Estate obtained late portability relief

Plain-English summary

A decedent's estate did not file Form 706 by the deadline for electing portability of the deceased spouse's unused estate and gift tax exclusion. The executor represented that the estate was below the filing threshold and that the decedent had made no taxable gifts, so no estate tax return was otherwise required. Because the election deadline was regulatory in that situation, the IRS could grant discretionary relief under the section 9100 regulations. The IRS allowed 120 days to file a complete Form 706 and make the portability election. The extension would be null and void if the estate was later determined to have been required to file under section 6018(a).

Ruling snapshot

• Question: May an estate not otherwise required to file Form 706 make a late portability election for the decedent's unused exclusion amount?
• Outcome: approved, with 120 days to file Form 706
• Key authorities: IRC §§ 2010(c)(5), 6018(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: 201732023                                             Third Party Communication: None
Release Date: 8/11/2017                                       Date of Communication: Not Applicable
Index Number: 9100.35-00, 2010.04-00
                                                              Person To Contact:
-------------------------------------                         -----------------------------------------------------
---------------------------                                   -----------------------------------------
---------------------------------                             Telephone Number:
                                                              ----------------------
                                                              Refer Reply To:
                                                              CC:PSI:B04
                                                              PLR-137400-16
                                                              Date:
         ----------------------------------------------       April 11, 2017



Legend

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

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

       This letter responds to your personal representative’s letter of November 1, 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 (Code) (a “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 summarized 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) to provide 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 prior to the due date. The estate discovered
its failure to elect portability after the due date for making the election.
PLR-137400-16                               2

       Individual served as executor of Decedent’s estate. Individual 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 lifetime, Decedent made no taxable gifts.
As executor, Individual 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.
PLR-137400-16                                 3

      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, 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,
PLR-137400-16                                 4

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 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 executor, Individual 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.

      In accordance with the Power of Attorney on file with this office, we have sent a
copy of this letter to your authorized representatives.

       Except as expressly provided herein, we neither express nor imply any opinion
concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

      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
PLR-137400-16                                5

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.



                                          Sincerely,

                                          Associate Chief Counsel
                                          Passthroughs and Special Industries



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




       Enclosures
             Copy for § 6110 purposes
             Copy of this letter