IRS Guidance On Estate Tax Portability


The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 amended the Internal Revenue Code to allow the estate of a decedent who is survived by a spouse to make a "portability election" which allows the surviving spouse to apply the decedent's unused exemption amount (known as the "DSUE amount") to the surviving spouse's lifetime gifts or transfers at death (i.e., to transfers which may be subject to the federal gift tax if made during the surviving spouse's lifetime or subject to the federal estate tax if made at the death of the surviving spouse). The portability provisions were scheduled to expire on January 1, 2013, but Congress permanently extended the portability provisions in the American Taxpayer Relief Act of 2012.

The Internal Revenue Service has just released Revenue Procedure 2014-18 (2014-7 IRB) which provides guidance on the means by which estates of decedents who died before January 1, 2014, may elect to take advantage of the estate tax “portability” election if the value of the estate is below the threshold required for the filing of a federal estate tax return. The effect of making the “portability” election can be illustrated as follows...

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