The IRS has released long-awaited portability rules
for estates to claim the unused estate and gift tax exclusion amounts of their deceased spouses, but the rules fell short of practitioners' hopes for an abbreviated estate tax form for smaller estates.
However, some practitioners said the proposed and temporary rules (REG-141832-11, T.D. 9593) were a move in the right direction in terms of simplicity.
Practitioners had hoped the IRS would create a so-called Form 706-EZ [United States Estate (and Generation-Skipping Transfer) Tax Return] for estates under $5 million. Instead, the IRS merely simplified the process by allowing executors of estates that are not otherwise required to file an estate tax return to avoid reporting the value of property that qualifies for the marital or charitable deduction.
If an executor chooses to make use of this special rule in filing an estate tax return, the temporary rules said the executor must estimate the total value of the gross estate, including the values of the property that do not have to be reported on the estate tax return under this provision. The estimate must be based on a determination made in good faith and with due diligence on the value of all the assets includible in the gross estate.
The instructions issued with respect to the estate tax return will provide ranges of dollar values and executors must identify on the estate tax return the particular range within which their best estimate of the total gross estate falls.
In addition, the proposed and temporary rules require estates to:
- Timely file an estate tax return even if they have no filing obligation
- Affirmatively opt out if they do not want to claim the election
- Compute the portability amount using the applicable, rather than the basic, exclusion amount if more than one predeceased spouse is involved
Every estate electing portability of a decedent's deceased spousal unused exemption (DSUE) amount is required to file an estate tax return within nine months of the decedent's date of death, unless an extension of time to file has been granted. That includes estates that are valued below $5 million and otherwise have no filing requirement.