Tag Archives: estate tax

Estate Tax, Second to Die, and ‘Portability’

In IR 2011-97, IRS recently reminded executors of estates of married decedents dying after 2010 that they must file an estate tax return in order to pass along the unused estate tax exclusion, available now for the first time, to the decedent’s surviving spouse.  This provision eliminates the need for spouses to retitle property and create certain kinds of trusts solely to take full advantage of each spouse’s exclusion.

IRS says it expects most estates of people who are married will want to make this “portability election,” including people who are not otherwise required to file an estate tax return.  The only way to make the election is by properly and timely filing an estate tax return on Form 706.  Estates of those who died before 2011 are not eligible to make this election.

Another interesting feature of this new scheme is the fact that IRS has authority to examine the return of a predeceased spouse even after the statute of limitations on assessment has expired, to make determinations regarding the deceased spouse’s unused exclusion amount.

Estates unable to meet the Form 706 filing deadline can request an automatic extension (six months) by filing Form 4768 before the original Form 706 due date, which is nine months after the date of death.

Got questions about estate tax? Get answers in Nolo’s Estate and Gift Tax FAQ.

IRS Issues Guidance for 2010 Decedents’ Estates

IRS issued a couple of important pronouncements last week that could be of interest for executors of 2010 decedents’ estates.

Recall that 2001 legislation repealed the application of the federal estate tax to estates of people who died in 2010. On December 17, 2010, however, the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (TRUIRJCA) was enacted, retroactively reinstating the estate tax. However, one of the provisions of TRUIRJCA allows the executor of the estate of a 2010 decedent to “opt out” of the estate tax, and thereby have the carryover basis rules apply, with certain potentially important modifications.

These executors will be required to file Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent. The Form will be due November 15, 2011, though the final version of the form has not yet been published by IRS! (for now, you can see the draft version here)

Rev Proc 2011-41 (issued August 5, 2011) provides the necessary guidance to executors regarding the “safe harbor” procedures of making the IRC Section 1022 election, and Notice 2011-66 (issued August 5, 2011) provides guidance regarding the time and manner of choosing to opt out of the estate tax and have the modified carryover basis rules apply.

It is important to note that Form 8939 is due November 15, 2011. IRS will not grant extensions of time to file a Form 8939, and will not accept an amended Form 8939 after the due date, with limited exceptions.