New IRS ruling where surviving spouse forgot to timely file the deceased spouse’s federal estate tax return and thereby failed to make portability election
When one spouse dies on or after January 1, 2011, his or her federal estate tax exemption can be transferred to the surviving spouse if the surviving spouse files a timely form 706 federal estate tax return for the first-spouse-to-die. Under certain conditions, based on Rev Rul 2014-18 which the IRS issued on January 27, 2014, a late-filed 706 will be considered as if it were timely filed, ie it will be treated as effective for purposes of making the portability election. Those conditions are:
1. The first-spouse-to-die was a U.S. citizen or resident
2. The first-spouse-to-die died in 2011, 2012 or 2013
3. A form 706 was not previously filed for the first-spouse-to-die
4. A form 706 was not required to be filed for the first-spouse-to-die because the estate of the first-spouse-to-die was not large enough to require it being filed.
5. The form 706 for the first-spouse-to-die must be filed no later than December 31, 2014
6. The form 706 for the first-spouse-to-die must state at the top of page one: Filed Pursuant to Revenue Procedure 2014-18 to elect portability under Section 2010(c)(5)(A)
7. The filer of form 706 is the executor of the estate of the first-spouse to die.
If you are a surviving spouse, or if you know of a surviving spouse who finds himself or herself in this position, it is critical that this opportunity be taken advantage of. Stated differently, if the above conditions all exist, the surviving spouse needs to file the first-spouse-to-die’s estate tax return form 706 no later than December 31, 2014 with the required statement on the top of page one in order to transfer the first-spouse-to-die’s estate tax exemption to the surviving spouse.