Private Letter Ruling Opens the Door for Late Portability Election

Starting with deaths that occurred in 2011, a surviving spouse is allowed to “port over” the unused portion of the estate tax exemption of the deceased spouse. This has become known as “portability.” For example, if your spouse died in 2015 and you timely filed for portability, you would now have $10.88 million in estate tax exemption instead of $5.45 million. To avail himself or herself of the benefits of portability, the surviving spouse is required to timely file an estate tax return (Form 706) within nine (9) months of the date of death. For a variety of reasons, many do not file and lose their ability to elect portability.For those who may be regretting that failure, a Christmas present arrived from the IRS on December 24 in the form of PLR 201552010. In that Private Letter Ruling, the IRS determined that an estate can request relief when the estate fails to timely file an estate tax return if the estate was not required to file the return statutorily. The IRS determined that relief will be granted if the taxpayer acted reasonably and in good faith and granting relief will not prejudice the government’s interests. In this case, the IRS determined that the taxpayer acted reasonably and in good faith in relying on a qualified tax professional and that the professional failed to make, or advise the taxpayer to make, the election. The IRS granted a 120 day extension to file the return. If you find yourself in this situation, talk with your tax professional to determine whether you may benefit from seeking such an extension.