IRS Extends Deadline on Estate Tax Portability Election
The Internal Revenue Service has extended the deadline to file estate tax returns and make a portability election to benefit the surviving spouses of married individuals who died during the first six months of 2011.
The portability election passes along the decedent spouse’s unused estate and gift tax exclusion amount to the surviving spouse. The IRS said Friday that an extension is now available to the estates of married individuals with assets of $5 million or less, but only if the decedent spouse died in the first six months of 2011, and the executor files Form 4768 requesting an extension no later than 15 months after the date of death.
The IRS said the extra time would be available to an estate, even if the estate did not request an automatic six-month filing extension on Form 4768 prior to the regular nine-month filing deadline. As a result, these estates will now have until 15 months after the date of death, rather than the usual nine months, to make the election by filing an estate tax return on Form 706. Thus, the first estate tax returns for estates eligible to make the portability election (because the date of death is after Dec. 31, 2010) are now due on Monday, April 2, 2012.
Affected estates should submit both a properly-prepared Form 4768 and Form 706 to the IRS no later than 15 months after the decedent’s date of death. Further details are in Notice 2012-21, posted Friday on IRS.gov.
The IRS has experienced difficulty coping with uncertain state of the estate tax during 2010 when the estate tax was technically not in effect because it had expired at the end of 2009. In December 2010, Congress finally passed an extension of the estate tax and gave taxpayers the option of using either the 2009 or 2011 rules for that year.
“Upon reinstatement, Congress gave taxpayers the option of using either the 2009 or the new 2011 rules for 2010,” said IRS Commissioner Doug Shulman in a speech Wednesday. “This kind of result is not optimal.” (see IRS Commissioner Shulman Warns of Tax Risks)
The IRS notice issued Friday defines a qualifying estate as the estate of a decedent whose date of death is after Dec. 31, 2010, and before July 1, 2011, who is survived by a spouse, and whose gross estate does not exceed the $5 million basic exclusion amount for 2011. The IRS noted that Sections 302(a)(1) and 303(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, amended Section 2010(c) of the Tax Code to allow the estate of a decedent who is survived by a spouse to make a portability election to permit the surviving spouse to apply the decedent’s unused exclusion (the deceased spousal unused exclusion amount, or DSUE amount) to the surviving spouse’s own transfers during life and at death. The portability election may be made only by the estates of decedents dying after Dec. 31, 2010.