The Tax Times: Simplified Method for Estate Tax Portability Provided in Rev. Proc. 2014-18.

Wednesday, January 29, 2014

Simplified Method for Estate Tax Portability Provided in Rev. Proc. 2014-18.

The Internal Revenue Service has released a revenue procedure this week allowing taxpayers who fall below the threshold for having to file an estate tax return, but who want to claim the portability exclusion, a simplified method for getting an automatic extension of time to file

Revenue Procedure 2014-18 provides an automatic extension of time for certain estates without a filing requirement to elect portability of the decedent’s unused exclusion amount for the benefit of the decedent’s surviving spouse. Those eligible must be decedents who were U.S. citizens, or residents who died after 2010 and before 2014, among other requirements.

The relief comes in response to many requests from taxpayers who may have been unaware they needed to file the Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) in order to claim portability, and otherwise had no filing requirement because their assets were below the $5 million mark.

A taxpayer who meets the requirements listed below will be deemed to meet the requirements for relief under Reg. § 301.9100-3, and relief is granted under the provisions of Reg. § 301.9100-3 to extend the time to elect portability under Code Sec. 2010(c)(5)(A). For purposes of electing portability, the taxpayer's Form 706 will be considered to have been timely filed in accordance with Reg. § 20.2010-2T(a)(1). The taxpayer will receive an estate tax closing letter acknowledging receipt of the taxpayer's Form 706.

In order to qualify for the automatic extension, the following requirements must be met:

1. The taxpayer is the executor of the estate of a decedent who:

has a surviving spouse;
died after Dec. 31, 2010, and on or before Dec. 31, 2013; and
was a citizen or resident of the United States on the date of death.

2. The taxpayer is not required to file an estate tax return under Code Sec. 6018(a) (as determined based on the value of the gross estate and adjusted taxable gifts, without regard to Reg. § 20.2010-2T(a)(1));

3. The taxpayer did not file an estate tax return within the time prescribed by Reg. § 20.2010-2T(a)(1) for filing an estate tax return required to elect portability; and

4. A person permitted to make the election on behalf of a decedent, pursuant to Reg. § 20.2010-2T(a)(6), must file a complete and properly-prepared Form 706 on or before Dec. 31, 2014.

5. The person filing the Form 706 on behalf of the decedent's estate must state at the top of the Form 706 that the return is "FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER Code Sec. 2010(c)(5)(A)."

Taxpayers that are not eligible for relief under this revenue procedure may request an extension of time to make the portability election under Code Sec. 2010(c)(5)(A) by requesting a letter ruling under the provisions of Reg. § 301.9100-3.

If, subsequent to the grant of relief pursuant to this revenue procedure, it is determined that, based on the value of the gross estate and taking into account any taxable gifts, the taxpayer was required to file an estate tax return pursuant to Code Sec. 6018(a), the grant of an extension under this revenue procedure becomes void.

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