Portability - Estate Tax Exemption

Portability of the Estate Tax Exemption - AICPA 


Practitioners with estate clients should be aware that the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 included a portability provision for the applicable exclusion amount ($5 million, indexed for inflation). The American Taxpayer Relief Act of 2012 included a permanent extension of portability.

Portability prevents families from incurring estate and gift taxes that could have been avoided with proper estate planning. Under the portability provision, if a spouse dies and all of his or her $5 million exclusion is not applied toward the exemption, any unused portion can be added to the applicable exclusion amount of the surviving spouse. 

To take advantage of portability, however, the unused portion must be transferred from the estate of the deceased spouse to the surviving spouse. This can only be done by timely filing an estate tax return (Form 706), even if no tax is due (IRC Sec. 2010(c)(5)). If a timely return is not filed, any excess exclusion amount is lost forever and is unavailable at the death of the surviving spouse.

Other AICPA Guidance for Members
IRS Releases/Links
  • Rev. Proc. 2014-18, provides an automatic extension of time for certain estates without a filing requirement to elect portability of the decedent's unused exclusion amount for the benefit of the decedent's surviving spouse
  • IRS Proposed Regulations (REG-141832-11) and Temporary Regulations, TD 9593, June 18, 2012, on portability rules and AICPA comments on the regs.
  • Notice 2012-21 and IR 2012-24 Feb. 17, 2012, IRS guidance on first half of 2011 decedents extra 6 months extension for filing for portability election
  • IR-2011-97, Sept. 29, 2011 (IRS information release on filing Form 706 to elect portability)
  • Notice 2011-82, IRS guidance on electing portability of deceased spousal unused exclusion amount
  • IRS Form 706 (estate tax return) and instructions  

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