First estate receives 120 days to elect portability after both spouses died

Plain-English summary

One spouse died without a timely Form 706 portability election, and the surviving spouse later died as well. The personal representative of both estates sought extra time to elect portability of the first decedent's unused estate and gift tax exclusion. The representative stated that the first estate was below the filing threshold and that the first decedent had made no taxable gifts, so no estate tax return was otherwise required. The IRS found that the requirements for discretionary relief were satisfied and allowed 120 days to file a complete Form 706. The relief would be void if the first estate was later found to have been required to file an estate tax return.

Ruling snapshot

• Question: Could the first decedent's estate make a late portability election after the surviving spouse also died?
• Outcome: approved, with a 120-day extension
• Key authorities: IRC §§ 2001, 2010(c)(5), 6018(a), and 6075(a); Treas. Reg. §§ 20.2010-2T(a) and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 201706012
Third Party Communication: None
Release Date: 2/10/2017
Date of Communication: Not Applicable
Index Number: 2010.04-00, 9100.35-00
Person To Contact:
------------------------------------------------------------ --------------------, ID No. -----------------
------- Telephone Number:
----------------------------------------------- ----------------------
----------------------------------------- Refer Reply To:
-------------------------- CC:PSI:04
PLR-120130-16
Date:
July 15, 2016

Legend

Decedent 1 = ----------------------------------

Decedent 2 = -----------------------------------

Personal Representative = -----------------------

Date 1 = -------------------

Date 2 = -----------------------

Date 3 = --------------------

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

This letter responds to your personal representative’s letter of June 21, 2016, and
subsequent correspondence 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) (portability election) to
allow a decedent’s surviving spouse to take into account that decedent’s
“deceased spousal unused exclusion” (DSUE) amount.
PLR-120130-16 2

FACTS

Decedent 1 died on Date 1, survived by Decedent 2. Decedent 2 died on Date 2
and appointed Personal Representative in charge of the estate. 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 1’s DSUE amount to Decedent 2, Decedent 1’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 1’s date of death or the last day
of the period covered by an extension. Decedent 1’s Form 706 was due on Date 3,
but the estate did not file a Form 706 to make the portability election. The estate
discovered its failure to elect portability after the due date for making the election.

Personal Representative, as executor of Decedent 1’s and Decedent 2’s estate,
represents that the value of Decedent 1’s gross estate is less than the basic
exclusion amount in the year of the Decedent 1’s death and that during her
lifetime, Decedent 1 made no taxable gifts. As executor, Personal Representative
requests an extension of time pursuant to § 301.9100-3 to elect portability of
Decedent 1’s DSUE amount pursuant to § 2010(c)(5)(A).

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.
PLR-120130-16 3

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 20.2010-2T(a) of the Estate Tax Regulations (as in effect on Date 1)
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. Under § 20.2010-2T(a)(1), the due
date of an estate tax return required to elect portability is nine 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 granted). Under § 20.2010-2T(a)(2), the
portability election is made by timely filing a complete and properly prepared estate
tax return, unless the executor 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.

Section 301.9100-3 provides the standards the Commissioner will use to determine
whether to grant an extension of time to make an election whose due date is
prescribed by a regulation (and not expressly provided by statute).
PLR-120130-16 4

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.

The due date for the portability election is prescribed by statute in the case of an
estate required to file an estate tax return under§ 6018(a). See §§ 2010(c)(5)(A),
6075(a), and 6018(a). In the case of an estate that is not required to file an estate
tax return under § 6018(a), the due date is prescribed by regulation. See
§ 20.2010-2T(a)(1). See also § 20.2010-2(a)(1) and Rev. Proc. 2014-18, 2014-7
IRB 513, § 2.03. Accordingly, in the latter case, a taxpayer may seek an extension
of time to elect portability under the provisions of § 301.9100-3.

Section 6018(a)(1) requires the filing of an estate tax return in all cases where the
gross estate exceeds the basic exclusion amount in effect under § 2010(c) for the
calendar year which includes the date of death. For purposes of this determination,
under § 6018(a)(3), the basic exclusion amount is 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.

CONCLUSION

As executor, Personal Representative represents that, based on the value of the
gross estate and taking into account any taxable gifts, Decedent 1’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 1’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, we grant an
extension of time of 120 days from the date of this letter 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
PLR-120130-16 5

Service, Cincinnati Service Center, M/S 343G, Cincinnati, OH 45999. For purposes
of electing portability, a Form 706 filed by Decedent 1’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 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 1’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 1’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.

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.

                                  Sincerely,


                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)




                                  Melissa Liquerman
                                  Branch Chief, Branch 4
                                  (Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes