By: Anthony S. Rachuba

Rachuba Law Offices, P.C

On June 9, 2017, the Internal Revenue Service issued Revenue Procedure 2017-34 which provides for a simplified process of obtaining a late portability election without the necessity of applying for a private letter ruling.  The cost to obtain a private letter ruling is typically $20,000 to $25,000 (this includes a user fee payable to the IRS and legal fees paid to taxpayer’s attorney); therefore, such relief is a welcome sight.

A portability election allows a surviving spouse to preserve his or her deceased spouse’s unused federal estate/gift tax exemption.  For decedent’s dying in 2017, the maximum exemption is $5.49 million. A surviving spouse would then have approximately $11 million of exemption to utilize during life or at death.

This simplified procedure set forth in Revenue Procedure 2017-34 is only available if certain criteria are met. The taxpayer must be the executor of the estate of a decedent who: (1) was survived by a spouse; (2) died after December 31, 2010; and (3) was a U.S. citizen or resident at his or her death. The estate must not otherwise be required to file a federal estate tax return, meaning that the total value of the decedent’s estate must be under the exemption amount.

The executor must file a complete and proper federal estate tax return by the later of January 2, 2018, or the second anniversary of the decedent’s date of death. At the top of the estate tax return it must state “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER §2010(c)(5)(A).”

Revenue Procedure 2017-34 will provide relief to those surviving spouses who have missed the deadline for electing portability without the requirement of having to seek a costly private letter ruling. It will also reduce the number of private letter ruling requests which have placed a significant burden on the IRS.