IRS simplifies procedure for obtaining extension to make portability election

Earlier this month, 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 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 estate 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. 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 these requirements are met, the estate may make the election by filing an estate tax return with the following language at the top: “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER SECTION 2010(c)(5)(A).”

Is portability right for you?

The portability provision can provide a safety net for couples with joint assets exceeding the exemption amount of the estate of the first spouse to die. We can answer any questions regarding making the portability election. Contact us at 1-866-287-9604.

© 2017