n-17-15.pdf

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Notice 2017-15
PURPOSE
This notice provides guidance on the application of the decision in United States
v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013), and the holdings of Revenue Ruling
2013-17, 2013-38 I.R.B. 201, to the rules regarding the applicable exclusion amount
under §§ 2010(c) and 2505 of the Internal Revenue Code (Code), and the
generation-skipping transfer (GST) exemption under § 2631, as they relate to certain
gifts, bequests, and generation-skipping transfers by (or to) same-sex spouses. In
particular, this notice provides special administrative procedures allowing certain
taxpayers and the executors of certain taxpayers’ estates to recalculate a taxpayer’s
remaining applicable exclusion amount and remaining GST exemption to the extent an
allocation of that exclusion or exemption was made to certain transfers made while the
taxpayer was married to a person of the same sex.
With respect to the applicable exclusion amount applied to a transfer between
spouses that did not qualify for the marital deduction for federal estate or gift tax
purposes at the time of the transfer, based solely on the application of the Defense of

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Marriage Act (DOMA), Public Law 104-199 (110 Stat. 2419), taxpayers will be permitted
to establish that transfer’s qualification for the marital deduction and to recover the
applicable exclusion amount previously applied on a return by reason of such a transfer,
even if the limitations period applicable to that return for the assessment of tax or for
claiming a credit or refund of tax under §§ 6501 or 6511, respectively, has expired. If,
however, qualification for the marital deduction or a reverse qualified terminable interest
property (QTIP) election would require a QTIP, qualified domestic trust (QDOT), or
reverse QTIP election, such taxpayers will have to request relief pursuant to
§ 301.9100-3 of the Procedure and Administration Regulations to make such an
election.
With respect to a taxpayer’s GST exemption that was allocated to transfers
made, prior to the recognition of same-sex marriages for federal tax purposes, to or for
the benefit of one or more persons in a same-sex marriage and/or any other person(s)
whose generation assignment is determined under § 2651 with reference to a same-sex
spouse, certain exemption allocations to transfers to persons now recognized to be non-
skip persons as defined in § 2613(b) will be deemed void. Accordingly, taxpayers who
made such a transfer will be permitted to recalculate the amount of their remaining GST
exemption.
BACKGROUND
Prior to the decision of the Supreme Court in Windsor, the Internal Revenue
Service (IRS) interpreted section 3 of DOMA as prohibiting it from recognizing same-sex
marriages for federal tax purposes. Specifically, section 3 of DOMA provided that:

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In determining the meaning of any Act of Congress, or of any ruling,
regulation, or interpretation of the various administrative bureaus and
agencies of the United States, the word ‘marriage’ means only a legal
union between one man and one woman as husband and wife, and the
word ‘spouse’ refers only to a person of the opposite sex who is a
husband or a wife.

1 U.S.C. § 7.
As a result, taxpayers in a same-sex marriage were not treated as married for
purposes of gift, estate, and GST taxes and were not entitled to claim a marital
deduction for gifts or bequests to each other. Those taxpayers were required to use
their applicable exclusion amount under § 2505 or § 2010(c) to defray any gift or estate
tax imposed on the transfer or were required to pay gift or estate taxes, to the extent the
taxpayer’s exclusion previously had been exhausted. Further, taxpayers in a same-sex
marriage were not allowed to determine generation assignments for GST tax purposes
based on a familial relationship with the spouse rather than on age.
In Windsor, the Supreme Court held that section 3 of DOMA is unconstitutional
because it violates the principles of equal protection. Subsequently, the IRS issued
Revenue Ruling 2013-17, which provides that, for federal tax purposes, the terms
“spouse,” “husband and wife,” “husband,” and “wife” include an individual married to a
person of the same sex if the individuals are lawfully married under state law, and the
term “marriage” includes such a marriage between individuals of the same sex.
Revenue Ruling 2013-17 also provides a general rule recognizing a marriage of
same-sex individuals that was validly entered into in a state whose laws authorize the
marriage of two individuals of the same sex even if the married couple is domiciled in a
state that does not recognize the validity of same-sex marriages. In addition, the terms

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“spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether
of the opposite sex or the same sex) who have entered into a registered domestic
partnership, civil union, or other similar formal relationship recognized under state law
that is not denominated as a marriage under the laws of that state, and the term
“marriage” does not include such formal relationships.
Revenue Ruling 2013-17 provides that its holdings will be applied prospectively
as of September 16, 2013, the date of its publication in the Internal Revenue Bulletin.
Taxpayers in a same-sex marriage recognized under state law may rely upon the
revenue ruling to file original, amended, or adjusted returns, or claims for credits or
refunds for any overpayment of tax resulting from the holdings in the revenue ruling,
provided that the applicable limitations period for filing such a claim under § 6511 has
not expired.
On September 2, 2016, the Department of the Treasury (Treasury Department)
and the IRS published in the Federal Register (81 FR 60609-01) final regulations
(T.D. 9785) amending the regulations under § 7701 to provide that, for federal tax
purposes, the terms “spouse,” “husband,” and “wife” mean an individual lawfully married
to another individual, and the term “husband and wife” means two individuals lawfully
married to each other. See also § 301.7701-18. In addition, the final regulations
provide that a marriage of two individuals will be recognized for federal tax purposes if
that marriage would be recognized by the state, possession, or territory of the United
States in which the marriage is entered into, regardless of the domicile of the parties to
the marriage or, for a foreign marriage, if the relationship would be recognized as

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marriage by at least one state, possession, or territory of the United States, regardless
of the domicile of the parties. Finally, the final regulations clarify that the term
“marriage” does not include registered domestic partnerships, civil unions, or other
similar relationships recognized under state law that are not denominated as a marriage
under that state’s law, and the terms “spouse,” “husband and wife,” “husband,” and
“wife” do not include individuals who have entered into such a relationship.
SPECIAL ADMINISTRATIVE PROCEDURES
1. Marital Deduction and Applicable Exclusion Amount
Section 2001(a) imposes an estate tax on the transfer of the taxable estate of
every decedent who is a citizen or resident of the United States. Section 2010(a)
provides that a credit of the applicable credit amount is allowed to the estate of every
decedent against the tax imposed by § 2001. Section 2010(c)(1) defines the applicable
credit amount as the amount of the tentative tax that would be determined under
§ 2001(c) if the amount with respect to which such tentative tax is to be computed were
equal to the applicable exclusion amount. Section 2010(c)(2) defines the applicable
exclusion amount as the sum of the basic exclusion amount of $5,000,000 (as
increased for inflation) and the deceased spousal unused exclusion amount. Section
2056(a) provides that, except as limited for certain terminable interests, the value of the
decedent’s taxable estate is determined by deducting from the value of the gross estate
the value of all interests in property passing from the decedent to the surviving spouse
(estate tax marital deduction), assuming all requirements for that deduction are
satisfied.

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Section 2501 imposes a gift tax for each calendar year on the transfer of property
by gift during such calendar year by any individual. Section 2502 provides that the tax
imposed by § 2501 for each calendar year is an amount equal to the excess of (1) a
tentative tax, computed under § 2001(c), on the aggregate sum of the taxable gifts for
such calendar year and for each of the preceding calendar periods, over (2) a tentative
tax, computed under such section, on the aggregate sum of the taxable gifts for each of
the preceding calendar periods. Under section 2505(a), in the case of a citizen or
resident of the United States, a credit is allowed against the tax imposed by § 2501 for
each calendar year in an amount equal to (1) the applicable credit amount in effect
under § 2010(c) that would apply if the donor died at the end of the calendar year,
reduced by (2) the sum of the amounts allowable as a credit to the individual under
§ 2505 for all preceding calendar periods. Section 2523(a) provides that, when a donor
transfers an interest in property by gift to a donee who is then the donor’s spouse, the
amount of the donor’s taxable gifts for that calendar year is reduced by the total value of
such gifts to the donor’s spouse (gift tax marital deduction), assuming that the other
requirements for that deduction are satisfied.
For example, when a married individual (A) makes a gift or bequest to A’s
spouse (B), A is entitled to claim a gift or estate tax marital deduction for the gift or
bequest under § 2523 or § 2056 if the requirements of those sections are satisfied.
Because of this marital deduction, A does not have to use any of A’s applicable
exclusion amount to exclude that spousal transfer from tax, thus preserving A’s
applicable exclusion amount for other gifts and bequests. Prior to the decision in

