New Estate Tax Portability Relief

The federal estate tax provides a lifetime exemption of $5,490,000 (for 2017) per person. That means that the first $5,490,000 of assets owned at death are exempt from federal estate tax. All additional assets are subject to a 40% tax (for 2017).   

Prior to 2010, if an individual died having used less than the applicable exemption amount, the remaining exemption was lost. In 2010, Congress enacted legislation allowing portability of the lifetime exemption between spouses. Specifically, for deaths after 2010, the estate of a deceased spouse can transfer any unused exemption to a surviving spouse.

Despite this new taxpayer-friendly provision, the transfer of the unused exemption amount between spouses is not automatic. Instead, the executor of the deceased spouse’s estate must elect portability on a timely filed (including extensions) estate tax return. This requirement holds true even if the value of the gross estate and adjusted taxable gifts would not ordinarily necessitate the filing of an estate tax return.  

In the ensuing years, numerous taxpayers failed to file a portability election in a timely manner and sought a mechanism for relief. Excluding a period in 2014, the only method available for relief was to request a private letter ruling, which involves significant legal, accounting and filing fees.

Thankfully, on June 9, 2017, the Internal Revenue Service issued Revenue Procedure 2017-34. The revenue procedure, which became effective immediately, provided a simplified method to obtain an extension of time to elect portability of a deceased spouse’s unused exemption amount. The estates of individuals who died between 2011 and January 2, 2016 (and who were not required to file an estate tax return and who left a surviving spouse) can file a “late” return and elect portability until January 2, 2018. In addition to providing relief to these taxpayers, the revenue procedure also made the portability election more flexible going forward. Specifically, the executors of individuals who die after January 2, 2016, can elect portability up to two years after the date of death. 

For more information, contact Schneider Downs or visit the Our Thoughts On blog.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2022 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Automobile, Tax BY Steven Barber
LIFO Relief Update
Superfund Excise Taxes Are Back Under the Infrastructure Investment and Jobs Act Effective July 1, 2022
The Sting of Section 163(j) for Private Equity-Owned Companies
IRS Announces 2021 Marginal Well Credit
IRS Announces 2022 Automobile Depreciation Limitations
Don’t Ignore an IRS 5071C letter!
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.