The Internal Revenue Service recently issued a revenue procedure, Rev. Proc. 2017-34, which provides a simplified method to obtain an extension for making a late or missed portability election. A portability election allows a surviving spouse to effectively inherit the predeceased spouse’s unused Federal lifetime estate tax exemption (currently, $5.49 million). Ordinarily, to make a portability election, the executor of the estate must timely file a Form 706 (federal estate tax return) and not elect out of portability. Even if an estate is under the filing threshold and, thus, not otherwise required to file an estate tax return, the executor must nonetheless file an estate tax return in order to claim portability.
Prior to the release of this revenue procedure, executors of estates below the filing threshold that did not timely file an estate tax return to elect portability were forced to request a private letter ruling, which is both expensive and time-consuming, in order to obtain relief. Rev. Proc. 2017-34 allows estates under the filing threshold that missed the portability election to obtain relief by filing a complete and properly prepared estate tax return on or before the later of January 2, 2018, or the second anniversary of the decedent’s date of death. The top of the Form 706 must state that the return is being “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER SECTION 2017-34(c)(5)(A)”. To be eligible, the decedent must have died after December 31, 2010, be survived by a spouse and be a citizen or resident of the United States.
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