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Windsor, if A and B were of the same sex, A was not allowed to claim the marital
deduction for a transfer to B, and A’s applicable exclusion amount (if any) would have
been applied automatically to reduce the amount of the gift or estate tax due.
Applicable law provides that, as long as the limitations period for filing claims of
credits or refunds under § 6511 has not expired, a taxpayer may file an amended
Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return) or a
supplemental Form 706 (United States Estate (and Generation-Skipping Transfer) Tax
Return) to claim the marital deduction for a gift or bequest to the taxpayer’s same-sex
spouse and to restore the applicable exclusion amount allocated to that transfer. If the
limitations period has expired, this notice allows the taxpayer to recalculate the
taxpayer’s remaining applicable exclusion amount as a result of recognizing the
taxpayer’s marriage to the taxpayer’s spouse. However, once the limitations period on
assessment of tax has expired, neither the value of the transferred interest nor any
position concerning a legal issue (other than the existence of the marriage) related to
the transfer can be changed pursuant to this notice. See §§ 2001(f), 2504(c),
6501(c)(9) and the regulations thereunder. Similarly, no credit or refund of the tax paid
on that marital gift can be given once the limitations period on claims for credit or refund
has expired.
In the interest of providing certainty and to ease the administrative burden on
both the taxpayer and IRS, a taxpayer must recalculate the taxpayer’s remaining
applicable exclusion amount, in accordance with IRS forms and instructions, on a Form
709 (preferably, the first Form 709 required to be filed by the taxpayer after the issuance

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of this notice), on an amended Form 709 (if the limitations period under § 6511 has not
expired), or on the Form 706 for the taxpayer’s estate if not reported on a Form 709.
Unless a taxpayer has predeceased this notice, it is not necessary to file an amended or
supplemental return solely to report the increase in available applicable exclusion
amount as a result of this administrative guidance. The taxpayer should include a
statement at the top of the Form 706 or Form 709 that the return is “FILED PURSUANT
TO NOTICE 2017-15.” Moreover, the taxpayer must attach a statement supporting the
claim for the marital deduction and detailing the recalculation of the taxpayer’s
remaining applicable exclusion amount as directed in forms and instructions issued by
the IRS. If a QTIP or QDOT election is required in order to obtain the marital deduction,
a separate request for relief pursuant to § 301.9100-3 must be submitted. The IRS will
provide on www.irs.gov a worksheet and instructions to the Form 706 and Form 709 to
properly compute and report the recalculated applicable exclusion amount.
The provisions of this section 1 apply both to the recalculation of the remaining
applicable exclusion amount of a taxpayer (whether living or deceased), as well as to
the recalculation of any deceased spousal exclusion amount allowed to be included in
the applicable exclusion amount of that taxpayer’s surviving spouse.
While this notice allows taxpayers to recalculate their remaining applicable
exclusion amount as a result of the allowance of a marital deduction, it does not extend
the applicable time limits on electing to split gifts made by a spouse under § 2513. In
addition, any claims for credit or refund of gift or estate tax filed after the expiration of
the limitations period under § 6511 will be denied. Any unrefunded gift tax paid on a gift

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to a same-sex spouse, for which the limitations period under § 6511 has expired, will
continue to be recognized as gift tax paid or payable for purposes of the computation of
the estate tax under § 2001.
2. GST Exemption and Generation Assignments
Section 2601 imposes a tax on all generation-skipping transfers. Section
2611(a) provides that a “generation-skipping transfer” is a taxable distribution, a taxable
termination, or a direct skip, all of which are transfers to or for the benefit of one or more
skip persons. Section 2613(a) provides that a skip person is (1) a person assigned to a
generation that is two or more generations below the generation assignment of the
transferor, or (2) a trust (A) if all interests in such trust are held by skip persons, or (B) if
(i) there is no person holding an interest in such trust, and (ii) at no time after such
transfer may a distribution (including distributions on termination) be made from such
trust to a non-skip person.
A person’s generation is determined under § 2651 based on the transferee’s
familial relationship to the transferor or the transferor’s spouse, or if there is no such
relationship, then based on the difference in age between the transferor and transferee.
For purposes of the GST generation assignment rules, family members of the transferor
include the transferor’s spouse and each lineal descendant of a grandparent of the
transferor or the transferor’s spouse. The generation assignment of each family
member other than a spouse is determined by comparing the number of generations
between the transferee and a grandparent of the transferee (or of the transferee’s
spouse or former spouse) with the number of generations between that grandparent

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and the transferor (or the transferor’s spouse or former spouse). Spouses are assigned
to the same generation: an individual who has been married at any time to the
transferor is assigned to the transferor’s generation, and an individual who has been
married at any time to a lineal descendant of a grandparent of the transferor (or of the
transferor’s spouse or former spouse) is assigned to the generation of that lineal
descendant. Finally, a relationship by legal adoption or by the half-blood is treated as a
relationship by blood.
Section 2651(d) provides that an individual who is not assigned to a generation
by reason of the family relationships described in the preceding paragraph shall be
assigned to a generation on the basis of the date of such individual’s birth. An
individual born not more than 12½ years after the date of birth of the transferor is
assigned to the transferor’s generation. An individual born more than 12½ years but not
more than 37½ years after the transferor is assigned to the first generation younger
than the transferor. A new generation begins every 25 years thereafter.
Under § 2631, every individual is allowed a GST exemption amount which may
be allocated by such individual to any property with respect to which such individual is
the transferor.
Section 26.2632-1(b)(4)(i) of the Generation-Skipping Transfer Tax Regulations
provides that an allocation of GST exemption to a trust is void to the extent that the
amount allocated exceeds the amount necessary to obtain an inclusion ratio of zero
with respect to the trust. An allocation also is void if the allocation is made with respect
to a trust that, at the time of the allocation, has no GST potential with respect to the

