Estate receives more time to elect portability of unused exclusion

Plain-English summary

An estate below the federal estate-tax filing threshold missed the deadline to file Form 706 and elect portability of the decedent's unused exclusion amount to the surviving spouse. Because the estate was not otherwise required to file an estate tax return, the portability deadline was regulatory and eligible for discretionary relief. The IRS granted 120 days to file a complete Form 706 and make the election. The extension would become null and void if the estate was later found to have been required to file a return under IRC § 6018(a).

Ruling snapshot

• Question: May the estate file a late Form 706 to elect portability of the deceased spouse's unused exclusion amount?
• Outcome: Approved
• Key authorities: IRC §§ 2010(c)(5), 6018(a), 6075(a); Treas. Reg. §§ 20.2010-2T(a), 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201552010 Third Party Communication: None
Release Date: 12/24/2015 Date of Communication: Not Applicable
Index Number: 2010.04-00, 9100.00-00
Person To Contact:
---------------------------- -------------------------------, ID No. -----------
---------------------------- -----------------
--------------------------- Telephone Number:
----------------------
In Re: -------------------------------------- Refer Reply To:
CC:PSI:B04
PLR-121226-15
Date:
August 26, 2015

Legend:

Decedent = -----------------------------------------------------
Spouse = ---------------------------------------------------------
Date 1 = ------------------
Date 2 = ----------------------

Dear ---------------:

   This letter responds to your letter of June 3, 2015, requesting an extension of

time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make
the election under § 2010(c)(5)(A) of the Internal Revenue Code (Code) to allow
Decedent's surviving spouse (Spouse) to take into account Decedent's “deceased
spousal unused exclusion” (DSUE) amount.

    Decedent died on Date 1, survived by Spouse. Date 1 is a date after the

effective date of the amendment to § 2010(c), which provides for portability of a DSUE
amount to a surviving spouse. To obtain the benefit of portability of Decedent's DSUE
amount to Spouse, Decedent's estate was required to file Form 706, United States
Estate (and Generation-Skipping Transfer) Tax Return, on or before the date that is
9 months after Decedent's date of death or the last day of the period covered by an
extension. Decedent's Form 706 was due on Date 2, but the estate did not file a timely
Form 706 to make the portability election. The estate discovered its failure to elect
portability after December 31, 2014, the extended due date to make the election under
§ 2010(c)(5)(A) as provided by Rev. Proc. 2014-18, 2014-7 I.R.B. 513.

   Executrix of Decedent's estate represents that the value of Decedent's gross

estate is less than the basic exclusion amount in the year of Decedent's death including
taxable gifts made during his lifetime. Executrix requests an extension of time pursuant
to § 301.9100-3 to elect portability of Decedent's DSUE amount pursuant to
§ 2010(c)(5)(A).
PLR-121226-15 2

LAW AND ANALYSIS:

 Section 2001(a) imposes a tax on the transfer of the taxable estate of every

decedent who is a citizen or resident of the United States.

  Section 2010(a) provides that a credit of the applicable credit amount shall be

allowed to the estate of every decedent against the tax imposed by § 2001.

   Section 2010(c)(1) provides that the applicable credit amount is the amount of

the tentative tax that would be determined under § 2001(c) if the amount with respect to
which such tentative tax is to be computed were equal to the applicable exclusion
amount.

  On December 17, 2010, Congress amended § 2010(c), effective for estates of

decedents dying and gifts made after December 31, 2010, to allow portability of a
decedent's unused applicable exclusion amount between spouses. Tax Relief,
Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No.
111-312, § 303, 124 Stat. 3296, 3302 (2010).

  Section 2010(c)(2) provides that the applicable exclusion amount is the sum of

the basic exclusion amount, and, in the case of a surviving spouse, the DSUE amount.

  Section 2010(c)(3) generally provides that the basic exclusion amount is

$5,000,000, to be adjusted for inflation annually after calendar year 2011.

    Section 2010(c)(4) defines the DSUE amount to mean the lesser of (A) the basic

exclusion amount, or (B) the excess of—(i) the applicable exclusion amount of the last
deceased spouse of the surviving spouse, over (ii) the amount with respect to which the
tentative tax is determined under § 2001(b)(1) on the estate of such deceased spouse.

    Section 2010(c)(5)(A) provides that a DSUE amount may not be taken into

account by a surviving spouse under § 2010(c)(2) unless the executor of the estate of
the deceased spouse files an estate tax return on which such amount is computed and
makes an election on such return that such amount may be so taken into account. The
election, once made, shall be irrevocable. No election may be made if such return is
filed after the time prescribed by law (including extensions) for filing such return.

  Section 2010(c)(6) provides that the Secretary shall prescribe regulations as may

be necessary or appropriate to implement § 2010(c).

   Section 6075(a) prescribes that returns made under § 6018(a) (relating to estate

taxes) shall be filed within 9 months after the date of the decedent's death.
PLR-121226-15 3

    Section 6018(a)(1) provides that in all cases where the gross estate at the death

of a citizen or resident exceeds the basic exclusion amount in effect under § 2010(c) for
the calendar year which includes the date of death, the executor shall make a return
with respect to the estate tax imposed by subtitle B of the Code.

    Section 6018(a)(3) provides, in part, that the basic exclusion amount referred to

in § 6018(a)(1) shall be reduced (but not below zero) by the sum of—(A) the amount of
the adjusted taxable gifts (within the meaning of § 2001(b)) made by the decedent after
December 31, 1976, plus, (B) the aggregate amount allowed as a specific exemption
under § 2521 (as in effect before its repeal by the Tax Reform Act of 1976) with respect
to gifts made by the decedent after September 8, 1976.

