Estate gets 120 days to elect portability

Plain-English summary

A decedent's estate missed the deadline to file Form 706 and elect portability of the deceased spouse's unused estate tax exclusion for the surviving spouse. The estate represented that the gross estate was below the filing threshold and that the decedent had made no taxable gifts, so the election deadline was set by regulation rather than statute. The IRS found that the requirements for discretionary relief under Treasury Regulation § 301.9100-3 were satisfied. It granted 120 days from the ruling date to file a complete Form 706 and make the portability election. The relief would be void if the estate was later found to have been required to file an estate tax return under IRC § 6018(a).

Ruling snapshot

• Question: Could the estate make a late portability election for the surviving spouse?
• Outcome: approved
• Key authorities: IRC § 2010(c)(5); Treas. Reg. §§ 20.2010-2 and 301.9100-3; IRC § 6018

Full text (IRS public release)

        Internal Revenue Service                                      Department of the Treasury
                                                                      Washington, DC 20224

        Number: 201648011                                             Third Party Communication: None
        Release Date: 11/25/2016                                      Date of Communication: Not Applicable
        Index Number: 2010.04-00, 9100.00-00
                                                                      Person To Contact:
        ----------------------------                                  ------------------------, ID No. --------------
        -----------------                                             Telephone Number:
         ----------------------------------------                     ---------------------
                                                                      Refer Reply To:
                                                                      CC:PSI:B04
                                                                      PLR-111904-16
                                                                      Date:
Re: E      Re: ------------------------------------                   August 03, 2016

        Legend:
        Decedent           = -------------------------
        -----------------------------------------------------------
        Spouse             = ----------------------
        Date 1             = ------------------------
        Date 2             = ------------------------------


        Dear -----------------

        This letter responds to your representative’s letter of April 1, 2016, requesting an extension
        of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make
        the portability election under § 2010(c)(5)(A) of the Internal Revenue Code (Code) 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. Decedent’s Form 706 was due on Date 2, but the estate did not
        file a Form 706 to make the portability election. The failure to elect portability was
        discovered after the due date for making the election.

        Spouse, as the Personal Representative of Decedent’s estate, represents that the value of
        Decedent’s gross estate is less than the basic exclusion amount in the year of Decedent’s
        death, and that during his lifetime, Decedent made no taxable gifts. As Personal
        Representative, Spouse requests an extension of time pursuant to § 301.9100-3 to elect
        portability of Decedent’s DSUE amount pursuant to § 2010(c)(5)(A).
PLR-111904-16                               2



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).

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,
PLR-111904-16                                 3


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).

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.

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
PLR-111904-16                                 4


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.

As Personal Representative, 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 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-111904-16                                 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 and Special Industries)


                                           Lorraine Gardner
                                           Lorraine Gardner
                                           Senior Counsel, Branch 4
                                           Office of Associate Chief Counsel
                                           (Passthroughs and Special Industries)

Enclosure
Copy of letter for § 6110 purposes


cc: