust under sec_26_2654-1 and to make a reverse_qtip_election under sec_2652 for the gst exempt marital trust law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states under sec_2044 any property in which the decedent had a qualifying_income_interest_for_life and for which a deduction is allowed under sec_2056 is includible in the decedent’s gross_estate sec_2044 provides that for purposes of chapter and chapter property includible in the decedent’s gross_estate under sec_2044 shall be treated as property passing from the decedent sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides the general_rule that no deduction shall be allowed for an interest passing to the surviving_spouse if on the lapse of time on the occurrence of an event or contingency or on the failure of an event or contingency to occur the interest will terminate or fail sec_2056 provides that in the case of qualified_terminable_interest_property such property shall be treated as passing to the surviving_spouse and for purposes of sec_2056 no part of the property shall be treated as passing to any person other than the surviving_spouse sec_2056 defines qualified_terminable_interest_property as property which passes from the decedent in which the surviving_spouse has a qualifying_income_interest_for_life and to which an election under sec_2056 applies plr-134221-04 sec_2056 provides that the surviving_spouse has a qualifying_income_interest_for_life if the surviving_spouse is entitled to all the income from the property payable annually or at more frequent intervals or has a usufruct interest for life in the property and no person has a power to appoint any part of the property to any person other than the surviving_spouse sec_2056 provides that an election under sec_2056 with respect to any property is to be made by the executor on the return of tax imposed by sec_2001 the election once made is irrevocable sec_20_2056_b_-7 of the estate_tax regulations provides generally that the qtip_election is made on the last filed estate_tax_return on or before the due_date of the return including extensions or if a timely return is not filed the first estate_tax_return filed after the due_date sec_2601 imposes a tax on every generation-skipping_transfer made by a transferor to a skip_person in general under sec_26_2652-1 the transferor for gst tax purposes is the individual with respect to whom the property was most recently subject_to federal estate and gift_tax sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a generation-skipping_transfer_tax_exemption of dollar_figure which may be allocated by such individual or by his or her executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable under sec_2632 the allocation may be made at any time on or before the date prescribed for filing the estate_tax_return including extensions sec_2632 provides that any portion of an individual's gst_exemption which has not been allocated within the time prescribed by sec_2032 shall be deemed to be allocated as follows-- a first to property which is the subject of a direct_skip occurring at such individual's death and b second to trusts with respect to which such individual is the transferor and from which a taxable_distribution or a taxable_termination might occur at or after such individual's death sec_26_2632-1 provides that a decedent's unused gst_exemption is automatically allocated on the due_date for filing form_706 to the extent not otherwise allocated by the decedent's executor on or before that date the automatic allocation occurs whether or not a return is actually required to be filed unused gst_exemption is allocated pro_rata subject_to the rules of sec_26_2642-2 on the basis of the value of the property as finally determined for purposes of chapter chapter value first to direct skips treated as occurring at the transferor's death the balance if any of unused gst_exemption is allocated pro_rata subject_to the rules of sec_26_2642-2 on the basis of the chapter value of the non-exempt portion of the trust property or in plr-134221-04 the case of trusts that are not included in the gross_estate on the basis of the date of death value of the trust to trusts with respect to which a taxable_termination may occur or from which a taxable_distribution may be made the automatic allocation of gst_exemption is irrevocable and an allocation made by the executor after the automatic allocation is made is ineffective no automatic allocation of gst_exemption is made to a_trust that will have a new transferor with respect to the entire trust prior to the occurrence of any gst with respect to the trust sec_2652 provides that in the case of any trust with respect to which a deduction is allowed to the decedent under sec_2056 the estate of the decedent may elect to treat all of the property in the trust for purposes of the gst tax as if the election to be treated as qualified_terminable_interest_property had not been made this election is referred to as the reverse_qtip_election the consequence of a reverse_qtip_election is that the decedent remains for gst tax purposes the transferor of the qtip_trust for which the election is made as a result the decedent's gst tax exemption may be allocated to the qtip_trust sec_26_2652-2 provides that the reverse_qtip_election is to be made on the return on which the qtip_election is made sec_26_2654-1 provides that the severance of a_trust that is included in the transferor's gross_estate or created under the transferor's will into two or more trusts is recognized for purposes of chapter if - i the trust is severed pursuant to a direction in the governing instrument providing that the trust is to be divided upon the death of the transferor or ii the governing instrument does not require or otherwise direct severance but the trust is severed pursuant to discretionary authority granted either under the governing instrument or under local law and a the terms of the new trusts provide in the aggregate for the same succession of interests and beneficiaries as are provided in the original trust b the severance occurs or a reformation proceeding if required is commenced prior to the date prescribed for filing the federal estate_tax_return including extensions actually granted for the estate of the transferor and c either - the new trusts are severed on a fractional basis if severed on a fractional basis the separate trusts need not be funded with a pro_rata portion of each asset held by the undivided trust the trusts plr-134221-04 may be funded on a nonpro rata basis provided funding is based on either the fair_market_value of the assets on the date of funding or in a manner that fairly reflects the net appreciation or depreciation in the value of the assets measured from the valuation_date to the date of funding or if the severance is required by the terms of the governing instrument to be made on the basis of a pecuniary amount the pecuniary payment is satisfied in a manner that would meet the requirements of paragraph a ii of this section if it were paid to an individual under c the commissioner may grant a reasonable extension of the time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i if the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer has acted reasonably and in good_faith and granting the relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 sec_301_9100-3 provides that taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied the trustees of marital trust are granted sixty days from the date of the issuance of the state court order severing marital trust into a gst exempt marital trust and a gst non-exempt marital trust to make the qtip_election for marital trust under sec_2056 sever marital trust into a gst exempt and non-exempt marital trust under sec_26_2654-1 and make the reverse_qtip_election for the gst exempt marital trust under sec_2652 plr-134221-04 the qtip and reverse qtip elections should be made on a supplemental form_706 for decedent’s estate the supplemental form_706 should be filed with the internal_revenue_service center cincinnati ohio a copy of the state court order severing marital trust and a copy of this letter should be attached to the return a copy is enclosed for this purpose an extension of time to make the reverse_qtip_election under sec_2652 does not extend the time to make an allocation of any remaining gst_exemption once the reverse_qtip_election is made sec_2632 and sec_26_2632-1 will operate to allocate decedent’s gst_exemption to the gst exempt marital trust except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely heather c maloy associate chief_counsel passthroughs special industries enclosures copy of this letter copy for purposes