Using Rev. Proc. 2017-34 for a Late Portability Election
Understand the simplified IRS relief for making a late portability election, allowing a surviving spouse to utilize the deceased's unused federal estate tax exclusion.
The Internal Revenue Service (IRS) provides a simplified method for an estate to make a late “portability” election. This election allows a surviving spouse to use the Deceased Spousal Unused Exclusion (DSUE), which is the portion of the federal estate tax exemption that the deceased spouse did not use. The rules for this relief were established in Revenue Procedure 2017-34, but this guidance was officially superseded by Revenue Procedure 2022-32, which extended the deadline significantly.
The portability election itself is a provision under Internal Revenue Code § 2010(c)(5)(A) that can be a valuable tool in estate planning, potentially shielding a larger amount of assets from federal estate tax for the surviving spouse. The simplified method avoids the need for a more complex and costly private letter ruling from the IRS.
Eligibility for Simplified Relief
The primary requirement is that the decedent must have been a U.S. citizen or resident on their date of death and must have passed away after December 31, 2010. This procedure is only available to estates where the decedent was survived by a spouse.
A central condition is that the estate is not otherwise required to file a federal estate tax return, Form 706. This means the value of the gross estate and any adjusted taxable gifts are below the statutory filing threshold for the year of the decedent’s death. If the estate’s value is above this threshold, filing is mandatory, and this simplified relief for a late election is not available.
The executor must also not have filed a timely estate tax return. If a return was filed within the nine-month period following the decedent’s death, the executor would have either made the portability election or opted out, and this procedure would not apply. Under Revenue Procedure 2022-32, the executor must file for this relief on or before the fifth anniversary of the decedent’s date of death, a significant extension from the previous two-year deadline.
Required Documentation and Information
The core of the late election process is the submission of a “complete and properly prepared” Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return. This is the same form that would be used for a mandatory filing, but in this context, it is filed solely to elect portability.
Preparing the form requires gathering detailed information about the decedent’s financial affairs as of the date of death. This includes the personal information of both the decedent and the surviving spouse, such as Social Security numbers and addresses. The executor must determine the fair market value of all estate assets, which can include real estate, bank accounts, investments, and personal property.
Once the asset values are compiled, the executor must calculate the Deceased Spousal Unused Exclusion (DSUE) amount. This calculation is performed on Part 6 of Form 706. The DSUE is the remaining exemption amount after accounting for the value of the decedent’s taxable estate and any lifetime taxable gifts.
A critical step in this simplified process is adding a specific statement to the top of the submitted Form 706. The IRS requires the executor to write the phrase: “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010”. This notation clearly indicates to the IRS that the return is being filed under the special relief procedure. Failure to include this exact language could lead to processing delays or a rejection of the late election.
The Filing Process
The executor must mail the return to the IRS service center designated in the official instructions for Form 706. It is important to check the most recent version of the instructions for the correct mailing address, as these locations can change. Using the address specified for estate tax returns ensures the document is routed to the correct department for processing.
Upon filing, the estate may or may not receive an immediate acknowledgment from the IRS. The processing time for these returns can vary. If the filing is accepted, the portability election is considered to have been timely made.
Should the IRS determine the filing is incomplete or that the estate does not meet the eligibility requirements for this simplified method, the request for relief will be denied. For example, if it is discovered that the estate was actually required to file a return due to its value, the simplified procedure is invalid. In such a case, the only remaining option for seeking relief would be to request a private letter ruling from the IRS, which is a significantly more complex and expensive process that requires a substantial user fee.