January 28, 2014
Authored by: Stephanie Moll and Kathy Sherby
Yesterday, the IRS released Rev. Proc. 2014-18, which provides a simplified method for certain taxpayers to obtain an extension of time to make a “portability” election, allowing a surviving spouse to apply a deceased spouse’s unused exclusion amount (deceased spousal unused exclusion amount, or DSUE amount) to the surviving spouse’s subsequent transfers during life or at death. For more discussions on portability, see our prior posts here, here, here, here and here (can you tell portability has been a hot topic in recent years?)
Under section 2010 (c)(5)(A) of the Code, a portability election must be made on a timely filed Form 706 (Estate Tax Return). If an executor would not otherwise be required to file an Estate Tax Return, the executor may file for an extension of time under section 301.9100-3 to make the portability election. In general, such an extension will be granted if the taxpayer establishes that the taxpayer “acted reasonably and in good faith and that the grant of relief will not prejudice the interests of the government.” In Revenue Procedure 2014-18, the Service sets forth a simplified method to obtain such an extension, if certain requirements are met.
The requirements are as follows:
1. The taxpayer is the executor of an estate of a decedent who:
a. has a surviving spouse;
b. died after December 31, 2010 and on or before December 31, 2013; and
c. was a citizen or resident of the United States on the date of death.
2. The taxpayer is not required to file an Estate Tax Return based on the value of the decedent’s gross estate and adjusted taxable gifts;
3. The taxpayer did not file a timely-filed estate tax return; and
4. The taxpayer files a complete Estate Tax Return on or before December 31, 2014, which must state at the top of the form “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER s 2010(c)(5)(A)
Taxpayers who do not meet these criteria may still apply for an extension of time under the provisions of section 301.9100-3, which requires filing for a letter ruling, and payment of the $10,000 user fee (which is actually scheduled to decrease in February to $6,900).
Pursuant to the Revenue Procedure, if, on January 27, 2014, you have already filed for a letter ruling under section 301.9100-3 and the request is pending, and your estate falls within the scope of this Revenue Procedure, you may rely on this Revenue Procedure, withdraw your pending request, and receive a refund of your user fee. If the request is not withdrawn by the earlier of March 10, 2014 or the issuance of the letter ruling, the IRS will still process the pending request.