Portability of a deceased spouse’s unused exclusion amount has been part of the Internal Revenue Code since 2010. It could not be relied upon (due to the sunset provision in the law) until the American Taxpayer Relief Act made it “permanent” (or what counts as permanent in today’s world) in 2012.
In order to obtain portability, the decedent’s executor needs to file a timely-filed estate tax return, including extensions. If the decedent’s executor fails to file an estate tax return timely, relief has been available by filing for relief under §301.9100-3, provided they acted reasonably and in good faith and paid the user fee. Also, no 9100 relief is allowable if the estate was required to file a return due to the size of the estate.
With the issuance of Revenue Procedure 2017-34, there is automatic relief if the conditions are met, specifically:
- The decedent:
- was survived by a spouse;
- died after 2010;
- and was a citizen or resident of the United States.
- The executor is not required to file an estate tax return based on the size of the estate and lifetime gifting.
- The executor did not file an estate tax return within the time required for filing an estate tax return.
- The executor satisfies the requirements of section 4.01 of the Rev. Proc.
The requirements of section 4.01 of the Rev. Proc. Provide:
- The executor must file a complete and properly prepared Form 706.
- The return is considered complete if prepared in accordance with the loosened standards of § 20.2010-2(a)(7).
- The return must be filed by the later of January 2, 2018, or the second anniversary of the decedent’s death.
- The executor must state at the top of Form 706 the following: FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).
Relief under the Rev. Proc. is deemed to satisfy the requirements of 9100 relief. Perhaps the best part of this Rev. Proc. is that no user fee is required for the relief. Of course, if the executor misses this deadline for relief, they are back to traditional 9100 relief and the accompanying uncertainty and typical user fee of $10,000.
In upcoming blogs, I’ll discuss more on the basics of estate planning.
Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
- The Magic of Grantor Trusts - September 19, 2023
- IRS Confirms Grantor Trust Status Alone Does Not Cause a Step-Up in Basis - August 15, 2023
- Double Your Gifting with Spousal Gift-Splitting - January 11, 2022
