Portability became possible starting in 2011 as part of the American Taxpayer Relief Act. The terms allow widowed spouses (or executors on their behalf) to take advantage of their deceased spouse’s unused applicable estate tax exclusion by filing a Form 706. The deadline to file a Form 706 is nine months after death, with an automatic six month extension available. Earlier relief for late returns was granted, but only through December 31, 2013. However, the IRS just issued Revenue Procedure 2014-18, which allows eligible estates an extension through December 31, 2014.
The IRS’ recent ruling offers a significant relief to those who neglected to file by the end of 2013. Under current law, couples can exclude $5.34 million each. The ruling automatically extends the portability election period for certain estates for another year. (Ineligible taxpayers may still receive an extension by requesting a private letter ruling.)
Estates of decedents who died after December 31, 2010 and before January 1, 2014 remain eligible for portability. Estates of decedents survived by a same-sex spouse who were not eligible to elect portability until after the United States v. Windsor ruling are also included.
Revenue Procedure 2014-18 will be published in the next IRS Bulletin on February 10, 2014. Until then, taxpayers can review the terms for extending the portability deadline here. Executors of estates of a deceased spouse must file a Form 706 in order to elect portability. This form must be filed whether or not tax is due. Use a tax attorney to ensure the return is prepared and filed properly.