In a recent bulletin, the IRS issued Revenue Procedure 2017-34 which outlines a potential opportunity for certain taxpayers to obtain a time extension for those seeking to make a “portability election.”
Under § 2010(c)(5)(A) of the Internal Revenue Code, a portability election creates a method for a decedent’s unused exclusion amount, also known as the deceased spousal unused exclusion amount or DSUE amount, to be applied to the later transfers during the life or at the death of the surviving spouse. In practical terms, if a situation occurs where a portion of the currently allotted $5.49 Million of a deceased spouse’s federal estate tax exemption is left unused, then the surviving spouse may make a portability election to add that remaining portion to his or her own exemption for coverage of additional assets.
The original due date for an estate tax return required to elect portability is limited to nine months after the decedent’s date of death or the last day of a covered extension period, if obtained. Previous procedures called for a letter ruling process to obtain an extension for making a portability election. With many taxpayers finding the nine months to be confining due to common circumstances that can accompany the death of a loved one, a considerable number of ruling requests to the IRS came flooding in. In its bulletin, the IRS recognizes the demonstrated need for relief on this issue, and the “significant burden” placed on the IRS due to the sheer number of ruling requests received. By doing away with the arduous letter ruling process, the IRS has created what it hopes to be a simplified method for qualifying taxpayers to obtain relief.
If a taxpayer seeking an extension can qualify under the criteria laid out by § 301.9100–3 of the Procedure and Administration Regulations, then he or she may obtain an extension for estates of decedents having no filing requirement under § 6018(a) from the later of either January 2, 2018 or the second anniversary of the decedent’s date of death. The taxpayer would then simply follow the steps laid out in Section 4 of Rev. Proc. 2017-34 to proceed in the portability election process. No user fee is required for submissions filed under this revenue procedure. If it has been over two years since the decedent’s death, a letter ruling made under additional procedures must be requested to obtain relief.
Although this revenue procedure aims to utilize a simplified method of obtaining relief compared to the previous route, it is best to consult with an attorney familiar with the recent changes in the Federal Tax procedures to ensure all laws are being followed accordingly. The IRS made this change with specific reasoning for limiting the availability of this simplified method. As further explained in the bulletin, there is likelihood for the new method to encourage timely portability elections, and the added bonus that it would reduce the risks associated with having to file a supplemental return or file a claim for a credit or a refund. Based on the potential for a drawn out saga of tax filings, it seems as if this new method may not only be a simpler method, but a safer one.