Using Rev Proc 2012 32 for a Late Portability Election

Revenue Procedure 2022-32 offers a simplified path for an estate’s executor to request an extension for making a portability election. Portability refers to the ability of a surviving spouse to utilize the deceased spouse’s unused estate tax exclusion amount, officially known as the Deceased Spousal Unused Exclusion (DSUE). The primary function of this revenue procedure is to grant this extension without the need for a formal private letter ruling, which can be a more complex and costly process.

Eligibility for Simplified Relief

The first requirement is that the decedent must have been a U.S. citizen or resident on their date of death and survived by a spouse. This procedure is not available for the estates of non-resident aliens.

A central condition is that the executor of the estate must not have been required to file a federal estate tax return under Internal Revenue Code section 6018. This filing requirement is based on the total value of the decedent’s gross estate and any adjusted taxable gifts. If this total value is less than the statutory estate tax exemption amount for the year of the decedent’s death, then no return is mandated. The executor must be able to demonstrate that the estate falls below this threshold.

The procedure also stipulates that the executor must not have filed an estate tax return within the standard prescribed time. The normal deadline for filing Form 706 and making the portability election is nine months after the decedent’s death, with a possible six-month extension. The final requirement is that the executor must be filing the late Form 706 for the sole purpose of electing portability.

Required Documentation and Preparation

The late portability election process requires the preparation of a complete and properly prepared Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Even though the estate is not taxable, this form is the vehicle for making the election. This includes the decedent’s personal details, the surviving spouse’s name and Social Security number, and a comprehensive list of the estate’s assets.

Valuation of the estate’s assets is a necessary step in this process. The executor will need to determine the fair market value of all assets as of the date of death. This information is used to compute the DSUE amount that will be transferred to the surviving spouse. This calculation is reported on Part 6 of Form 706.

A specific statement must be included on the tax form. The executor must type or write the following declaration at the very top of the Form 706: “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010”. This exact phrasing is mandatory and signals to the IRS that the return is being filed under the simplified relief provisions. Failure to include this statement can result in the rejection of the late election.

Filing the Late Portability Election

The executor must mail the completed return to the IRS service center designated in the instructions for Form 706. It is important to check the most current version of the form’s instructions for the correct mailing address, as these can change. There is no user fee required when filing under this specific revenue procedure.

The filing must be completed on or before the fifth anniversary of the decedent’s date of death. The executor should retain records that clearly show the estate was not required to file an estate tax return in the first place, as the burden of proof for eligibility rests with the estate.

Upon receiving a properly filed return that meets all the requirements of the revenue procedure, the IRS will treat the portability election as having been timely made. The DSUE amount calculated on the decedent’s Form 706 becomes available to the surviving spouse. This allows the surviving spouse to apply the decedent’s unused exclusion against their own lifetime gifts or against their own estate tax liability at death.