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IRS Extends Portability Election Deadline for 2011 to 2013 Estates

Deadline

Last week I discussed why every surviving spouse should consider filing a Federal Estate Tax Return Form 706 to elect portability of the unused portion of their spouse’s federal estate tax exemption.  I explained that in order to take advantage of portability the estate’s representative must make an affirmative election on a timely filed Form 706.  The usual deadline for filing is 9 months after death, plus an additional 6 months if an extension is requested.

An Opportunity Missed

Portability was introduced in 2011, but did not become “permanent” until 2013.  Regulations were issued in June 2012, have been subsequently amended and remain the source of much discussion.  Issues relating to recognition of same-sex marriage were unclear until after the Windsor decision last year.  For these reasons, and because many were simply unaware of this new opportunity, the election was missed by some who might have benefited.  As a result, the IRS fielded many inquiries and so-called 9100 relief requests asking that untimely elections be allowed.

The IRS listened (yes, you read that correctly).

In a special Revenue Procedure (Rev. Proc. 2014-18) that surprised many observers, on January 27, 2014 the IRS announced that it is now offering blanket relief extending the deadline to file a Form 706 to make a portability election for the estate of any decedent who died in 2011, 2012 or 2013.

Does the Estate Qualify?

The new extension deadline requires that the Form 706 be filed on or before December 31, 2014.  In sum, the extension under Rev. Proc. 2014-18 will apply when all of following requirements are satisfied:

  1. A U.S. citizen or resident died in 2011, 2012 or 2013;
  2. The decedent left a surviving spouse (note that this does include same-sex marriage for those that were married in states that permitted it);
  3. The estate did not already file a Form 706 and was not legally required to timely file a Form 706 (i.e the estate would have been required if the gross estate exceeded the applicable exclusion — $5m in 2011; $5.12m in 2012; $5.25m in 2013);
  4. A complete and properly prepared Form 706 is filed in 2014; and
  5. The 706 states at the top that the return is “FILED PURSUANT TO REV. PROC.. 2014-18 TO ELECT PORTABILITY UNDER SECTION 2010(c)(5)(A)”.

Limited-Time Opportunity

Note that this extension applies only for 2011, 2012 and 2013 estates.  Estates of decedents dying in 2014 and after will be subject to the usual 9 month (plus 6 months extension by request) deadline.  I expect that this special extension is a one-time opportunity that will not be afforded in the future.

If you are a surviving spouse or the representative for the estate of a married Illinois decedent who died in 2011, 2012 or 2013 that didn’t already make a timely portability election on a Form 706, please feel free to give us a call at (847) 991-2250 to discuss whether it might be worth taking advantage of this opportunity.

Image courtesy of Stuart Miles / freedigitalphotos.net