IRS Extends Key Deadline for New Tax Break

Deborah L. Jacobs, writing in Forbes Magazine, notes that the IRS released a ruling that will make things considerably easier for married couples to carry over the estate tax exemption of a recently deceased spouse. The agency’s action will also have implications for same-sex married couples, who only during the past year have become entitled to the same federal tax benefits as heterosexual spouses. 

The ruling, in Revenue Procedure 2014-18, extends the time to take advantage of this tax break, which has been dubbed “portability”.  The ruling was introduced on an interim basis starting in 2011 and made permanent with the American Taxpayer Relief Tax Act of 2012. 

By enabling this “portability,” Congress allows widows and widowers to carry over the estate tax exemption of the spouse who died most recently and add it to their own. At current rates this enables married couples to transfer $5.34 million apiece ($10.68 million together) tax-free. 

To take advantage of this option, or “elect portability,” the executor handling the estate of the spouse who died must file an estate tax return (IRS Form 706), even if no tax is due. This return is due nine months after death with a six-month extension allowed. 

The Revenue Procedure now allows an executor to elect portability for a person who: 

• Died after Dec. 31, 2010, and on or before Dec. 31, 2013;
• Was a citizen or resident of the United States on the date of death; and
• Had a surviving spouse. 

If you meet these requirements, you can get an extension of time to file Form 706 without going to the costly and time-consuming procedure of getting a Private Letter Ruling from the IRS. But to do that you must file Form 706 by Dec. 31, 2014. 

The Revenue Procedure indicates that you should write at the top of the form that the return is “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”

Source:  Forbes Magazine at http://www.forbes.com/sites/deborahljacobs/2014/01/28/irs-extends-key-deadline-for-new-tax-break/