Tax alert: Late filing relief for portability


Contributed by Roberto Viceconte, CPA, JD, LLM

Under current law, portability allows the unused lifetime exemption of a deceased spouse to be transferred to a surviving spouse. In the instance when an estate tax return is required and timely filed, the portability election is fairly simple. In instances when a federal estate tax return is not required, the portability election can sometimes slip through the cracks.

The IRS recently released Revenue Procedure 2017-34, giving surviving spouses of estates additional time to file for portability after the death of their spouse. Previously, a surviving spouse had until the estate tax filing deadline plus extension to file for portability. That provided a window of only 15 months to elect portability (a 9-month due date plus a 6-month extension). This applied even to estates under the filing threshold of $5 million in 2011, increasing each year to the current $5.49 million. Those estates that had no estate tax filing requirement might easily have missed the deadline to file if the only reason for filing was to secure portability. The only option for a missed election in that narrow window of time was to request relief via a private letter ruling, which was a costly and time consuming option.

Under the new Revenue Procedure, surviving spouses may now file a late portability election up to January 2, 2018 for any death occurring after 2011. Also under the new rules, a surviving spouse has until the later of January 2, 2018 or two years after the death of the spouse to file for portability.

This new Revenue Procedure allows clients and practitioners another bite of the apple to correct any missed elections and to use the additional lifetime exemption granted under portability to create opportunities for estate planning or to enhance existing planning.

To determine what opportunities might be available, consult your trusted tax professional.