   Section 20.2010-2T(a) of the Estate Tax Regulations provides that to allow a

decedent's surviving spouse to take into account that decedent's DSUE amount, the
executor of the decedent's estate must elect portability of the DSUE amount on a timely-
filed Form 706.

   Section 20.2010-2T(a)(1) provides that an estate that elects portability will be

considered, for purposes of Subtitle B and Subtitle F of the Code to be required to file a
return under § 6018(a). Accordingly, the due date of an estate tax return required to
elect portability is 9 months after the decedent's date of death or the last day of the
period covered by an extension (if an extension of time for filing has been obtained).

   Section 20.2010-2T(a)(2) provides that upon the timely filing of a complete and

properly-prepared estate tax return, an executor of an estate of a decedent (survived by
a spouse) will have elected portability of the decedent's DSUE amount unless the
executor chooses not to elect portability and satisfies the requirements for the election
not to apply in § 20.2010-2T(a)(3)(i).

   Section 301.9100-1(c) provides that the Commissioner may grant a reasonable

extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a
regulatory election, or a statutory election (but no more than six months except in the
case of taxpayer who is abroad), under all subtitles of the Code, except subtitles E, G,
H, and I.

   Section 301.9100-1(b) provides that the term “statutory election” means an

election whose due date is prescribed by statute. The term “regulatory election” means
an election whose due date is prescribed by a regulation published in the Federal
Register, or a revenue ruling, revenue procedure, notice, or announcement published in
the Internal Revenue Bulletin.

    Sections 301.9100-2 and 301.9100-3 provide the standards the Commissioner

will use to determine whether to grant an extension of time to make an election. Section
301.9100-2 provides automatic extensions of time for making certain statutory and
PLR-121226-15 4

regulatory elections. Section 301.9100-3 provides for an extension of time for making
regulatory elections that do not meet the requirements for an automatic extension of
time under § 301.9100-2.

   A request for relief under § 301.9100-3 will be granted when the taxpayer

provides evidence to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and in good faith, and that granting relief will not prejudice the
interests of the government.

   Section 301.9100-3(b)(1)(iii) provides that a taxpayer is deemed to have acted

reasonably and in good faith if the taxpayer failed to make the election because, after
exercising reasonable diligence (taking into account the taxpayer’s experience and the
complexity of the return or issue), the taxpayer was unaware of the necessity for the
election.

   Sections 2010(c)(5)(A), 6075(a), and 6018(a), when construed jointly, prescribe a

due date for electing portability for those estates required to file an estate tax return
under § 6018. Accordingly, with respect to those estates, the portability election is a
statutory election as defined in § 301.9100-1(b). However, when an executor is not
required to file an estate tax return under § 6018, the Code does not specify a due date
for an estate tax return filed for the purpose of making a portability election. Rather, the
regulations under § 20.2010-2T(a), which are applicable to all estates electing
portability, specify that the portability election must be made on a timely-filed Form 706.
Accordingly, with respect to estates not required to file an estate tax return under
§ 6018, the portability election is a regulatory election as defined in § 301.9100-1(b).

   Executrix represents that, based on the value of the gross estate and taking into

account any taxable gifts, Decedent's estate is not required to file an estate tax return
under § 6018(a). Under these facts, the Commissioner has discretionary authority
under § 301.9100-3 to grant to Decedent's estate an extension of time to elect
portability.

    Based on the facts submitted and the representations made, we conclude that

the requirements of § 301.9100-3 have been satisfied. Accordingly, an extension of time
of 120 days from the date of this letter is granted in which to elect portability under
§ 2010(c)(5). The election should be made by filing a complete and properly-prepared
Form 706 and a copy of this letter, within 120 days from the date of this letter, to the
Cincinnati Service Center, at the following address: Internal Revenue Service,
Cincinnati Service Center, Stop 82, Cincinnati, OH 45999. For purposes of electing
portability, a Form 706 filed by Decedent's estate within 120 days from the date of this
letter will be considered to be timely filed.

  The rulings contained in this letter are based upon information and

representations submitted by the taxpayer and accompanied by a penalty of perjury
PLR-121226-15 5

statement executed by an appropriate party. While this office has not verified any of the
material submitted in support of the request for rulings, it is subject to verification on
examination.

   If it is later determined that, based on the value of the gross estate and taking

into account any taxable gifts, Decedent's estate is required to file an estate tax return
pursuant to § 6018(a), the Commissioner is without authority under § 301.9100-3 to
grant to Decedent's estate an extension of time to elect portability and the grant of the
extension referred to in this letter is deemed null and void.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your authorized representative. Except as expressly provided
herein, no opinion is expressed or implied concerning the tax consequences of any
aspect of any transaction or item discussed or referenced in this letter.

  The rulings contained in this letter are based upon information and

representations submitted by the taxpayer and accompanied by a penalty of perjury
statement executed by an appropriate party. While this office has not verified any of the
material submitted in support of the request for rulings, it is subject to verification on
examination.

                                   Sincerely,

                                   Lorraine E. Gardner

                                   Lorraine E. Gardner
                                   Senior Counsel, Branch 4
                                   (Passthroughs & Special Industries)

Enclosures: Copy for § 6110 purposes

cc: