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IRS Reminds Estates Of New Tax Break

Wednesday, October 5, 2011

The United States Internal Revenue Service (IRS) has reminded estates of married individuals dying after 2010 that they must file an estate tax return, before October 31, to pass along their unused estate and gift tax exclusion amount to their surviving spouse.

It was explained that, available for the first time this year, the new portability election allows estates of married taxpayers to pass along the unused part of their exclusion amount, normally USD5m in 2011, to their surviving spouse. Enacted last December, this provision eliminates the need for spouses to retitle property and create trusts solely to take full advantage of each spouse’s exclusion amount.

The IRS expects that most estates of people who are married will want to make the portability election, including people who are not required to file an estate tax return. However, it confirmed that the only way to make the election is by properly and timely filing an estate tax return, and that there are no special boxes to check, or statements needed, to make the election.

The first estate tax returns for estates eligible to make the portability election (because the date of death is after December 31, 2010) are due as early as October 3, 2011. This is because the estate tax return is due nine months after the date of death. Estates unable to meet this deadline can request an automatic six-month filing extension.

The IRS re-emphasized that the estates of those who died before 2011 are not eligible to make this election, but that it plans to issue regulations providing further guidance on this matter and welcomes public comment.