IRS Grants Extension to Elect Portability Under Certain Circumstances

The IRS has released Rev. Proc. 2014-18 to provide taxpayers the opportunity to obtain an extension of time to make a portability election under certain circumstances.

Portability allows a surviving spouse to receive the unused estate tax exemption of the predeceased spouse for gift and estate tax purposes. The estate tax exemption for 2014 is $5,340,000.

Under the new revenue procedure, an extension to file for this election will be granted under the following conditions:

(1) The taxpayer is the executor of the estate of a decedent who:

(a) has a surviving spouse;

(b) died after December 31, 2010, and on or before December 31, 2013; and

(c) was a citizen or resident of the United States on the date of death.

(2) The taxpayer was not otherwise required to file an estate tax return based on the value of the decedent’s estate;

(3) The taxpayer did not timely file an estate tax return; and

(4) The taxpayer completes an Estate Tax Return prior to December 31, 2014 which states at the top “Filed Pursuant to Rev. Proc. 2014-18 to Elect Portability Under § 2010(c)(5)(A).”

Even if a taxpayer does not meet the above requirements, they still may be able to pay a penalty and apply for an extension.

Something further to note is that the definition of a surviving spouse will be as interpreted in Rev. Rul. 2013-17, which holds that the term “spouse” includes an individual married to a person of the same sex if the individuals are lawfully married under state law.