[Federal Register Volume 65, Number 243 (Monday, December 18, 2000)]
[Proposed Rules]
[Pages 79015-79024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31648]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 602

[REG-106542-98]
RIN 1545-AW24


Election To Treat Trust as Part of an Estate

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations that relate to an 
election to have certain revocable trusts treated and taxed as part of 
an estate. This document provides the procedures and requirements for 
making the election, rules regarding the tax treatment of the trust and 
the estate while the election is in effect, and rules regarding the 
termination of the election. This document also provides clarification 
of the reporting rules for a trust, or portion of a trust, that is 
treated as owned by the grantor, or another person under the provisions 
of subpart E (section 671 and following) part I, subchapter J, chapter 
1 of the Internal Revenue Code, for the taxable year ending with the 
death of the grantor or other person. In addition, this document 
provides notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by March 19, 
2001. Requests to speak (with outlines of oral comments) at a public 
hearing scheduled for February 21, 2001, at 10 a.m., must be submitted 
by January 31, 2001.

ADDRESSES: Send submissions to: CC:M&SP:RU (REG-106542-98), room 5226, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may also be hand delivered Monday through Friday 
between the hours of 8 a.m. and 5 p.m. to: CC:M&SP:RU (REG-106542-98), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC. Alternatively, taxpayers may submit comments 
electronically via the Internet by selecting the ``Tax Regs'' option on 
the IRS Home Page, or by submitting comments directly to the IRS 
Internet site at http://www.irs.gov/tax_regs/reglist.html (the IRS 
Internet site). The public hearing will be held in the IRS Auditorium, 
Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Faith Colson, (202) 622-3060; concerning submission of comments, the 
hearing, and/or to be placed on the building access list to attend the 
hearing, LaNita VanDyke, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information in this notice of proposed rulemaking 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under 
control number 1545-1578.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to the collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains proposed regulations under section 645 
relating to certain revocable trusts for which an election is made to 
be treated and taxed as part of an estate. This document also contains 
proposed amendments to the Income Tax Regulations under section 671 
relating to reporting for a trust, or portion of a trust, for the 
taxable year ending with the death of the grantor or other person 
treated as the owner of the trust, or portion of the trust.

Explanation of Provisions

A. Overview of Section 645

    Both estates and trusts can function to settle the affairs of a 
decedent and distribute assets to heirs. In the case of a revocable 
inter vivos trust, the grantor transfers property to a trust that the 
grantor may revoke during the grantor's lifetime. When the grantor 
dies, the power to revoke ceases, and the trustee performs the 
settlement functions typically performed by an estate executor. See 
H.R. Conf. Rep. No. 220, 105th Cong., 1st Sess. at 711 (1997).
    Section 1305 of the TRA 1997 added section 646 to the Internal 
Revenue Code. Section 646 was redesignated section 645 by section 
6013(a) of the Internal Revenue Service Restructuring and Reform Act of 
1998, Public Law 105-206 (112 Stat. 685) (1998). Section 645 provides 
that an election may be made to have certain revocable trusts treated 
and taxed as part of an estate.
    Under section 645, if both the executor (if any) of an estate and 
the trustee of a qualified revocable trust (QRT) elect the treatment 
provided in section 645, the trust shall be treated and taxed for 
income tax purposes as part of the estate (and not as a separate trust) 
during the election period.
    A QRT is any trust (or portion thereof) that on the date of death 
of the decedent was treated as owned by the decedent under section 676 
by reason of a power held by the decedent (determined without regard to 
section 672(e)). In accordance with the legislative history

[[Page 79016]]

accompanying section 645, the proposed regulations provide that a trust 
that was treated as owned by the decedent under section 676 solely by 
reason of a power held by a nonadverse party is not a QRT. See H.R. 
Conf. Rep. No. 220, 105th Cong., 1st Sess. at 711 (1997). In addition, 
a trust that was treated as owned by the decedent under section 676 by 
reason of a power held by the decedent that was exercisable by the 
decedent only with the approval or consent of another person is not a 
QRT. Further, a QRT must be a domestic trust under section 
7701(a)(30)(E). A section 645 election for a QRT must result in a 
domestic estate under section 7701(a)(30)(D). A section 645 election 
may be made with respect to more than one QRT.

B. The Election

    The section 645 election may be made whether or not a personal 
representative is appointed for the decedent's estate. Under the 
proposed regulations, if a personal representative is appointed for the 
decedent's estate, the personal representative and the trustee of the 
QRT make the section 645 election by attaching a statement to the Form 
1041, ``U.S. Income Tax Return for Estates and Trusts,'' filed for the 
first taxable year of the decedent's estate (related estate). If a 
personal representative is not appointed for the decedent's estate, the 
trustee makes a section 645 election for the QRT by attaching a 
statement to the Form 1041 filed for the first taxable year of the 
trust treating the trust as an estate.
    Rev. Proc. 98-13 (1998-1 C.B. 370) sets forth procedures for making 
the section 645 election. These proposed regulations, when finalized, 
will replace Rev. Proc. 98-13. The proposed regulations, in some 
instances, contain different procedures than those provided in Rev. 
Proc. 98-13. Rev. Proc. 98-13, in most situations, requires a trust 
that will make a section 645 election to obtain a taxpayer 
identification number (TIN) and file a Form 1041 for the trust's short 
taxable year beginning with the decedent's death and ending December 31 
of that year. In these situations, Rev. Proc. 98-13 provides that the 
section 645 election is made at the time the Form 1041 is filed for the 
trust. If a Form 1041 is not required to be filed for the trust, the 
election is considered made when the Form 1041 is filed for the estate. 
The proposed regulations, however, provide that if a section 645 
election will be made for a trust, the trustee and the personal 
representative, if any, may choose not to obtain a TIN for the trust or 
file a Form 1041 for the trust's short taxable year. Under the proposed 
regulations, the section 645 election is considered made only upon the 
filing of a Form 1041, with the required election statement attached, 
for the first taxable year of the related estate, or, if there is no 
personal representative, the first taxable year of the trust filing as 
an estate.

C. General Form 1041 Filing Requirements and TINs for the Related 
Estate and Electing Trust During the Election Period

    During the election period, the personal representative files one 
Form 1041 for the combined electing trust and related estate under the 
name and TIN of the related estate. Thus, the electing trust must 
furnish payors of the trust with the TIN of the related estate. Except 
as required under the separate share rule of section 663(c), for 
purposes of filing the Form 1041 and computing the tax, the items of 
income, deduction, and credit of the electing trust and the related 
estate are combined. The proposed regulations do not provide rules for 
apportioning the tax liability of the combined estate and electing 
trust. The personal representative and trustee must allocate the tax 
burden of the combined electing trust and related estate to the trust 
and the estate in a manner that reasonably reflects the tax obligations 
of each. If the tax burdens are not reasonably allocated, gifts may be 
deemed to have been made.
    If there is no personal representative, the trustee of the electing 
trust must file a Form 1041 treating the trust as an estate under 
section 645 during the election period. The trustee of the trust must 
obtain a TIN to be used by the trust during the election period to file 
as an estate and must furnish this TIN to payors of the trust.

D. Tax Treatment of the Electing Trust and Related Estate During the 
Election Period

    Under the proposed regulations, the personal representative treats 
the electing trust as part of the related estate for all purposes of 
subtitle A of the Internal Revenue Code.
    The electing trust and related estate are treated as separate 
shares under section 663(c) for purposes of computing distributable net 
income (DNI) and applying the distribution provisions of sections 661 
and 662. The proposed regulations provide rules for adjusting the DNI 
of the separate shares with respect to distributions made from one 
share to another share of the combined electing trust and related 
estate to which sections 661 and 662 would apply had the distribution 
been made to a beneficiary other than another share. Under the proposed 
regulations, the share making the distribution reduces its DNI by the 
amount of the distribution deduction that it would have been entitled 
to under section 661 had the distribution been made to a beneficiary 
other than another share of the combined related estate and electing 
trust, and, solely for purposes of calculating its DNI, the share 
receiving the distribution increases its gross income by this amount.
    If there is no personal representative, the trustee of the electing 
trust treats the trust as an estate for all purposes of subtitle A of 
the Internal Revenue Code. Thus, the trustee of the electing trust may 
adopt a taxable year other than a calendar year.

E. Duration of the Election Period

    The proposed regulations provide that the election period begins on 
the date of the decedent's death and terminates on the day before the 
applicable date. If a Form 706 is not required to be filed for the 
decedent's estate, the applicable date is the day which is two years 
after the date of the decedent's death.
    If a Form 706 is required to be filed, the applicable date is the 
day that is 6 months after the date of final determination of liability 
for estate tax. The proposed regulations provide that the final 
determination of liability for estate tax is the earliest day on which 
any of the following has occurred: (A) The issuance of an estate tax 
closing letter, unless a claim for refund with respect to the estate 
tax is filed within six months after the issuance of the letter; (B) 
the final disposition of a claim for refund that resolves the liability 
for the estate tax, unless suit is instituted within six months of the 
disposition of the claim; (C) the execution of a settlement agreement 
that resolves the liability for estate tax; (D) the issuance of a 
decision, judgment, decree, or other order by a court of competent 
jurisdiction resolving the liability for estate tax unless a notice of 
appeal or petition for certiorari is filed within 90 days after the 
issuance of the decision, judgment, decree, or other order of a court; 
or (E) the expiration of the period of limitations for assessment of 
the estate tax provided in section 6501.

F. Tax Treatment of the Electing Trust and Related Estate Upon 
Termination of the Election Period

    At the close of the last day of the election period, the combined 
related estate and electing trust, if there is a personal 
representative, or the electing trust, if there is no personal 
representative, is deemed to distribute all the assets and liabilities 
of the share

[[Page 79017]]

(or shares) comprising the electing trust to a new trust in a 
distribution to which sections 661 and 662 apply. Thus, the combined 
related estate and electing trust, or the electing trust, as 
appropriate, is entitled to a distribution deduction to the extent 
permitted under section 661 in the taxable year in which the election 
period terminates as a result of the deemed distribution. The new trust 
must include the deemed distribution in gross income to the extent 
required under section 662.
    At the end of the election period, the new trust must obtain a new 
TIN. The related estate continues to report under the TIN assigned to 
the combined related estate and electing trust during the election 
period.
    Following the termination of the election period, the taxable year 
of the new trust must be the calendar year. The related estate must 
continue to use the taxable year chosen by the combined related estate 
and electing trust during the election period.

G. Clarification of the Reporting Rules for Grantor Trusts Under 
Sec. 1.671-4

    In the process of drafting these proposed regulations regarding 
section 645, the IRS and the Treasury Department received many taxpayer 
questions concerning the section 645 election procedures and the proper 
application of the reporting rules under Sec. 1.671-4 to a trust, or a 
portion of a trust, treated as owned by a grantor or another person for 
the taxable year ending with the death of the grantor or other person. 
Accordingly, these proposed regulations amend Sec. 1.671-4 to clarify 
those reporting rules.
    The proposed regulations clarify that a trust, or portion of a 
trust, reports under Sec. 1.671-4 for the taxable year that ends with 
the death of the grantor or other person (decedent) treated as the 
owner of the trust. If the trust was filing a Form 1041 under 
Sec. 1.671-4(a) during the life of the decedent, the proposed 
regulations also provide that the due date for the return for the trust 
or portion of the trust for the taxable year ending with the death of 
the decedent shall be the date specified under section 6072 as though 
the decedent had lived throughout the decedent's last taxable year.
    The proposed regulations provide that a trust that was wholly owned 
by the decedent must obtain a new TIN upon the death of the decedent 
whether or not a TIN was obtained for the trust prior to the death of 
the decedent; however, if a section 645 election will be made for the 
trust, a new TIN need not be obtained for the trust. For administrative 
convenience, the proposed regulations clarify that with respect to a 
trust which was treated as owned by two or more grantors or other 
persons, following the death of one of the deemed owners, the trust, 
including the portion formerly owned by the decedent (if it remains 
part of the original trust following the death of the deemed owner), 
continues to report under the TIN used by the trust prior to the death 
of the decedent.

Proposed Effective Date

    These regulations are proposed to apply on or after the date that 
final regulations are published in the Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based on the understanding of the IRS and Treasury Department that the 
number of trusts and estates making the election is not substantial, 
and none are small entities within the meaning of the Regulatory 
Flexibility Act. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 
Pursuant to section 7805(f) of the Internal Revenue Code, this notice 
of proposed rulemaking will be submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any electronic or written comments (a 
signed original and eight (8) copies) that are submitted timely (in the 
manner described in the ADDRESSES caption) to the IRS. The IRS and 
Treasury Department request comments on the clarity of the proposed 
rules and how they can be made easier to understand. All comments will 
be available for public inspection and copying.
    A public hearing has been scheduled for February 21, 2001, 
beginning at 10 a.m., in the IRS Auditorium, Internal Revenue Building, 
1111 Constitution Avenue, NW., Washington, DC. Due to building security 
procedures, visitors must enter at the 10th Street entrance, located 
between Constitution and Pennsylvania Avenues, NW. In addition, all 
visitors must present photo identification to enter the building. 
Because of access restrictions, visitors will not be admitted beyond 
the immediate entrance area more than 15 minutes before the hearing 
starts. For information about having your name placed on the building 
access list to attend the hearing, see the FOR FURTHER INFORMATION 
CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit timely written 
comments and an outline of the topics to be discussed and the time to 
be devoted to each topic (signed original and eight (8) copies) by 
January 31, 2001. A period of 10 minutes will be allotted to each 
person for making comments. An agenda showing the scheduling of the 
speakers will be prepared after the deadline for receiving outlines has 
passed. Copies of the agenda will be available free of charge at the 
hearing.

Drafting Information

    The principal author of these regulations is Faith Colson, Office 
of Associate Chief Counsel (Passthroughs and Special Industries). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 301, and 602 are proposed to be 
amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
an entry in numerical order to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.645-1 also issued under 26 U.S.C. 645. * * *

    Par. 2. Section 1.641(b)-3 is amended by adding a sentence to the 
end of paragraph (a) to read as follows:

[[Page 79018]]

Sec. 1.641(b)-3  Termination of estates and trusts.

    (a) * * * Notwithstanding the above, if the estate has joined a 
valid election under section 645 to treat a qualified revocable trust, 
as defined under section 645(b)(1), as part of the estate, the estate 
shall not terminate under this paragraph prior to the termination of 
the section 645 election period. See section 645 and the regulations 
thereunder for rules regarding the termination of the section 645 
election period.
* * * * *
    Par. 3. In Sec. 1.642(c)-1, the last sentence of paragraph (a)(1) 
is revised to read as follows:


Sec. 1.642(c)-1  Unlimited deduction for amounts paid for a charitable 
purpose.

    (a) * * * (1) * * * In applying this paragraph without reference to 
paragraph (b) of this section, a deduction shall be allowed for an 
amount paid during the taxable year in respect of gross income received 
in a previous taxable year, but only if no deduction was allowed for 
any previous taxable year to the estate or trust, or in the case of a 
section 645 election, to a related estate, as defined under Sec. 1.645-
1(b), for the amount so paid.
* * * * *
    Par. 4. Section 1.645-1 is added under a new undesignated center 
heading to read as follows:

Election by Certain Revocable Trusts To Be Treated as Part of 
Estate


Sec. 1.645-1  Election by certain revocable trusts to be treated as 
part of estate.

    (a) In general. If an election is filed for a qualified revocable 
trust, as defined in paragraph (b)(1) of this section, in accordance 
with the rules set forth in paragraph (c) of this section, the 
qualified revocable trust is treated and taxed as part of its related 
estate, as defined in paragraph (b)(4) of this section (and not as a 
separate trust) during the election period, as defined in paragraph 
(b)(6) of this section. Rules regarding the use of taxpayer 
identification numbers (TINs) by an electing trust, as defined in 
paragraph (b)(2) of this section, are in paragraph (d) of this section. 
Rules regarding obtaining a TIN and filing requirements for a qualified 
revocable trust for which a section 645 election will or may be made 
are also in paragraph (d) of this section. Rules regarding the tax 
treatment of an electing trust and related estate and the general 
filing requirements for the combined entity during the election period 
are in paragraph (e)(2) of this section. Rules regarding the tax 
treatment of an electing trust and its filing requirements during the 
election period if no personal representative, as defined in paragraph 
(b)(5) of this section, is appointed for a related estate are in 
paragraph (e)(3) of this section. Rules for determining the duration of 
the section 645 election period are in paragraph (f) of this section. 
Rules regarding the tax effects of the termination of the election are 
in paragraph (h) of this section. Rules regarding the tax consequences 
of the appointment of a personal representative after a trustee has 
made a section 645 election believing that a personal representative 
would not be appointed for a related estate are in paragraph (g) of 
this section.
    (b) Definitions. For purposes of this section:
    (1) Qualified revocable trust. A qualified revocable trust (QRT) is 
any trust (or portion thereof) that on the date of death of the 
decedent was treated as owned by the decedent under section 676 by 
reason of a power held by the decedent (determined without regard to 
section 672(e)). A trust that was treated as owned by the decedent 
under section 676 by reason of a power that was exercisable by the 
decedent only with the approval or consent of another person is not a 
QRT. In addition, a trust that was treated as owned by the decedent 
under section 676 solely by reason of a power held by a nonadverse 
party is not a QRT. A QRT must be a domestic trust as defined in 
section 7701(a)(30)(E). A section 645 election for a QRT must result in 
a domestic estate as defined in section 7701(a)(30)(D).
    (2) Electing trust. An electing trust is a QRT for which a valid 
section 645 election has been made. Once a section 645 election has 
been made for the trust, the trust shall be treated as an electing 
trust throughout the entire election period.
    (3) Decedent. The decedent is the individual who was treated as the 
owner of the QRT under section 676 on the date of that individual's 
death.
    (4) Related estate. A related estate is the estate of the decedent 
who was treated as the owner of the QRT on the date of the decedent's 
death. A related estate must be a domestic estate as defined in section 
7701(a)(30)(D).
    (5) Personal representative. A personal representative is an 
executor or administrator that has obtained letters of appointment to 
administer the decedent's estate through formal or informal appointment 
procedures.
    (6) Election period. The election period is the period of time 
during which an electing trust is treated and taxed as part of its 
related estate. The rules for determining the duration of the election 
period are in paragraph (f) of this section.
    (7) Payor. A payor is any person who is required by any provision 
of the Internal Revenue Code and the regulations thereunder to make any 
type of information return with respect to an electing trust or the 
related estate for the taxable year. A payor includes a person who 
makes payments to an electing trust or related estate and a person who 
collects (or otherwise acts as a middleman with respect to) payments on 
behalf of an electing trust or related estate.
    (c) The election--(1) Filing the election if there is a personal 
representative--(i) Time and manner for filing the election. If there 
is a personal representative of the related estate, the trustee of the 
QRT and the personal representative of the related estate make an 
election under section 645 and this section to treat a QRT as part of 
its related estate in a written statement described in paragraph 
(c)(1)(ii) of this section. The statement must be attached to the Form 
1041, ``U.S. Income Tax Return for Estates and Trusts,'' filed for the 
first taxable year of the related estate. See paragraph (e)(2) for 
rules regarding the filing of this return. For the election to be 
valid, the Form 1041 and the attached statement must be filed not later 
than the time prescribed under section 6072 (including extensions) for 
filing the return for such taxable year.
    (ii) Written statement. The written statement must--
    (A) Identify the election as an election under section 645;
    (B) Contain the name, address, date of death, and TIN of the 
decedent;
    (C) Contain the name and address of the QRT and, if a TIN has been 
obtained after the death of the decedent, the TIN of the QRT;
    (D) Contain the name, address and TIN of the related estate;
    (E) Provide a representation that the trust for which the election 
is being made meets the definition of a QRT under section 645 and 
paragraph (b)(1) of this section;
    (F) Contain a statement from the personal representative, signed 
and dated under penalties of perjury, stating that the personal 
representative elects to treat the QRT as part of the related estate 
under section 645 and that the personal representative understands that 
the personal representative is required to make a timely return of 
income for the combined related estate and QRT on Form 1041 and to pay 
timely any tax due thereon; and
    (G) Contain a statement from the trustee of the QRT, signed and 
dated

