Practitioners with 2011 and later years 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). Under this provision, if a spouse dies after 2010 and all of his or her $5 million is not applied toward the exemption, the 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 first spouse to die to the surviving spouse. This can only be done by timely filing an estate tax return (2011 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. There is a procedure to file to request a 6-month extension to file the estate tax return, and a special extension relief procedure for the deaths in the first six months of 2011. The American Taxpayer Relief Act of 2012 included a permanent extension of portability. For information on 2010 deaths and carryover basis, see the 2010 carryover basis resources page.
Other AICPA Guidance for Members
Note: For information on 2010 deaths and carryover basis, see the 2010 carryover basis resources page.
- 2012 IRS Form 706, U.S. Estate (and GST) Tax Return, and instructions, with Part 6 on portability election for 2012 deaths
- 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
- Form 4768 (6 month extension request) and instructions