By Trisha J. English, Esq.
Winstead PC, Houston, TX
The Internal Revenue Service has simplified the process for manyestates seeking an extension of time to make a portability electionof a decedent's unused exclusion amount.
Recall that decedents' estates may make a portability electionwith regard to the deceased spousal unused exclusion amount ("DSUEamount") if the decedent passed away after December 31, 2010, andwas survived by a spouse. The election allows the surviving spouseto apply the DSUE amount to the surviving spouse's own transfersduring life and at death. In order to make the election, a Form706, United States Estate (and Generation-Skipping Transfer)Tax Return, must be timely filed on behalf of the decedent'sestate and include a computation of the DSUE amount.
Generally, the due date of an estate tax return (whether or notit elects portability) is within nine months of the decedent's dateof death, unless an extension has been granted. If an estate hadmissed the deadline for seeking an extension of time to file theestate tax return for the sole purpose of electing portability, theestate would have had to request a private letter ruling grantingan extension pursuant to Regs. §301.9100-3. Relief under Regs.§301.9100-3 is usually granted if the taxpayer acted reasonably andin good faith, however, the process of preparing and requesting aprivate letter ruling can be both time consuming and costly.
Revenue Procedure 2014-18, 2014-7 I.R.B. 513, which becameeffective January 27, provides an automatic extension of time tofile an estate tax return to elect portability for estates thatmeet the following criteria:
1. The taxpayer is the executor of the estate of a decedentwho:
2. The estate was not otherwise required to file an estatetax return (based on the value of the decedent's gross estate andadjusted taxable gifts made by the decedent during the decedent'slife).
3. The estate tax return was not timely filed.
4. An estate tax return is filed on or before December 31,2014.
5. The estate tax return states at the top of the formthat the return is "FILED PURSUANT TO REV. PROC. 2014-18 TO ELECTPORTABILITY UNDER §2010(c)(5)(A)."
This revenue procedure will be particularly helpful to executorsof estates that may have missed the filing deadline because thevalue of the decedent's gross estate was below the thresholdrequirement for filing an estate tax return. Additionally, thisrevenue procedure will assist executors of estates of marriedsame-sex couples whose legal status may not have been recognized atthe time the estate tax return had been due.(See Rev. Rul. 2013-17, issued following the decisionin United States v. Windsor, 570 U.S. __, 133 S. Ct. 2675(2013), and recognizing same sex spouses lawfully married understate law for federal tax purposes prospectively as of September16, 2013).
The revenue procedure warns, however, that there is no change tothe filing deadline for a claim for credit or refund of anoverpayment of tax. Generally, a request for a credit or refundmust be filed within three years from the date of filing the taxreturn, or two years from the date the tax was paid, whichever islater. Thus, surviving spouses (or the executors of theestates of surviving spouses) that are seeking (or who may seek) acredit or refund due to a late portability election need to bemindful of these deadlines and, if need be, file a protective claimif it is anticipated that a portability election will be made.
Finally, for those estates that have pending requests forprivate letter rulings (dated prior to January 27) seeking anextension of time to file an estate tax return to electportability, as long as the estate meets the criteria outlinedabove, the executor may rely on the revenue procedure, withdraw theletter ruling request, and receive a refund of the user fee. If theexecutor does not withdraw the letter ruling request, the IRS willissue the letter ruling.
For more information, in the Tax Management Portfolios, seePeebles, 844 T.M., Estate Tax Credits and Computations,and in Tax Practice Series, see ¶6300, Credits, Deferred TaxPayments, and Tax Liabilities.
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