IRS written determination 201440007

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201440007
Release Date: 10/3/2014
Index Number: 2511.00-00, 2511.11-00
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In Re: Ruling Request
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
------------------------------, ID No. ------------
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Telephone Number:
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Refer Reply To:
CC:PSI:B04
PLR-109161-14
Date:
June 17, 2014
Legend:
Taxpayer=-----------------------
Donor =------------------
A=-------------------
B=-----------------------------
C=------------------------------------
D=-----------------
E=------------------------
Trust 1=-----------------------------------------------------------------------------
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Trust 2=-----------------------------------------------------------------------------
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Date 1=--------------------------
Date 2=--------------------------
Date 3=-------------------------
State=-----------
State Statute 1=---------------------------------------------------
State Statute 2=--------------------------------------------------
State Statute 3=--------------------------------------------------
State Statute 4=--------------------------------------------------
State Statute 5=--------------------------------------------------
State Statute 6=--------------------------------------------------
Dear -----------:
This responds to your authorized representative’s letter of February 10, 2014, in
which Taxpayer requests a ruling that her execution and delivery of proposed

PLR-109161-14
2
disclaimers will not constitute a transfer subject to federal gift tax. The facts and
representations are as follows.
Trust 1
Donor executed Trust 1, an irrevocable trust, on Date 1, a date prior to
January1, 1977. Under Article Second, paragraph (b), of Trust 1, the trustees are to
pay such sum or sums from time to time out of the income, accumulated income, or
principal of Trust 1 to or for the benefit of A (Donor’s child) or any of A’s descendants, in
the trustees’ sole and absolute discretion in the event of illness, accident, other
misfortune, or any emergency, or if, in the trustees’ judgment, it is necessary to provide
for the beneficiaries’ comfortable maintenance, support, or education. Trust 1 will
terminate 20 years after the death of the survivor of A, B, and C, and all of Donor’s
descendants living on Date 1. On termination, the remaining Trust 1 principal and
undistributed income will be distributed free and clear of all trusts, to the descendants of
A who have no living ancestor who is a descendant of A, per stirpes.
On Date 1, the date Trust 1 was executed, Donor had 11 living descendants
consisting of three children (A, B, and C) and eight grandchildren, all of whom are still
living. D is a child of A and was not living on Date 1. Taxpayer is D’s child and A’s
grandchild. Under Article Second, paragraph (b), Taxpayer is one of the beneficiaries to
whom the trustees may, in their discretion, make current distributions of income and
principal. In addition, under Article Second, paragraph (b), Taxpayer will be entitled to
receive a per stirpitalportion of the Trust 1 remainder, if Taxpayer survives until the
termination of Trust 1 and D dies prior to the time of distribution.
Taxpayer will attain the age of 18 on Date 3. Taxpayer proposes to disclaim her
contingent right to receive any distribution from Trust1 on termination of the trust. The
disclaimer will be executed by Taxpayer within nine months after Date 3. Taxpayer has
not received any discretionary distributions from Trust1.
Trust 2
A executed Trust 2, an irrevocable trust, on Date 2, a date prior to
January1, 1977. Under Paragraph First of Trust 2, the trustees are to divide Trust 2
into three equal shares. Under Paragraph First, subparagraphs (a), (b) and (c), the
income derived from the first one-third share is to be accumulated and added to
principal. The income of the second one-third share is to be paid to A, and, on A’s
death, to E, if she survives A as his spouse. However, under Paragraph Third,
subparagraph (d), A reserved the right, exercisable by will, to direct a contrary
disposition of the income of this one-third share to be effective after A’s death or E’s
death if she survives A as his spouse. The income of the remaining one-third share is
to be paid to E so long as she is A’s spouse or has survived A as his spouse, or to any

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3
of A’s descendants in the event of need occasioned by illness, accident or other
misfortune, or in any emergency, or if in the trustee’s discretion it is necessary for the
comfortable maintenance, support or education of any beneficiary or of his or her family.
Under Paragraph First, subparagraph (d), after A’s death, or on E’s later death if
she survives A as his spouse, the three shares of Trust 2 are to be combined into a
single trust (less any portion of the second one-third share for which A has made a
contrary testamentary disposition of the income pursuant to the right A reserved to do
so in Paragraph Third, subparagraph (d)) along with accumulated income. Trust 2 is
then to be divided into equal shares, one such share for each of A’s then living children
and deceased children leaving surviving issue, the surviving issue to take the deceased
child’s share, per stirpes. During the continuation of the trust term, the trustee is to pay
to the beneficiaries (a child of A, if living, or if a child dies, his or her surviving issue by
representation) of a respective share so much income of that share as the trustee in the
trustee’s discretion determines. In addition, under Paragraph First, subparagraph (e),
after A’s death, the trustee may distribute such principal as the trustee deems
necessary to an income beneficiary in the event of illness, accident, other misfortune, or
any emergency, or if, in the judgment of the trustee it is necessary for the comfortable
maintenance, support or education of any beneficiary or of the beneficiary’s family. Any
amount paid is to be charged against the share from which the beneficiary is then
receiving or entitled to receive income.
Under Paragraph First, subparagraph (d), Trust 2 is to terminate 20 years after
the death of the last survivor of A, E, and those of A’s children living on Date 2. On
termination, Trust 2 principal and accumulated income will be distributed free and clear
of all trusts, per stirpes, to A’s descendants then living who have no living ancestor who
is a descendant of A.
D was not yet born when A executed Trust 2 on Date 2. D is not one of the
measuring lives determining the duration of Trust 2, hence D is a potential recipient of a
one-third share of the remainder. Taxpayer is D’s child, and A’s grandchild. Taxpayer,
as A’s descendant, is entitled to distributions of income from a one-third share,
described above, in the event certain needs arise. After A and E have both died, and if
D has also died, Taxpayer, if then living, will be entitled, as a surviving issue of D, to
distributions of income and principal of the Trust 2 share set aside with respect to D. It
has been represented that E has died. Further, on termination of Trust 2, Taxpayer, if
living, will be entitled to a distribution of all or a portion of the remainder of that share,
per stirpes.
Taxpayer proposes to disclaim her contingent right to share in the distribution of
Trust 2 on termination of the trust. The disclaimer will be executed by Taxpayer within
nine months after Date 3. Taxpayer has not received any income or principal
distributions from Trust 2.

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4
Law and Analysis:
Trust 1 and Trust 2 are governed by the laws of State. State Statute 1 provides
in part that any person of sound mind and 18 years of age or older may by last will
devise his or her real or personal property. State Statute 2 provides in part that the
legal age at which a person becomes competent to contract in State is 18 years.
State Statute 3 provides that a contingent future interest may be disclaimed in
whole or in part at any time before, or within nine months after, beneficiaries of the
interest have been fully ascertained and their interests vested. A vested interest subject
to defeasance or divestment is deemed a contingent interest.
State Statute4 provides in part that any individual to whom property or an
interest therein is donatively transferred by any means, including a transfer resulting
from another disclaimer, may disclaim all or any portion of the transfer. Unless the
terms of the transfer otherwise provide, the disclaimer will cause the terms of the
transfer to be applied to the disclaimed transfer and to any future interests taking effect
thereafter as if the disclaimant had died immediately before the transfer. For all
purposes the disclaimed interest is deemed to have passed directly from the transferor
to the ultimate taker or takers and is not subject to the claim of any creditor of the
disclaimant. A disclaimed portion of a transfer passes to the same ultimate taker or
takers and in the same proportions as in the case of a disclaimer of all of the transfer.
State Statute 5 provides that each separate interest in property is subject to
disclaimer or acceptance and each separate interest, including any specific amount,
part, fraction or asset thereof, or formula amount based on present or future facts
independent of the disclaimant’s volition, is subject to disclaimer or acceptance.
State Statute 6 provides that a disclaimer is made by a writing showing an
unconditional refusal to accept a transfer, or a portion thereof, signed by the
disclaimant, or representative, and delivered on or before nine months after the transfer,
or by any later time provided in the particular case or pursuant to other provisions of this
chapter, and before any acceptance of the disclaimed interest. Delivery of a disclaimer
may be accomplished by delivery to the transferor, the transferor’s personal
representative or other legal representative, or the holder of the legal title to the property
to which the interest related. A disclaimer involving an estate or property within the
jurisdiction of the probate division of a circuit court may be filed in that division. The
right to disclaim exists notwithstanding any intention to the contrary expressed by the
transferor and notwithstanding any limitation on the disclaimant such as a spendthrift
provision or similar restriction.

