Under the portability rules a surviving spouse can elect to have the deceased spouse’s unused estate tax exemption (currently $5.34 Million) added to the surviving spouse’s estate tax exemption amount. But to do this, a federal estate tax return has to be filed within 9 months of the death of the first spouse, even if there is no taxable estate for estate tax purposes. The federal estate tax return is the only way to take advantage of the portability election. The nine month time limit has proved to be an issue in regards to same-sex spouses, whose marriages were not recognized by the IRS until the Windsor decision on June 26, 2013. Click here, here, and here to read about the Windsor decision. We believed the Windsor decision may have opened the door to the otherwise “late” portability elections for same-sex spouses, but were not sure how the IRS would treat an otherwise late return for this purpose.
Good News! Now, for deaths of same-sex couples that occurred in 2010, 2011, and 2012, Rev. Proc. 2014-18 provides a process for claiming portability for any spouse, same sex or not, who died between December 31, 2010 and December 31, 2013, even if otherwise a “late” election. The revenue procedure issued Monday by the IRS applies only if the taxpayer is the executor of the estate of a decedent who (a) has a surviving spouse; (b) died after Dec. 31, 2010, and on or before Dec. 31, 2013; and (c) was a citizen or resident of the U.S. on the date of death. Taxpayers can get an extension of time to file Form 706 without needing to get a private letter ruling as long as they file by Dec. 31, 2014.
Click here to read more about Rev. Proc. 2014-18.