IRC §2010(c) allows the estate of a decedent who is survived by a spouse to make a portability election, that allows the surviving spouse to use the decedent spouse’s unused estate tax exclusion amount for transfers during life and at death of the surviving spouse. Currently, the portability election applies to estates of decedents dying after 2010 and before 2013.
The Treasury Department has recently promulgated temporary regulations under IRC §2010, which provide guidance on the requirements and application of the portability election. IRC §2010(c)(5)(A) and Temp. Treas. Reg. §20.2010-2T(a) provide that an executor must make a portability election by timely filing an estate tax return for the decedent spouse. Temp. Treas. Reg. §20.2010-2T(a) provides that the last return filed by the return due date, including any extensions actually granted, will supersede any previously-filed estate tax return. Further, a portability election is irrevocable once the due date (including any extensions actually granted) for the estate tax return has passed.
Under IRC §2010(c)(4), the deceased spousal unused exclusion amount is the lesser of: (i) the basic exclusion amount; or (ii) the excess of (x) the basic exclusion amount of the last such deceased spouse of such surviving spouse over (y) the amount with respect to which the tentative tax is determined under IRC §2001(b)(1) on the estate of such deceased spouse. This section clarifies that if there is more than one (1) surviving spouse, the amount of the unused exclusion available for the surviving spouse is based on the amount of the unused exclusion of the last decedent spouse.
The new temporary regulations contain numerous examples and other guidance relating to the portability election for decedents dying after 2010 and before 2013. As the estate tax laws currently stand, the $1,000,000 lifetime exemption for decedents dying on January 1, 2013 is not portable.