In Revenue Procedure 2017-34 the IRS published a simplified method for extending the time to elect portability. As we have explored in previous editions of the Fiduciary Minute, a surviving spouse may make an election to claim the estate tax exclusion unused at the first spouse’s death (the “portability election”). However, the portability election is only effective if made by the due date of the estate tax return (including extensions) for the deceased spouse (typically nine months from date of death). Prior to Rev. Proc 2017-34, if a surviving spouse wanted to make a late filing to claim portability, he or she had to receive relief by filing a private letter ruling under Treas. Reg. §301.9100-3. Having received numerous requests for relief, the IRS has now provided a simplified method for electing portability on an otherwise untimely Form 706.

Under Rev. Proc. 2017-34, for an estate which was not otherwise required to file a 706, the Form 706 can now be filed by the later of:

  •  January 2, 2018 or
  • The second anniversary of the decedent’s date of death.

It is important to note that this extension does not apply to estate tax returns that were otherwise required to be filed (i.e., where the spouse’s estate exceeded the filing requirement). If a return is filed pursuant to this Rev. Proc., and it is later determined that the estate was originally required to file an estate tax return, the election under this Rev Proc is deemed to be void.

Relief is available if all the following requirements are satisfied:

  • The decedent:
    • was survived by a spouse;
    • died after December 31, 2010; and
    • was a citizen or resident of the United States on the date of death.
  • The executor is not otherwise required to file an estate tax return (based on the value of the gross estate and adjusted taxable gifts) — ignoring the need to file for portability purposes only;
  • The executor did not file an estate tax return within the original time required by § 20.2010- 2(a)(1) for filing estate tax returns (i.e., if the executor filed the estate tax return, but did not elect portability, he or she cannot elect portability through this Rev. Proc process);
  • The executor files a complete and properly prepared Form 706, on or before the later of (i) January 2, 2018, or (ii) the second annual anniversary of the decedent’s date of death. The Form 706 will be considered complete and properly prepared if it is prepared in accordance with § 20.2010-2(a)(7);
  • The executor filing the Form 706 on behalf of the decedent’s estate must state at the top of the Form 706 that the return is “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”