[[Page 79019]]

under penalties of perjury, stating that the trustee elects to treat 
the trust as part of the related estate under section 645 and agrees to 
cooperate with the personal representative to insure that a return of 
income is timely made for the combined related estate and QRT, and that 
any tax due thereon is timely paid.
    (2) Filing the election if there is no personal representative--(i) 
Time and manner for filing the election. If there is no personal 
representative for a related estate, an election to treat a QRT as an 
estate is made by the trustee, in a written statement described in 
paragraph (c)(2)(ii) of this section. The statement must be attached to 
the Form 1041 filed for the first taxable year of the QRT taking into 
account the trustee's election to treat the trust as an estate under 
section 645. See paragraph (e)(3) for other rules regarding the filing 
of this return. For the election to be valid, the Form 1041 of the QRT 
and the attached statement must be filed not later than the time 
prescribed under section 6072 (including extensions) for filing the 
return for such taxable year.
    (ii) Written statement. The written statement must--
    (A) Identify the election as an election under section 645;
    (B) Contain the name, address, date of death, and TIN of the 
decedent;
    (C) Contain the name and address of the QRT and, if a TIN has been 
obtained after the death of the decedent, the TIN of the QRT;
    (D) Provide a representation that the trust for which the election 
is being made meets the definition of a QRT under section 645 and 
paragraph (b)(1) of this section;
    (E) Provide a representation that there is no personal 
representative and to the trustee's knowledge and belief, one will not 
be appointed;
    (F) Contain the TIN obtained by the trust to file as an estate 
under Sec. 301.6109-1(a)(4)(ii)(B) of this chapter; and
    (G) Contain a statement from the trustee of the QRT, signed and 
dated under penalties of perjury, stating that the trustee elects to 
treat the trust as an estate under section 645 and that the trustee 
understands that the trustee is required to make a timely return of 
income for the trust on Form 1041 taking into account the section 645 
election and to pay timely any tax due thereon.
    (d) TIN for an electing trust and QRT--(1) Obtaining a TIN--(i) For 
an electing trust--(A) If there is a personal representative. If there 
is a personal representative, a TIN must be obtained for the related 
estate but the electing trust is not required to obtain a TIN in its 
own name. See Sec. 301.6109-1(a)(4)(ii)(A)(1) of this chapter for rules 
for completing the Form SS-4, ``Application for Employment 
Identification Number,'' filed for the related estate.
    (B) If there is no personal representative. If there is no personal 
representative, the trustee must obtain a TIN to file as an estate. See 
Sec. 301.6109-1(a)(4)(ii)(B) of this chapter for rules regarding 
obtaining a TIN for an electing trust to file as an estate during the 
election period. The trustee is not required to obtain a TIN for the 
electing trust to file as a trust.
    (ii) Obtaining a TIN and filing a Form 1041 for a QRT--(A) Option 
not to obtain a TIN or file a Form 1041 for a QRT for which a section 
645 election will be made. If a section 645 election will be made for a 
QRT, the personal representative of the related estate, if any, and the 
trustee of the QRT may treat the QRT as an electing trust from the 
decedent's date of death until the due date for the section 645 
election. Accordingly, the trustee of the QRT is not required to obtain 
a TIN for the QRT following the death of the decedent as required under 
Sec. 301.6109-1(a)(3)(i) of this chapter or file a Form 1041 for the 
QRT for the short taxable year beginning with the decedent's date of 
death and ending with December 31 of that year. However, if a QRT is 
treated as an electing trust under this paragraph from the decedent's 
date of death until the due date for the section 645 election and a 
valid section 645 election is not made for the QRT, the QRT will be 
subject to penalties and interest for failing to obtain a TIN and file 
a Form 1041 and pay the tax due thereon.
    (B) Requirement to obtain a TIN and file a Form 1041 for QRT if 
paragraph (d)(1)(ii)(A) of this section does not apply--(1) Requirement 
to obtain TIN and file Form 1041. If the trustee of the QRT and the 
personal representative of the related estate, if any, do not treat the 
QRT as an electing trust as provided under paragraph (d)(1)(ii)(A) of 
this section, or if the trustee of the electing trust and the personal 
representative, if any, are uncertain whether a section 645 election 
will be made for a QRT, the trustee of the QRT must obtain a TIN in the 
name of the QRT as required under Sec. 301.6109-1(a)(3)(i) of this 
chapter and must file a Form 1041 for the short taxable year beginning 
with the decedent's death and ending December 31 of that year (unless, 
the QRT is not required to file a Form 1041 under section 6012 for this 
period).
    (2) Requirement to amend return if section 645 election is made. If 
a valid section 645 election is made for a QRT after a Form 1041 is 
filed for the QRT pursuant to paragraph (d)(1)(ii)(B)(1) of this 
section, the trustee must amend the Form 1041. The trustee must 
indicate on the Form 1041 that the return is a final return and must 
attach a copy of the statement described in paragraph (c) of this 
section to the amended Form 1041 filed pursuant to this paragraph. In 
addition, the trustee must provide the following statement at the top 
of the return: ``FILED PURSUANT TO Sec. 1.645-1.'' The QRT's items of 
income, deduction, and credit must be excluded from the amended Form 
1041 filed under this paragraph and must be included on the Form 1041 
filed for the first taxable year of the related estate under paragraph 
(e)(2)(ii)(A) of this section, if there is a personal representative, 
or for the first taxable year of the electing trust under (e)(3)(ii) of 
this section, if there is no personal representative. The section 645 
election is not considered made upon the filing, under this paragraph, 
of an amended Form 1041 for the QRT with the attached statement. To be 
valid, a section 645 election must be filed in the time and manner 
specified in paragraph (c) of this section.
    (2) Furnishing TIN to payors--(i) If there is a personal 
representative for a related estate. If there is a personal 
representative, all payors of an electing trust shall be furnished a 
Form W-9, ``Request for Taxpayer Identification Number and 
Certification,'' or an acceptable substitute Form W-9 with the name of 
the related estate as the primary name on the form, the name of the 
electing trust as the secondary name on the form, the TIN of the 
related estate, and the address of the trustee. The form must be signed 
under penalties of perjury by the personal representative. See section 
3406 and the regulations thereunder for the information to include on, 
and the manner of executing, the Form W-9, depending on the type of 
reportable payments made by the payor to the trust.
    (ii) If there is no personal representative. If there is no 
personal representative, the trustee of the electing trust shall 
furnish a Form W-9 or an acceptable substitute Form W-9 with the name 
required by, and the TIN obtained under, Sec. 301.6109-1(a)(4)(ii)(B) 
of this chapter. See section 3406 and the regulations thereunder for 
the information to include on, and the manner of executing, the Form W-
9, depending on the type of reportable payments made by the payor to 
the trust.
    (e) Tax treatment and general filing requirements of electing trust 
and

[[Page 79020]]

related estate during the election period--(1) Effect of election. The 
section 645 election once made is irrevocable.
    (2) If there is a personal representative--(i) Tax treatment of the 
combined electing trust and related estate. If there is a personal 
representative, during the election period the personal representative 
treats the electing trust as part of the related estate for all 
purposes of subtitle A of the Internal Revenue Code. For example, the 
electing trust is treated as part of the related estate for purposes of 
the subchapter S shareholder requirements of section 1361(b)(1) and the 
special offset for rental real estate activities in section 469(i)(4).
    (ii) Filing requirements--(A) Filing the Form 1041 for the combined 
electing trust and related estate during the election period. If there 
is a personal representative, one income tax return is filed under the 
name and TIN of the related estate for the electing trust and the 
related estate. See Sec. 301.6109-1(a)(4)(ii)(A)(1) of this chapter. 
Except as required under the separate share rule of section 663(c), for 
purposes of filing the Form 1041 under this paragraph and computing the 
tax, the items of income, deduction, and credit of the electing trust 
and related estate are combined. One personal exemption in the amount 
of $600 is permitted under section 642(b) and the tax is computed under 
section 1(e), taking into account section 1(h), for the combined 
taxable income.
    (B) Filing a Form 1041 for the electing trust is not required. The 
trustee of the electing trust does not file a Form 1041 for the 
electing trust during the election period. In certain situations, the 
trustee of a QRT may be required to file a Form 1041 for the QRT's 
short taxable year beginning with the decedent's date of death and 
ending December 31 of that year. See paragraph (d)(1)(ii) of this 
section.
    (iii) Application of the separate share rules--(A) Distributions to 
beneficiaries (other than to a share (or shares) of the combined 
electing trust and related estate). Under the separate share rules of 
section 663(c), the electing trust and related estate are treated as 
separate shares for purposes of computing distributable net income 
(DNI) and applying the distribution provisions of sections 661 and 662. 
Further, the electing trust share or the related estate share may each 
contain two or more shares. Thus, if during the taxable year, a 
distribution is made by the electing trust or the related estate, the 
DNI of the share making the distribution must be determined and the 
distribution provisions of sections 661 and 662 must be applied using 
the separately determined DNI applicable to the distributing share.
    (B) Adjustments to the DNI of the separate shares for distributions 
between shares to which sections 661 and 662 would apply. A 
distribution from one share to another share to which sections 661 and 
662 would apply if made to a beneficiary other than another share of 
the combined related estate and electing trust affects the computation 
of the DNI of the share making the distribution and the share receiving 
the distribution. The share making the distribution reduces its DNI by 
the amount of the distribution deduction that it would be entitled to 
under section 661, had the distribution been made to another 
beneficiary, and, solely for purposes of calculating DNI, the share 
receiving the distribution increases its gross income by the same 
amount. The distribution has the same character in the hands of the 
recipient share as in the hands of the distributing share. The 
following example illustrates the provisions of this paragraph 
(e)(2)(iii)(B):

    Example. (i) A's will provides that after the payment of debts, 
expenses, and taxes, the residue of A's estate is to be distributed 
to Trust, an electing trust. The sole beneficiary of Trust is C. The 
estate share has $15,000 of gross income, $5,000 of deductions, and 
$10,000 of taxable income and DNI for the taxable year based on the 
assets held in A's estate. During the taxable year, A's estate 
distributes $15,000 to Trust. The distribution reduces the DNI of 
the estate share by $10,000, the amount of the distribution 
deduction A's estate would be entitled to if A's estate made the 
distribution to a beneficiary other than Trust.
    (ii) For the same taxable year, the trust share has $25,000 of 
gross income and $5,000 of deductions. None of the modifications 
provided for under section 643(a) apply. In calculating the DNI for 
the trust share, the gross income of the trust share is increased by 
$10,000, the amount of the reduction in the DNI of the estate share 
as a result of the distribution to Trust. Thus, solely for purposes 
of calculating DNI, the trust share has gross income of $35,000, and 
taxable income of $30,000. Therefore, the trust share has $30,000 of 
DNI for the taxable year.
    (iii) During the same taxable year, Trust distributes $35,000 to 
C. The distribution deduction reported on the Form 1041 filed for 
A's estate and Trust is $30,000. As a result of the distribution by 
Trust to C, C must include $30,000 in gross income for the taxable 
year. The gross income reported on the Form 1041 filed for A's 
estate and Trust is $40,000.

    (iv) Application of the governing instrument requirement of section 
642(c). A deduction is allowed in computing the taxable income of the 
combined related estate and electing trust to the extent permitted 
under section 642(c) for--
    (A) Any amount of the gross income of the related estate that is 
paid or set aside during the taxable year pursuant to the terms of the 
governing instrument of the related estate for a purpose specified in 
section 170(c); and
    (B) Any amount of gross income of the electing trust that is paid 
or set aside during the taxable year pursuant to the terms of the 
governing instrument of the electing trust for a purpose specified in 
section 170(c).
    (3) If there is no personal representative--(i) Tax treatment of 
the electing trust. If there is no personal representative, during the 
election period the trustee treats the electing trust as an estate for 
all purposes of subtitle A of the Internal Revenue Code. Thus, for 
example, an electing trust is treated as an estate for purposes of the 
set-aside deduction under section 642(c)(2), the subchapter S 
shareholder requirements of section 1361(b)(1), and the special offset 
for rental real estate activities under section 469(i)(4). The trustee 
may also adopt a taxable year other than a calendar year.
    (ii) Filing the Form 1041 for the electing trust. If there is no 
personal representative, during the election period the trustee of the 
electing trust must file Form 1041 treating the trust as an estate. See 
Sec. 301.6109-1(a)(4)(ii)(B) of this chapter for rules regarding the 
name and TIN to be used in filing a Form 1041 under this paragraph 
(e)(3)(iii). Any return filed by a trustee of an electing trust, in 
accordance with this paragraph, shall be treated under section 6012 as 
a return filed for the electing trust and not as a return filed for any 
subsequently discovered related estate. Accordingly, the period of 
limitations provided in section 6501 for assessments with respect to a 
subsequently discovered related estate does not start until a return is 
filed with respect to the related estate.
    (f) Duration of election period--(1) In general. The election 
period begins on the date of the decedent's death and terminates on the 
day before the applicable date. The election does not apply to 
successor trusts.
    (2) Definition of applicable date--(i) Applicable date if no Form 
706 (United States Estate (and Generation Skipping Transfer) Tax 
Return) is required to be filed. If a Form 706 is not required to be 
filed for the decedent's estate, the applicable date is the day which 
is 2 years after the date of the decedent's death.
    (ii) Applicable date if a Form 706 is required to be filed. If a 
Form 706 is required to be filed for the decedent's

[[Page 79021]]

estate, the applicable date is the day that is 6 months after the date 
of final determination of liability for estate tax. Solely for purposes 
of determining the applicable date under section 645, the date of final 
determination of liability is the earliest day on which any of the 
following has occurred--
    (A) The issuance by the Internal Revenue Service of an estate tax 
closing letter, unless a claim for refund with respect to the estate 
tax is filed within six months after the issuance of the letter;
    (B) The final disposition of a claim for refund, as defined in 
paragraph (f)(2)(iii) of this section, that resolves the liability for 
the estate tax, unless suit is instituted within six months after a 
final disposition of the claim;
    (C) The execution of a settlement agreement with the Internal 
Revenue Service that determines the liability for the estate tax;
    (D) The issuance of a decision, judgment, decree, or other order by 
a court of competent jurisdiction resolving the liability for the 
estate tax unless a notice of appeal or a petition for certiorari is 
filed within 90 days after the issuance of a decision, judgment, 
decree, or other order of a court; or
    (E) The expiration of the period of limitations for assessment of 
the estate tax provided in section 6501.
    (iii) Definition of final disposition of claim for refund. For 
purposes of paragraph (f)(2)(ii)(B) of this section, a claim for refund 
shall be deemed finally disposed of by the Secretary when all items 
have been either allowed or disallowed. If a waiver of notification 
with respect to disallowance is filed with respect to a claim for 
refund prior to disallowance of the claim, the claim for refund will be 
treated as disallowed on the date the waiver is filed.
    (iv) Examples. The application of this paragraph (f)(2) is 
illustrated by the following examples:

    Example 1. A died on October 20, 1999. The personal 
representative of A's estate and the trustee of Trust, an electing 
trust, made a section 645 election. A Form 706 is not required to be 
filed for A's estate. The applicable date is October 20, 2001, the 
day that is two years after A's date of death. The last day of the 
election period is October 19, 2001. Beginning October 20, 2001, 
Trust will no longer be treated and taxed as part of A's estate.
    Example 2. Assume the same facts as Example 1, except that a 
Form 706 is required to be filed for A's estate. The Internal 
Revenue Service issues an estate tax closing letter accepting the 
Form 706 as filed on March 15, 2001. The estate does not file a 
claim for refund by September 15, 2001, the day that is six months 
after the date of issuance of the estate tax closing letter. The 
final determination of liability is March 15, 2001 and the 
applicable date is September 15, 2001. The last day of the election 
period is September 14, 2001. Beginning September 15, 2001, Trust 
will no longer be treated and taxed as part of A's estate.

    Example 3. Assume the same facts as Example 1, except that a 
Form 706 is required to be filed for A's estate. The Form 706 is 
audited and a notice of deficiency authorized under section 6212 is 
mailed to the personal representative of A's estate as a result of 
the audit. The personal representative files a petition in Tax 
Court. The Tax Court issues a decision resolving the liability for 
estate tax on December 14, 2003 and neither party appeals. The final 
determination of liability is December 14, 2003. The applicable date 
is June 14, 2004, the day that is six months after the date of final 
determination of liability. The last day of the election period is 
June 13, 2004. Beginning June 14, 2004, Trust will no longer be 
treated and taxed as part of A's estate.

    (g) Personal Representative appointed after the section 645 
election is made--(1) Effect on the election. If a personal 
representative for the related estate is not appointed until after the 
trustee has made a valid section 645 election, the personal 
representative is deemed to agree to the election and to accept the 
associated responsibilities unless, within 60 days of appointment, the 
personal representative notifies the trustee in writing of the personal 
representative's refusal to agree to the election. If the personal 
representative refuses to agree to the election, the election period 
terminates the day before the effective date of the personal 
representative's appointment. If the personal representative and the 
trustee are the same person, the personal representative cannot refuse 
to agree to the election.
    (2) Continuation of election period. If the personal representative 
does not refuse to agree to the section 645 election, the personal 
representative of the related estate and the trustee of the electing 
trust must file amended Forms 1041 reflecting the items of income, 
deduction, and credit of the related estate and the electing trust for 
all taxable years ending after the death of the decedent. If the period 
of limitations for making assessments has expired with respect to the 
electing trust for any of the Forms 1041 filed by the trustee, the 
personal representative must obtain a TIN for the related estate and 
file Forms 1041 for any items of income, deduction, and credit of the 
related estate that cannot be properly included on amended forms for 
the electing trust.
    (3) Termination of the election period. If the election period 
terminates as a result of the personal representative's refusing to 
agree to the election, the personal representative must obtain a new 
TIN for the related estate. The personal representative must file 
returns under the new TIN for all taxable years of the related estate 
ending after the death of the decedent. The trustee of the electing 
trust is not required to amend any returns filed for the electing trust 
during the election period. Following termination of the election 
period, the trustee of the electing trust must obtain a new TIN as 
required under Sec. 301.6109-1(a)(4)(iii) of this chapter.
    (h) Treatment of an electing trust and related estate following 
termination of the election--(1) The share (or shares) comprising the 
electing trust is deemed to be distributed by its related estate upon 
termination of the election period. On the close of the last day of the 
election period, the combined related estate and electing trust, if 
there is a personal representative, or, the electing trust, if there is 
no personal representative, is deemed to distribute the share (or 
shares, as determined under section 663(c)) comprising the electing 
trust to a new trust in a distribution to which sections 661 and 662 
apply. Thus, the combined related estate and electing trust, if there 
is a personal representative, or the electing trust, if there is no 
personal representative, is entitled to a distribution deduction to the 
extent permitted under section 661 in the taxable year in which the 
election period terminates as a result of the deemed distribution. The 
new trust shall include such distribution in gross income to the extent 
required under section 662.
    (2) Filing of the Form 1041 upon the termination of the section 645 
election--(i) If there is a personal representative--If there is a 
personal representative, the Form 1041 filed under the name and TIN of 
the related estate for the taxable year in which the election 
terminates includes--
    (A) The items of income, deduction, and credit of the electing 
trust attributable to the period beginning with the first day of the 
related estate and electing trust's taxable year and ending with the 
last day of the election period;
    (B) The items of income, deduction, and credit, if any, of the 
related estate for the taxable year; and
    (C) A deduction for the deemed distribution of the share (or 
shares) comprising the electing trust to the new trust as provided for 
under paragraph (h)(1) of this section.
    (ii) If there is no personal representative. If there is no 
personal representative, the taxable year of the electing trust closes 
on the last day of the election period. A Form 1041 is filed in the 
manner prescribed under

