Did You Miss The Portability Election? Relief Is Provided

The estate tax exclusion amount is now “portable” between husband and wife and until recently, no explicit guidance was available to determine when and how to successfully file a late return to elect such portability. In the recent Revenue Procedure 2014-18 the IRS has provided a simplified method for certain taxpayers to make such a “portability” election and gives professionals relief with these late filed returns.

This Revenue Procedure only applies if the taxpayer is the personal representative (“PR”) of the estate of the decedent who (1) has a surviving spouse; (2) died after December 31, 2010 and on or before December 31, 2013; and (3) was a citizen or resident of the United States on the date of death. Additionally, this Revenue Procedure only applies if the PR was not otherwise required to file an estate tax return or did not timely file a Form 706 to elect portability. The new Form 706 must be prepared according to Treasury Regulations, filed on or before December 31, 2014, and the PR must write on top of the application “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER §2010(c)(5)(A).” The PR is considered to have filed a timely Form 706 to elect portability if the Revenue Procedure requirements are satisfied, it is demonstrated that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the government.

Advice:

Portability is a relatively new election. Thus, many clients may not have received proper advice and this Revenue Procedure may help them. Be sure to put this election on your checklist!