Estate received 120 days to make a late portability election

Plain-English summary

A decedent's estate missed the deadline to file Form 706 and elect portability of the decedent's unused estate and gift tax exclusion for the surviving spouse. The estate represented that the gross estate, including taxable gifts, was below the amount requiring an estate tax return under section 6018(a). Because the estate was not otherwise required to file, the portability deadline was treated as regulatory and eligible for discretionary relief. The IRS granted 120 days to file a complete Form 706 and make the portability election. The relief would be void if the estate were later found to have been required to file an estate tax return.

Ruling snapshot

• Question: Could an estate not otherwise required to file Form 706 receive extra time to elect portability for the surviving spouse?
• 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: 201736014                                             Third Party Communication: None
Release Date: 9/8/2017                                        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:B04
                                                              PLR-138728-16
                                                              Date:
                                                              June 05, 2017

RE: -----------------------------------------

Legend

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

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

This letter responds to your personal representative’s letter of December 14, 2016,
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 (portability election) to allow a decedent’s surviving spouse to take into
account that decedent’s “deceased spousal unused exclusion” (DSUE) amount.

The facts and representations are as follows.

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 nine 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 Form 706 to make
the portability election. The estate discovered its failure to elect portability after the due
date for making the election.

It is represented that the value of Decedent’s gross estate is less than the basic
exclusion amount in the year of Decedent’s death including any taxable gifts made
during her lifetime.
PLR-138728-16                               2


You request an extension of time pursuant to § 301.9100-3 to elect portability of
Decedent’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.

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).
PLR-138728-16                                 3

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 a 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).

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)(v) provides that a taxpayer is deemed to have acted
reasonably and in good faith if the taxpayer reasonably relied on a qualified tax
professional, including a tax professional employed by the taxpayer, and the tax
professional failed to make, or advise the taxpayer to make, 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.
PLR-138728-16                                4

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.

It is represented 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, 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 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 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.

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.
PLR-138728-16                                  5


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)

                                       Lorraine E. Gardner
                                 By: ________________________
                                     Lorraine E. Gardner
                                     Senior Counsel, Branch 4
                                     Office of Associate Chief Counsel
                                     (Passthroughs & Special Industries)




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