Private Letter Ruling

A CFP® professional is working with a client who is considering a complex estate planning strategy involving the transfer of assets to a grantor retained annuity trust (GRAT). The client expresses concern about how the IRS might interpret a unique aspect of the proposed transaction. The CFP® professional suggests the client consult with a tax attorney to request a Private Letter Ruling (PLR) from the IRS.

Which of the following statements about Private Letter Rulings is MOST accurate?

1. A PLR is issued by the IRS and establishes a precedent that can be cited by other taxpayers in similar situations.
2. A PLR is a binding ruling between the IRS and the requesting taxpayer, providing assurance on the tax treatment of a specific transaction.
3. A PLR is a formal appeal process used when a taxpayer disagrees with a tax assessment or audit finding.
4. A PLR is issued automatically when a taxpayer files a Form 1040 with a unique tax position disclosed.