IRS increases time for late portability elections

 

The IRS recently released guidance (Rev. Proc. 2022-32) increasing the time limit for taxpayers to make a late portability election using the simplified method from two years from a decedent’s death to five years from a decedent’s death.

 

The portability election generally permits the unused exclusion amount from the first spouse to die (DSUE) to become available for application to the surviving spouse’s subsequent transfers by gift or at death. For 2022, the exclusion amount is $12,060,000. The election must be made on the decedent spouse’s timely filed estate tax return.

 

Prior to 2017, if taxpayers did not timely elect portability, they were generally required to obtain a private letter ruling (PLR) granting an extension of time to elect portability. In an effort to reduce these PLR requests, the IRS in 2017 issued Rev. Proc. 2017-34, which held that if estates were not required to file an estate tax return (except to elect portability), the IRS would provide a simplified method for requests made within two years of the decedent’s death.

 

Rev. Proc. 2022-32 supersedes Rev. Proc. 2017-24 and extends the period to make the simplified portability election to five years after the decedent’s death. Thus, executors of applicable estates may file a complete estate tax return prior to five years after the decedent’s death and elect portability. The estate tax return must state at the top of the form that the return is “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).” There is no fee for submissions under this procedure — though if the election results in an overpayment of estate or gift tax by the surviving spouse, Rev. Proc. 2022-32 does not extend the statute of limitations for filing a claim for refund by the surviving spouse or their estate.

 

This revenue procedure will be helpful to surviving spouses where subsequent appreciation of the value of the estate of the surviving spouse might otherwise result in an estate tax liability and there is DSUE available from the first-to-die spouse’s estate. If it has been more than five years after the death of the first-to-die spouse — or the surviving spouse does not qualify under this revenue procedure for other reasons — the surviving spouse still must file for a PLR to obtain relief.

 

Contact:

 
 
 
Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.

 

More tax hot topics