Obtaining Extension to make Estate Tax Portable Election Made Easier

The IRS has provided a permanently available simplified method for estates to obtain an extension of time to make the estate tax portability election.   The simplified method is only available to estates that are not required to file an estate tax return based on the value of the gross estate and is effective June 9, 2017.

 

 The IRS has provided a permanently available simplified method for estates to obtain an extension of time to make the estate tax portability election. The simplified method is only available to estates that are not required to file an estate tax return based on the value of the gross estate and is effective June 9, 2017.

IRS explained that, since Dec. 31, 2014, it has issued numerous letter rulings under Reg. § 301.9100-3 granting an extension of time to elect portability under Code Sec. 2010(c)(5)(A) in situations in which the decedent’s estate was not required by Code Sec. 6018(a) to file an estate tax return. IRS determined that the considerable number of ruling requests for an extension of time to elect portability received since Dec. 31, 2014 indicates a need for continuing relief for the estates of decedents having no filing requirement under Code Sec. 6018(a). Further, the considerable number of ruling requests received has placed a significant burden on IRS.

A taxpayer who meets the requirements listed below will be deemed to meet the requirements for relief under Reg. § 301.9100-3, and relief is granted under the provisions of Reg. § 301.9100-3 to extend the time to elect portability under Code Sec. 2010(c)(5)(A). Accordingly, for purposes of electing portability, the taxpayer’s Form 706 will be considered to have been timely filed in accordance with Reg. § 20.2010-2(a)(1). (Rev Proc 2017-34, Sec. 4.02)

In order to qualify for the automatic extension, the following requirements must be met:

  1. The taxpayer is the executor of the estate of a decedent who: 
    1. Has a surviving spouse;
    2. Died after Dec. 31, 2010; and
    3. Was a citizen or resident of the U.S. on the date of death;
  2. The taxpayer is not required to file an estate tax return under Code Sec. 6018(a) (as determined based on the value of the gross estate and adjusted taxable gifts, without regard to the need to file for portability purposes);
  3. The taxpayer did not file an estate tax return within the time prescribed by Reg. § 20.2010-2(a)(1) for filing an estate tax return required to elect portability;
  4. The executor must file a complete and properly-prepared Form 706 on or before the later of Jan. 2, 2018, or the second annual anniversary of the decedent’s date of death; and
  5. The executor filing the Form 706 on behalf of the decedent’s estate must state at the top of the Form 706 that the return is “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER Code Sec. 2010(c)(5)(A)”. (Sec. 3.01; Sec. 4.01)

IRS notes that making the simplified method of Rev Proc 2017-34 available for all eligible estates through Jan. 2, 2018 provides additional relief to the estates of decedents with a date of death in the first years after the enactment of the portability election provisions because the executors of those estates and their advisors may not have been aware of the opportunity and need to file an estate tax return to elect portability. Making the simplified method of this revenue procedure available after Jan. 2, 2018, to estates during the 2-year period immediately following the decedent’s date of death should not unduly compromise the ability of the taxpayer or IRS to compute and verify the DSUE amount because the necessary records are likely to be available during that period.

Circumstances under which the extension doesn’t apply. The new procedures do not apply to taxpayers that filed an estate tax return within the time prescribed by Reg. § 20.2010-2(a)(1) for the purpose of electing portability. Such a taxpayer either will have elected portability of the DSUE amount by timely filing that estate tax return or will have affirmatively opted out of portability in accordance with Reg. § 20.2010-2(a)(3)(i). (Sec. 3.02)

 

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