Tax News

CCH (cch.taxgroup.com) reports:

Proposed Reg. §26.2642-6 would provide guidance on the qualified severance of a trust for generation-skipping transfer (GST) tax purposes. The proposed regulations amend the regulations under Reg. §26.2642-6, published contemporaneously with the notice of proposed rulemaking on August 2, 2007, to address a situation where trusts resulting from a severance do not meet the requirements of a qualified severance, see T.D. 9348 (TAXDAY, 2007/08/02, I.1). If resulting trusts do not meet the qualified severance requirements, the resulting trusts will be treated as separate trusts for GST tax purposes so long as the resulting trusts are recognized under applicable state law. However, because the severance is not a qualified severance, each resulting trust will have the same inclusion ratio immediately after the severance as the original trust had prior to the severance. Conforming amendments are proposed to Reg. §§26.2654-1(a)(1)(i) and 26.2654-1(a)(5), Example 8 . The proposed regulations also provide for an additional type of qualified severance, the severance of a trust with an inclusion ratio between zero and one into more than two resulting trusts. The proposed regulations clarify Reg. §26.2642-6(d)(4) to provide that no discount or other reduction from the value of an asset owned by the original trust arising as a result of the division of the original trust's interest in the asset between the resulting trusts is allowed in funding the resulting trusts. This clarification is proposed to be effective with respect to severances occurring on or after the date the proposed regulations are published in the Federal Register.
The IRS has requested comments and requests for a public hearing on the proposed regulations. Written and electronic comments and requests for a hearing must be received by October 31, 2007. Written comments should be sent to CCA:LPDR (REG-128843-05), IRS, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. They may also be hand-delivered to the IRS Courier's Desk. Electronic comments can be submitted via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-128843-05).
Proposed Regulations NPRM REG-128843-05, FINH ¶41,127
Other References:
Code Sec. 2601
CCH Reference - FINH ¶12,060
Code Sec. 2642
CCH Reference - FINH ¶12,870
Code Sec. 2654
CCH Reference - FINH ¶13,125
Tax Research Consultant
CCH Reference - TRC ESTGIFT: 57,074.15