IRS Simplifies Ability to Obtain Late Portability Election Relief

On June 9, 2017, the Internal Revenue Service issued Revenue Procedure 2017-34, which is effective immediately and provides a simplified method to obtain permission for an extension of time under Reg. 301.9100-3 to file Form 706 (Federal Estate Tax Return) and elect portability without the need to apply for a private letter ruling and pay the associated user fee.

Revenue Procedure 2017-34 applies to estates that are not normally required to file an estate tax return because the value of the gross estate and adjusted taxable gifts is under the filing threshold.

Portability of the estate tax exemption means that if one spouse dies and does not make full use of his or her $5,490,000 (in 2017) federal estate tax exemption, then the surviving spouse can make an election to utilize the unused exemption (deceased spousal unused exclusion (DSUE)), add it to the surviving spouse’s own exemption.  The DSUE is also available for application to the surviving spouse’s subsequent gifts during life.

In February 2014, the IRS issued Revenue Procedure 2014-18 that provided a simplified method for obtaining an extension of time under the “9100 relief” provisions to make a portability election that was available to estates of decedents dying after 2010, if the estate was not required to file an estate tax return and if the decedent was survived by a spouse.  This simplified method was available only on or before December 31, 2014.

After 2014, the IRS issued “numerous letter rulings” granting an extension of time to elect portability under §2010(c)(5)(A) when the decedent’s estate was not required to file an estate tax return.

The IRS acknowledged in Revenue Procedure 2017-34 that it has determined that the “considerable number of ruling requests” for an extension of time to elect portability “indicates a need for continuing relief for the estates of decedents having no filing requirement.”   Accordingly, Revenue Procedure 2017-34 allows for use of a simplified method to obtain an extension of time under the 9100 relief provisions to elect portability (provided that certain requirements are satisfied).

The IRS has made this simplified method available for all eligible estates through January 2, 2018, or the second anniversary of the decedent’s date of death.  The simplified method provided in Revenue Procedure 2017-34 is to be used in lieu of the letter ruling process.  No user fee is required for submissions filed under this revenue procedure.