[[Page 79022]]

paragraph (e)(3)(ii) of this section reporting the items of income, 
deduction, and credit of the electing trust for the short period ending 
with the last day of the election period. The Form 1041 filed under 
this paragraph includes a distribution deduction for the deemed 
distribution provided for under paragraph (h)(1) of this section. The 
Form 1041 must indicate that it is a final return.
    (3) Use of TINs following termination of the election. Upon 
termination of the section 645 election, a former electing trust must 
obtain a new TIN, as required under Sec. 301.6109-1(a)(4)(iii) of this 
chapter. If the related estate continues after the termination of the 
election period, the related estate must continue to use the TIN 
assigned to the estate during the election period.
    (4) Taxable year of estate and trust upon termination of the 
election--(i) Estate. Upon termination of the election, if the estate 
will continue, the taxable year of the estate is the same taxable year 
used during the election period.
    (ii) Trust. Upon termination of the election, the taxable year of 
the new trust is the calendar year. See section 644.
    (i) Reserved.
    (j) Effective date. This section applies on or after the date final 
regulations are published in the Federal Register.
    Par. 5. Section 1.671-4 is amended as follows:
    1. The text of paragraph (d) is redesignated paragraph (d)(1) and a 
paragraph heading is added for newly designated paragraph (d)(1).
    2. Paragraph (d)(2) is added
    3. Paragraphs (h) and (i) are redesignated as paragraphs (i) and 
(j).
    4. New paragraph (h) is added.
    The additions and revisions read as follows:


Sec. 1.671-4  Method of Reporting.

* * * * *
    (d) Due date and other requirements with respect to statement 
required to be furnished by trustee--(1) In general. * * *
    (2) Statement for the taxable year ending with the death of the 
grantor or other person treated as the owner of the trust. If a trust 
ceases to be treated as owned by the grantor, or other person, by 
reason of the death of that grantor or other person (decedent), the due 
date for the statement required to be furnished for the taxable year 
ending with the death of the decedent shall be the date specified by 
section 6034A(a) as though the decedent had lived throughout the 
decedent's last taxable year. See paragraph (h) of this section for 
special reporting rules for a trust or portion of the trust that ceases 
to be treated as owned by the grantor or other person by reason of the 
death of the grantor or other person.
* * * * *
    (h) Reporting rules for a trust, or portion of a trust, that ceases 
to be treated as owned by a grantor or other person by reason of the 
death of the grantor or other person--(1) Definition of decedent. For 
purposes of this paragraph (h), the decedent is the grantor or other 
person treated as the owner of the trust, or portion of the trust, 
under subpart E, part I, subchapter J, chapter 1 of the Internal 
Revenue Code on the date of death of that person.
    (2) In general. The provisions of Sec. 1.671-4 apply to a trust, or 
portion of a trust, treated as owned by a decedent for the taxable year 
that ends with the decedent's death. Following the death of the 
decedent, the trust or portion of a trust that ceases to be treated as 
owned by the decedent, by reason of the death of the decedent, may no 
longer report under Sec. 1.671-4. A trust, all of which was treated as 
owned by the decedent, must obtain a new TIN upon the death of the 
decedent, if the trust will continue after the death of the decedent. 
See Sec. 301.6109-1(a)(3)(i) of this chapter for rules regarding 
obtaining a TIN upon the death of the decedent. An electing trust as 
defined in Sec. 1.645-1(b)(2) is not required to obtain a TIN following 
the death of the decedent. A qualified revocable trust, as defined in 
section 645(b) and Sec. 1.645-1(b)(1), for which a section 645 election 
will be made, need not obtain a TIN. See Sec. 301.6109-1(a)(4) of this 
chapter and Sec. 1.645-1(d)(1)(ii)(A).
    (3) Special rules--(i) Trusts reporting pursuant to paragraph (a) 
of this section for the taxable year ending with the decedent's death. 
The due date for filing of a return pursuant to paragraph (a) of this 
section for the taxable year ending with the decedent's death shall be 
the due date provided for under Sec. 1.6072-1(a)(2). The return filed 
under this paragraph for a trust all of which was treated as owned by 
the decedent must indicate that it is a final return.
    (ii) Trust reporting pursuant to paragraph (b)(2)(B) of this 
section for the taxable year of the decedent's death. A trust that 
reports pursuant to paragraph (b)(2)(B) of this section for the taxable 
year ending with the decedent's death must indicate on each Form 1096 
(Annual Summary and Transmittal of the U.S. Information Returns) that 
it files (or appropriately on magnetic media) for the taxable year 
ending with the death of the decedent that it is the final return of 
the trust.
    (iii) Trust reporting under paragraph (b)(3) of this section. If a 
trust has been filing under paragraph (b)(3) of this section, the 
trustee may not report under that paragraph if any portion of the trust 
has a short taxable year by reason of the death of the decedent and the 
portion treated as owned by the decedent does not terminate on the 
death of the decedent.
* * * * *
    (4) Effective date. This paragraph (h) applies on or after the date 
final regulations are published in the Federal Register.
    Par. 6. Section 1.6072-1 is amended as follows:
    1. The text of paragraph (a) is redesignated as paragraph (a)(1) 
and a paragraph heading is added for newly designated paragraph (a)(1).
    2. Paragraph (a)(2) is added.
    The additions are as follows:


Sec. 1.6072-1  Time for filing returns of individuals, estates, and 
trusts.

    (a) In general--(1) Returns of income for individuals, estates and 
trusts.* * *
    (2) Return of trust, or portion of a trust, treated as owned by a 
decedent--(i) In general. In the case of a return of a trust, or 
portion of a trust, that was treated as owned by a decedent under 
subpart E (section 671 and following), part I, subchapter J, chapter 1 
of the Internal Revenue Code as of the decedent's date of death that is 
filed in accordance with Sec. 1.671-4(a) for the fractional part of the 
year ending with the date of death of the decedent, the due date of 
such return shall be the fifteenth day of the fourth month following 
the close of the 12-month period which began with the first day of such 
fractional part of the year.
    (ii) Effective date. This paragraph (a)(2) applies on or after the 
date final regulations are published in the Federal Register.
* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 7. The authority citation for part 301 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 8. Section 301.6109-1 is amended as follows:
    1. Paragraph (a)(2)(iii) is removed.
    2. Paragraphs (a)(3) through (a)(6) are added.
    The additions are as follows:


Sec. 301.6109-1  Identifying numbers.

