Extension of time to elect ‘Portability”
IRS simplifies procedure for Extension to make Portability Election
In June 2017, the IRS issued a Revenue Procedure that allows certain Estates to make a late portability election without first filing a ruling request. “Portability” is a useful tax law provision that permits a surviving spouse to take advantage of the deceased spouse’s unused combined gift and estate tax exemption (currently $5.49 million). But portability isn’t automatic: It’s available only if the deceased spouse’s estate makes a portability election on a timely-filed estate tax return. This return is due nine months after death, with a six-month extension option, regardless of whether any tax is owed.
What’s new?
Previously, if a deceased spouse’s Executor failed to make a timely portability election, the surviving spouse’s only recourse was to request a private letter ruling from the IRS – a costly and time-consuming process. The new Rev. Proc. 2017-34 grants an automatic extension for taxpayers not otherwise required to file an estate tax return, provided they file a return making the election on or before the later of:
- The second anniversary of the deceased’s death, or
- January 2, 2018.
If the requirements are met within two years following the date of death, the estate may make the election by filing an estate tax return with the following language added at the top:
“FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER SECTION 2010(c)(5)(A).”
An estate seeking relief after the second anniversary of the decedent’s death may still request a letter ruling. Here’s a Forbes article for more background.
Is portability right for you?
The portability provision can provide a safety net for couples who have joint assets which may grow to exceed the exemption amount (currently $5.49 million) of the estate of the first spouse to die. Contact us to answer any questions about making a portability election.