Article on Portability
Lora G. Davis (The BlumFirm) has recently published an article entitled, Portability – Planning and Compliance Issues, The Texas Tax Lawyer,Vol. 40, No. 2 (Spring 2013). Providedbelow is the beginning of her article:
“Portability”allows a surviving spouse to “port” or use his or her deceased spouse’s unusedestate and gift tax exemption amount. The portability concept has beendiscussed for many years as being sound tax policy. It was recommended in 2004by a task force comprised of representatives from the American Bar Association(“ABA”) Section of Taxation, the ABA Section of Real Property, Probate andTrust Law, the American College of Tax Counsel, the American College of Trustand Estate Counsel (“ACTEC”), the American Bankers Association and the AmericanInstitute of Certified Public Accountants. Although it appeared in several congressionalbills subsequent to that time, portability was not available until 2011 withthe enactment of the Tax Relief, Unemployment Insurance Reauthorization andJobs Creation Act of 2010 (the “2010 Tax Act”). The provisions allowingportability were set to expire on December 31, 2012 under the 2010 Tax Act,however, they were permanently extended under the American Taxpayer Relief Actof 2012 (“ATRA”).
Inspite of the possible transitory nature of portability, the Department of theTreasury (“Treasury”) and the Internal Revenue Service (“IRS”) issued helpfulguidance with respect to the application of portability prior to the passage ofATRA. On October 11, 2011, Notice 2011-82 was issued to alert executors (andtheir advisors) of the need to file a timely estate tax return to electportability for decedents whose deaths occurred after December 31, 2010. The provisions ofSection 2010(c) require an “election” by the executor on a timely-filed estatetax return in order for portability to apply. The IRS recognizes that manyestate tax returns will be filed for the sole purpose of electing portability.Notice 2011-82 clarifies that if portability is elected, the followingrequirements must be met:
- A complete andtimely-filed estate tax return (including extensions) must be filed; and
- The “election” requiredby the statute will be deemed to have been made by the timely filing of a“complete and properly-prepared”3estate taxreturn until a revised estate tax return form that provides for making theelection is released.