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5
Section 2501(a) imposes a tax on thetransfer of property by gift during any
calendar year by any individual.
Section 2511(a) provides that the gift tax imposed under § 2501 applies whether
the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the
property is real or personal, tangible or intangible.
Section 25.2511-1(c)(2) of the Gift Tax Regulations provides that, in the case of
transfers that create an interest in the person disclaiming made before January 1, 1977,
where the law governing the administration of the decedent’s estate gives a beneficiary
a right completely and unqualifiedly to refuse to accept ownership of property
transferred from a decedent, a refusal to accept ownership does not constitute the
making of a gift if the refusal: (1) ismade within a reasonable time after knowledge of
the existence of the transfer; (2) is unequivocal; (3) is effective under local law; and
(4) is made before the disclaimant has accepted the property. Compare with§ 2518
and §§ 25.2518-1 through 25.2518-3 (providing rules for determining whether a
disclaimer is a qualified disclaimer effective for estate and gift tax purposes, in the case
of the disclaimer of an interest in property that is created in the beneficiary disclaiming a
transfer made after December 31, 1976).
As noted above, under § 25.2511-1(c), if the interest to be disclaimed was
created before January 1, 1977, the disclaimant must disclaim the interest in the
property within a reasonable time after knowledge of the existence of the transfer that
created the interest to be disclaimed. In the case of a disclaimer of an interest in trust,
in general, the transfer occurs when the trust is established rather than when the
interest actually vests in the disclaimant, if the transferor has not reserved any power
over the trust. See Jewett v. Commissioner, 455 U.S. 305 (1982). However, the time
limitation for making the disclaimer does not begin to run until the disclaimant has
attained the age of majority and is no longer under a legal disability to disclaim. Jewitt
at 318. See also§ 2518(b)(2)(B) and § 25.2518-2(c)(1)(ii).
In this case, Taxpayer intends to disclaim her possible interest in the remainder
of Trust 1 and Trust 2 within nine months of attaining age eighteen on Date 3. State
Statutes 1 and 2 provide that Taxpayer has the authority at age eighteen to contract and
execute a will. Under these circumstances, the proposed disclaimers will be considered
to be made within the time prescribed in § 25.2511-1(c).
Under § 25.2511-1(c)(2), the disclaimers must be unequivocal. Rev. Rul. 76-56,
1976-1 C.B. 292, which considers the application of § 25.2511-1(c), concludes that a
disclaimer is unequivocal if the disclaimant's act of refusal is unambiguous in its
consequences; that is, the disclaimant must unqualifiedly refuse to accept ownership of
the property. For example, a disclaimer is unequivocal if the disclaimed property must
pass as otherwise provided in the instrument, and not pursuant to the direction of the
disclaimant. In this case,the disclaimed interests will not pass pursuant to any direction

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on the part of Taxpayer. State Statute 4 provides that Taxpayer’s disclaimed interest
will be deemed to have passed directly from the transferor to the ultimate taker or takers
and is not subject to the claim of any creditor of the disclaimant. It further provides that
a disclaimed portion of a transfer passes to the same ultimate taker or takers and in the
same proportions as in the case of a disclaimer of all of the transfer. Cf.§§ 25.2518-
3(a)(1)(i) and 25.2518-3(d), Examples(10) and (11) (regarding treatment of certain
interests in the same property as separate interests eligible for qualified disclaimer
treatment under § 2518).
Under § 25.2511-1(c)(2), the disclaimers must be effective under local law. In
this case, State Statutes 3, 4, and 5 provide that an individual may make a valid
disclaimer of any separate interest in property while retaining other separate interests in
the same property. Further, the disclaimers will be timely under State Statute 3
because the disclaimers will be made before, or within nine months after, beneficiaries
of the interest have been fully ascertained and their interests vested. Consequently, if
Taxpayer satisfies the procedural requirements prescribed under State Statute 6, the
disclaimers will be valid under local law.
Finally, under § 25.2511-1(c)(2), the disclaimant must not have accepted the
property before the disclaimer. It has been represented that this is the case.
Accordingly, we conclude that, based on the facts submitted and representations
made, assuming that the disclaimers are executed as proposed, the disclaimers with
respect to Trust 1 and Trust 2 will not constitute transfers subject to the federal gift tax.
The ruling contained in this letter is based upon information and representations
submitted by 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 ruling, it is subject to verification on examination. Except as
specifically ruled herein, we express no opinion on the federal tax consequences of the
transaction under the cited provisions or under any other provisions of the Internal
Revenue Code.
This ruling is directed only to Taxpayer. Section 6110(k)(3) provides that it may
not be used or cited as precedent.

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In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to Taxpayer’s authorizedrepresentative.
Sincerely,
Lorraine E. Gardner
Lorraine E. Gardner
Senior Counsel, Branch 4
(Passthroughs & Special Industries)
Enclosures: Copy for § 6110 purposes
cc: