To simplify the process and reduce the number of letter rulings, on Friday, July 8, 2022, the IRS issued a revenue procedure (Rev. Proc. 2022-32), extending the time to elect portability of a deceased spouses unused exclusion amount for as much as five years after the decedent's death. Prior to this ruling, portability election was required within two years of the decedent's death, for those estates not requiring estate tax returns. When required, an estate tax return must be made within nine months of the date of decedent's death or the last day of the period covered by an extension, if an extension for filing time has been obtained. In all cases where an estate tax return is required, portability must be elected on the return or else waived.
What is portability?
Portability is the term for the concept that permits a surviving spouse to use the deceased spousal unused exclusion (DSUE), and add it to their own basic exclusion under Section 2010(c)(5)(A) of the Internal Revenue Code.
When might there be a case where no estate tax return was required that this ruling would apply to?
In cases where all assets pass to a surviving spouse who holds title as joint tenants with a right of survivorship and the decedent spouse had no taxable gifts made during their lifetime, no estate tax return would be required to be filed. If the countable estate of the surviving spouse then exceeds or could possibly exceed the estate tax exclusion, then portability to use the decedent's spouse unused exclusion would be elected. Under the new ruling, election may now be made as many as five (5) years after the death of the decedent spouse.
Do you have questions about portability or DSUE?
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