On July 8, 2022, the Internal Revenue Service issued Tax Procedure 2022-32, which provides a simplified method for certain estates to make a late portability election to allow the surviving spouse of the deceased to use the unified tax on gifts and unused estates of the deceased. exemption (i.e. the unused deceased spouse’s exclusion or DSUE). Reverend Proc. expressly replaces Rev. proc. 2017-34, which allowed an estate that was not required to file a tax return (due to gross estate value and adjusted taxable gifts below the Code section 6018(a) filing threshold taxes) to make a late election by the second birthday of death.
New requirements for portability election
Under the new procedure, the executor of the deceased’s estate may elect transferability of the EUSD to a surviving spouse if: (1) the deceased died after December 31, 2010, (2) the deceased was a citizen or resident at the date of death, (3) the estate of the deceased is not required to file a tax return (i.e. the estate of the deceased is below the filing threshold of IRC section 6018 (a )), and (4) the estate did not in fact file a tax return in a timely manner. To take advantage of the new procedure, the executor of the deceased’s estate must file a duly completed inheritance tax return no later than fifth anniversary of the date of death of the deceased person, and the top of the return should read: “FILED UNDER REV. PROC. 2022-32 TO CHOOSE PORTABILITY UNDER 2010(C)(5)(A). If the tax procedure requirements are met, the return and election will be considered filed in a timely manner, and the deceased’s DSUE amount is available to the deceased’s surviving spouse (or surviving spouse’s estate) for application to the spouse. survivor. transfers made on or after the date of death of the deceased. If the IRS later determines that the executor has been actually required to file an inheritance tax return, the grant of an extension under the new procedure will be void.
In particular, if the increase in the amount of the surviving spouse’s exemption attributable to the addition of the deceased’s DSUE amount results in a overpayment of gift or inheritance tax by the surviving spouse (or the survivor’s estate), the statute of limitations under IRC Section 6511(a) still applies (i.e. Rev Proc. 2022-32 doesn’t used to extend the statute of limitations under section 6511(a) for the application of a credit or refund). Rev. proc. 2022-32, however, states that if the deceased’s estate tax return has not yet been filed to elect portability, the surviving spouse (or the survivor’s estate) may file for protection for a credit or refund in provision of the EUSD, to prevent the survivor from being barred from such credit or reimbursement under the statute of limitations.