The IRS posted a draft version of Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, on Friday. The draft form for the first time addresses portability of a deceased spouse’s unused estate and gift tax exclusion amount and provides a check box for the executor to opt out of electing portability of the unused portion. Draft instructions have not yet been posted.
Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, a surviving spouse can increase his or her applicable exclusion amount by the amount of the unused exclusion amount of the deceased spouse (dying after 2010). This provision is currently scheduled to expire after 2012.
The election is made by the executor of the deceased spouse’s estate. Form 706 must be filed to make the election, and even estates that would not otherwise be required to file Form 706 must file in order to make the election.
Because filing Form 706 by default causes the election to be made, the draft Form 706 provides a mechanism for estates that are required to file because the value of the gross estate exceeds the applicable exclusion amount or for another reason to opt out of the election.
On the draft form, in new Part 6, Section A, there is a “Denial of Portability” check box. Executors are instructed, “Check here and do not complete Sections B and C of Part 6 only if the estate opts NOT to elect portability” of the deceased spouse’s unused exclusion amount.
Section B asks if any assets are being transferred to a qualified domestic trust (QDOT), which will affect the amount of the unused exclusion.
In Section C, the estate calculates the unused portion of the deceased spouse’s exclusion amount that is portable to the surviving spouse.
Section D is used to calculate the unused spousal exclusion amount from the decedent’s predeceased spouses.
—Alistair M. Nevius (email@example.com) is the JofA’s editor-in-chief, tax.