2005 REGS, RULINGS & PRONOUNCEMENTS

PLR 200540004 illustrates the importance of carefully drafted marital trusts. The federal estate tax return incorrectly claimed a deduction for only the actuarial value of the spouse’s income interest, rather than for the entire interest, including the remainder interest. The IRS would not grant an extension of time to make a correct QTIP election, reasoning that an election to deduct the actuarial value of the spouse’s income interest constituted a partial QTIP election which could not be amended.

Proposed Regs (NPRM REG 147775-06) provide guidance with respect to circumstances in which a transferor may request an extension of time in which to allocatino a generation-skipping transfer (GST) exemption to a transfer pursuant to IRC §2642(g)(1).

Proposed Regs have been issued which provide that in any state which requires a deed to be recorded in a public index before being valid, a notice of federal tax lien (NFTL) will not meet the filing requirements until it is both filed and indexed in the appropriate office. (NPRM REG-141998-06).

Notice 2008-46 provides additional guidance concerning return preparer penalty provisions of IRC §6694. The guidance adds certain returns to which preparer penalties may apply, including Form 1040NR, Form 1040-SS, various Forms 1120 and various information returns relating to foreign persons and entities.

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