Extended Time for Estates to File Portability Election

August 5, 2022

Extended Time for Estates to File Portability Election

The IRS recently issued Revenue Procedure 2022-32 to provide a simplified method for obtaining an extension of time to make a portability election. The following is summary of the portability election rules and pertinent information from Revenue Procedure 2022-32.

Portability Election
A portability election allows a surviving spouse to apply a deceased spouse’s unused exclusion (DSUE) amount to their own transfers during life or at death. Federal estate tax does not apply if the value of an estate is less than the exemption amount, currently set at $12.06 million. The portability election allows couples to use the entirety of both $12.06 million estate tax exemption amounts, effectively sheltering up to $24.12 million in assets from federal estate tax.

Procedure 2017-34 Superseded
In 2017, Revenue Procedure 2017-34 was issued to provide a simplified method for obtaining an extension of time to make a portability election for an estate not required to file an estate tax return. This procedure was to be used in lieu of the letter ruling process, and was available up to the second anniversary of the decedent’s date of death.

Since Rev. Proc. 2017-34 was issued, the IRS has received numerous private letter rulings requesting an extension of time to elect portability in situations in which the decedent’s estate was not required to file an estate tax return. This caused a burden on the IRS that prompted them to issue the new Rev. Proc. 2022-32.

Extended Time to File Portability Election
With the issuance of Rev. Proc. 2022-32, taxpayers can file for an extension of time to make the portability election until the fifth anniversary of the decedent’s death. The simplified method replaces the use of the letter ruling process after the two-year anniversary of death has passed.

The revenue procedure applies to estates that are not normally required to file an estate tax return, because the value of the gross estate and adjusted taxable gifts is under the filing threshold. This means that an estate where the sum of gross assets and prior taxable lifetime gifts exceeds the federal estate exemption amount, currently set at $12.06 million, may not make a portability election.

Effective Date
Revenue Procedure 2022-32 is effective July 8, 2022 and it is the exclusive method for obtaining an extension of time for estates meeting the requirements in the procedure.
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Article contributed by Annika McKinney.