The Internal Revenue Service has announced a new simplified procedure for obtaining relief for filing a late estate tax return in order to elect portability.

Under IRC section 2010(c)(5)(A), the federal estate tax exclusion amount for a surviving spouse can be increased by the “deceased spousal unused exclusion amount” of the deceased spouse, but only if the executor elects “portability” by filing an estate tax return for the deceased spouse within the time prescribed by law (including extensions) for filing the return.

The IRS does not have the power to extend the time to make an election with the due date is set by statute, but can extend deadlines when the due date is prescribed by regulation.  When the combined gross estate and adjusted taxable gifts exceed the base exclusion amount, the due date for the return is prescribed by IRC § 6018(a) and so the IRS does not have the power to allow for a late filed election, but when no estate tax return is required by § 6018(a) and the return is being filed only to make the portability election, the due date is prescribed by Treas. Reg. § 20.2010-2(a) and the IRS can grant an extension of time under Treas. Reg. § 301.9100-3.

Therefore, under the new procedure, a late portability election will be allowed if (1) the estate tax return was not required due to the combined values of the gross estate and total adjusted taxable gifts and (2) the federal estate tax return is filed not later than two years after the decedent’s death or January 2, 2018, whichever is later.  A letter ruling not required to take advantage of this new procedure, and so there is no user fee required.

Rev. Proc. 2017-34, 2017-26 IRB 1282 (6/26/2017).

[Note:  This Revenue Procedure has been superseded by Rev. Proc. 2022-32, IRB 2022-30 IRB ___ (7/25/2022).  See “Late Filing for Portability Extended to Five Years.”]