Late estate-tax portability election is treated as timely

Plain-English summary

An estate below the estate-tax filing threshold failed to file Form 706 on time to transfer the deceased spouse's unused exclusion amount to the surviving spouse. The surviving spouse later filed the return and requested regulatory-election relief. The IRS found that the section 301.9100-3 requirements were satisfied and treated the return as timely for the portability election. The relief would become void if the estate were later found large enough to have been required to file an estate tax return under section 6018(a).

Ruling snapshot

• Question: May an estate not otherwise required to file Form 706 make its portability election after the normal deadline?
• Outcome: Approved
• Key authorities: IRC §§ 2010(c)(5), 6018(a), 6075(a); Treas. Reg. §§ 20.2010-2T(a), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201537012 Third Party Communication: None
Release Date: 9/11/2015 Date of Communication: Not Applicable
Index Number: 9100.35-00, 2010.04-00
Person To Contact:
--------------------------------- --------------------, ID No. -----------
--------------------------------- Telephone Number:
------------------------------------------------------- ----------------------
------------------------------ Refer Reply To:
CC:PSI:B04
PLR-110299-15
Date: JUNE 01, 2015

Legend

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

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

This letter responds to your personal representative’s letter of February 5, 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) (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 submitted 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 9 months after
Decedent’s date of death or the last day of the period covered by an extension. 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. On Date 2, Spouse,
as executrix of Decedent’s estate, filed the Form 706 and made the portability election.

Spouse, as executrix, represents that the value of Decedent’s gross estate is less than
the basic exclusion amount in the year of the Decedent’s death and that during his
PLR-110299-15 2

lifetime, Decedent made no taxable gifts. As executrix and trustee of the family trust,
requests 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-110299-15 3

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.

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.
PLR-110299-15 4

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
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)(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.

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).

As executrix, Spouse 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, we grant an extension
of time to Date 2 in which to elect portability under § 2010(c)(5). For purposes of
electing portability, the Form 706 filed by Decedent’s on Date 2 is considered 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.
PLR-110299-15 5

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.

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


                                  By: ____________________________
                                      Lorraine E. Gardner, Senior Counsel
                                      Office of the Associate Chief Counsel
                                      (Passthroughs & Special Industries)

Enclosure
Copy for § 6110 purposes