In a taxpayer-friendly development on Friday, the IRS issued guidance permitting certain estates to make a late portability election if they did not make a timely election (Rev. Proc. 2017-34). A portability election allows a decedent’s unused exclusion amount (deceased spousal unused exclusion amount, or DSUE amount) for estate and gift tax purposes to be available for the surviving spouse’s subsequent transfers during life or at death.
Previously, the IRS had provided a simplified method for obtaining an extension of time to make a portability election, if the estate was not required to file an estate tax return and if the decedent was survived by a spouse. However, this simplified method was available only on or before Dec. 31, 2014.
After that time, the only way to file a late portability election has been to submit a ruling request under Regs. Sec. 301.9100-3, which is expensive and time-consuming for taxpayers. Since the end of 2014, the IRS has issued a large number of rulings granting an extension of time to elect portability in situations in which the decedent’s estate was not required to file an estate tax return.
To provide relief for taxpayers and reduce the burden on the IRS, Rev. Proc. 2017-34 provides a simplified method to obtain an extension of time to elect portability that is available to estates of decedents that do not have a filing requirement under Sec. 6018(a) for a period the last day of which is the later of Jan. 2, 2018, or the second anniversary of the decedent’s date of death. (Estates that have a Sec. 6018(a) requirement to file an estate tax return are not eligible for this relief.) There is no user fee for submissions for relief under this procedure.
A taxpayer seeking relief after the second anniversary of a decedent’s death may do so by requesting a letter ruling under Regs. Sec. 301.9100-3 and Rev. Proc. 2017-1 (or any successor).
To qualify for the simplified late election, the executor must file a complete and properly prepared Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, on or before the later of Jan. 2, 2018, or the second annual anniversary of the decedent’s date of death. The executor must state at the top that the return is “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”
—Sally P. Schreiber (Sally.Schreiber@aicpa-cima.com) is a JofA senior editor.