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transferor whose exemption was allocated. For this purpose, a trust has GST potential
even if the possibility of a GST is so remote as to be negligible. Under this rule, an
allocation made to a trust with one or more skip persons as beneficiaries is not void.
Prior to the decision in Windsor, if a married individual (A) made a gift to A’s
same-sex spouse (B) or to a lineal descendant of B, B and B’s descendants would be
assigned to a generation for GST tax purposes based upon their ages, because they
had no familial relationship to A that was recognized for federal tax purposes. If those
generation assignments resulted in B or any of B’s descendants being skip persons, A’s
gift could be subject to GST tax except to the extent A allocated A’s GST exemption to
the gift (or to the recipient trust). One result of the Windsor decision, however, is that
the generation assignments of B and B’s lineal descendants instead are established
based on their familial relationship with A by reason of A and B’s marriage. Accordingly,
B is in the same generation as A, so neither B nor any of B’s children are skip persons,
A’s gifts (or transfers on death) to them are not subject to GST tax, and any of A’s GST
exemption allocated to such transfers (or made to a trust solely for those individuals) is
void.
In light of the Windsor decision, the Treasury Department and the IRS conclude
that any allocation of GST exemption to a transfer also is void if the transfer is a direct
skip not in trust to B or to a lineal descendant of B (or such descendant’s spouse) who
is not a skip person with regard to transfers from A.
These rules apply to allocations of a taxpayer’s GST exemption made on a return
filed, or by operation of law as of a date, before the issuance of this notice, whether or

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not the limitations period on claims for credits or refunds under § 6511 has expired.
This notice also permits a taxpayer to reduce his or her GST exemption allocated to
transfers that were made to or for the benefit of transferees whose generation
assignment is changed as a result of the Windsor decision. This notice is limited to the
recalculation of the taxpayer’s GST exemption that was allocated to a transfer to (or to a
trust for the sole benefit of) one or more transferees whose generation assignment for
purposes of that exemption allocation should have been determined on the basis of a
familial relationship as the result of the Windsor decision, and who therefore are non-
skip persons.
In the interest of providing certainty and to ease the administrative burden on
both the taxpayer and IRS, a taxpayer should recalculate (also taking into account the
GST implications of any interim transfers), in accordance with IRS forms and
instructions, and report such taxpayer’s available GST exemption based upon that
recalculation, on a Form 709 (preferably, the first Form 709 required to be filed by the
taxpayer after the issuance of this notice), on an amended Form 709 (if the limitations
period under § 6511 has not expired), or on the Form 706 for the taxpayer’s estate if not
reported on a Form 709. Unless a taxpayer has predeceased this notice, it is not
necessary to file an amended or supplemental return solely to report the increase in
available GST exemption as a result of this notice. Chapter 13 of the Code, and the
regulations thereunder, shall apply to the allocation of a taxpayer’s newly recalculated
GST exemption. A request for relief under § 301.9100-3 is not required. Rather, the
taxpayer should include a statement at the top of the Form 706 or Form 709 that the

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return is “FILED PURSUANT TO NOTICE 2017-15.” Moreover, the taxpayer should
attach a statement that the taxpayer’s allocation of GST exemption in a prior year is
void pursuant to this notice and a copy of the computation of the resulting exemption
allocation(s) and the amount of exemption remaining available to that taxpayer. The
IRS will provide on www.irs.gov a worksheet and instructions to the Form 706 and Form
709 to be used to properly recalculate the remaining exemption amount.
Notwithstanding the recalculation of GST exemption under this notice, a claim for
a credit or refund resulting from this notice will be denied if the claim is not filed within
the applicable period of limitations under § 6511.
DRAFTING INFORMATION
The principal authors of this notice are Juli Ro Kim and Mayer Samuels of the
Office of Associate Chief Counsel (Passthroughs & Special Industries). For further
information regarding this notice, contact Ms. Kim or Mr. Samuels at (202) 317-6859
(not a toll-free call).