    (a) * * *
    (3) Obtaining a taxpayer identification number for a trust, or 
portion of a trust, following the death of the individual

[[Page 79023]]

treated as the owner--(i) In general--(A) A trust all of which was 
treated as owned by a decedent. In general, a trust all of which is 
treated as owned by a decedent under subpart E (section 671 and 
following), part 1, subchapter J, chapter 1 of the Internal Revenue 
Code as of the decedent's date of death must obtain a new taxpayer 
identification number following the death of the decedent if the trust 
will continue after the death of the decedent. See, however, 
Sec. 301.6109-1(a)(4) for rules regarding obtaining a taxpayer 
identification number for a qualified revocable trust, as defined in 
section 645(b)(1), for which a section 645 election has been or will be 
made.
    (B) Taxpayer identification numbers of trust with multiple owners. 
With respect to a portion of a trust treated as owned under subpart E 
(section 671 and following), part 1, subchapter J, chapter 1 of the 
Internal Revenue Code by a decedent as of the date of the decedent's 
death, if, following the death of the decedent, the portion treated as 
owned by the decedent remains part of the original trust and the other 
portion (or portions) of the trust continue to report under the 
taxpayer identification number assigned to the trust prior to the 
decedent's death, the portion of the trust treated as owned by the 
decedent prior to the decedent's death continues to report under the 
taxpayer identification number used for reporting by the other portion 
(or portions) of the trust.
    (ii) Furnishing correct taxpayer identification number to payors 
following the death of the decedent. If the trust continues after the 
death of the decedent and is required to obtain a new taxpayer 
identification number under paragraph (a)(3)(i)(A) of this section, the 
trustee must furnish payors with a new Form W-9, or an acceptable 
substitute Form W-9, containing the new taxpayer identification number 
required under paragraph (a)(3)(i)(A) of this section, the name of the 
trust, and the address of the trustee.
    (4) Taxpayer identification numbers if a section 645 election has 
been, or will be, made--(i) Definitions. For purposes of this paragraph 
(a)(4), the terms qualified revocable trust (QRT), electing trust, 
related estate, election period, and personal representative shall have 
the meanings provided in Sec. 1.645-1(b) of this chapter.
    (ii) Taxpayer identification number to be used during the election 
period--(A) If there is a personal representative--(1) In general. If 
there is a personal representative for a related estate, a taxpayer 
identification number does not need to be obtained for an electing 
trust. The personal representative of the related estate must obtain a 
taxpayer identification number in the name of the estate. A trustee of 
a QRT for which a section 645 election will be made and the personal 
representative of the related estate, if any, may choose to treat the 
QRT as an electing trust and not obtain a taxpayer identification 
number for the trust. See Sec. 1.645-1(d)(1)(ii)(A) of this chapter. If 
the personal representative knows that a section 645 election has been 
made for an electing trust or will be made for a QRT at the time the 
personal representative files the Form SS-4, ``Application for Employer 
Identification Number,'' for the related estate, the personal 
representative may enter the name of the trust as a secondary name on 
the form. All returns filed for the combined related estate and 
electing trust during the election period must be filed using the name 
of the related estate as the primary name on the return.
    (2) Obligations of persons who make payments to electing trusts. 
Any payor that is required to file an information return with respect 
to payments of income or proceeds to an electing trust must show the 
name of the related estate, as the primary name on the return, the name 
of the electing trust as the secondary name on the return, and the 
taxpayer identification number of the related estate on the return. 
Nevertheless, the statement to recipients must be furnished by the 
payor to the trustee of the trust, rather than the personal 
representative of the related estate. Under these circumstances, the 
payor satisfies all information reporting sections that require the 
payor to show the name and taxpayer identification number of the payee 
on the information return and to furnish the statement to recipients to 
the person whose taxpayer identification number is required to be shown 
on the form.
    (B) If there is no personal representative. If there is no personal 
representative for a related estate, the trustee of an electing trust 
must obtain a taxpayer identification number as an estate. The name 
entered on the Form SS-4 filed by the trustee must be the name of the 
trust followed by ``filing as an estate under section 645.'' Any 
returns filed by the electing trust in accordance with section 645 
during the election period must be filed under the name required to be 
entered on the Form SS-4 under this paragraph and under the taxpayer 
identification number obtained pursuant to this paragraph. A trustee of 
a QRT for which a section 645 election will be made may choose to treat 
the QRT as an electing trust and obtain a taxpayer identification 
number as an estate under this paragraph and not as a trust. See 
Sec. 1.645-1(d)(1)(ii)(A) of this chapter.
    (iii) Taxpayer identification number to be used by a trust upon 
termination of the election period. Upon the termination of the 
election period, the trustee must obtain a taxpayer identification 
number in the name of the new trust. If there is no personal 
representative and the trustee obtained a taxpayer identification 
number under paragraph (a)(4)(ii)(B) of this section for the trust to 
file as an estate under section 645, the trustee must obtain a new 
taxpayer identification number for the new trust. See Sec. 1.645-1(h) 
of this chapter for rules regarding the treatment of an electing trust 
upon termination of the election period. The trustee must furnish to 
all payors of the trust a completed Form W-9 or acceptable substitute 
Form W-9 signed under penalties of perjury by the trustee providing 
each payor with the name of the new trust, the TIN required to be used 
under this paragraph (a)(4)(iii), and the address of the trustee.
    (5) Persons treated as payors. For purposes of paragraphs (a)(2), 
(3), and (4) of this section, a payor is a person described in 
Secs. 1.671-4(b)(4) and 1.645-1(b)(7) of this chapter.
    (6) Effective date. Paragraphs (a)(3), (4), and (5) of this section 
apply on or after the date final regulations are published in the 
Federal Register.
* * * * *

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 9. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 10. In Sec. 602.101, paragraph (b) is amended by adding an 
entry in numerical order to the table to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (b) * * *

[[Page 79024]]



------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
 *                *                 *                 *                *
                                  *                 *
1.645-1.................................................       1545-1578
 
 *                *                 *                 *                *
                                  *                 *
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David A. Mader,
Acting Deputy Commissioner of Internal Revenue.
[FR Doc. 00-31648 Filed 12-15-00; 8:45 am]
BILLING CODE 4830-01-P