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T&E TALK: IRS Simplifies Rules for Making the Portability Election

Scott T. Ditman, CPA/PFS 07.24.2017 | T&E TALK

Recently, the IRS issued a Revenue Procedure that allows certain estates to make a late portability election without first filing a ruling request. Portability is a tax law provision that permits a surviving spouse to take advantage of the deceased spouse’s unused combined gift and estate tax exemption which is currently $5.49 million.

But portability isn’t automatic: It’s available only if the deceased spouse’s estate makes a portability election on a timely filed estate tax return. This return is due nine months after death, with a six-month extension option, regardless of whether any tax is owed.

What’s New?

Previously, if a deceased spouse’s estate failed to make a timely portability election, the surviving spouse’s only recourse was to request a private letter ruling from the IRS — a costly and time-consuming process. Rev. Proc. 2017-34 grants an automatic extension for taxpayers not otherwise required to file an estate tax return, provided they file a return making the election on or before the later of:

  • The second anniversary of the deceased’s death, or
  • January 2, 2018.

If these requirements are met, the estate may make the election by filing an estate tax return with the following language at the top: “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER SECTION 2010(c)(5)(A).”

Is Portability Right for You?

The portability provision can provide a safety net for couples with joint assets exceeding the exemption amount of the estate of the first spouse to die. I can answer any questions regarding making the portability election. 

If you would like to discuss this in light of your circumstances, I can be reached at SDitman@BerdonLLP.com or call your Berdon advisor.

Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.

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