Background
Practitioners with 2011 and 2012 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 for 2011 and 2012). 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. President's fiscal year 2013 budget proposal includes a permanent extension of portability. For information on 2010 deaths and carryover basis, see the 2010 carryover basis resources page.
Resources
- Sample client letter to surviving spouses of individuals who died in 2011 and 2012 regarding need to file an estate tax return to elect portability
- Information on IRS Notice 2012-21 regarding procedures for estates of decedents dying in the first half of 2011 to elect portability if they missed the Form 706 filing deadline.
- AICPA webinar on 2011 deaths and portabilty
- AICPA blog on portability and transcript of 11/15/11 AICPA webinar
Other AICPA Guidance for Members
Note: For information on 2010 deaths and carryover basis, see the 2010 carryover basis resources page.
IRS Releases/Links