IRS Grants Extension for Portability Election Under § 2010(c)(5)(A)

IRS Allows Estate to Claim Portability Election After Deadline Miss

The IRS granted a 120-day extension under § 301.9100-3 to an estate that missed the portability election deadline under § 2010(c)(5)(A), allowing the surviving spouse to claim the deceased spousal unused exclusion (DSUE) amount. The estate, which was not required to file Form 706 under § 6018(a), sought relief after failing to timely elect portability, and the IRS approved the extension based on the estate’s reasonable and good-faith efforts.

Why the Estate Missed the Portability Election Deadline

The decedent died on [Date], survived by their spouse. At the time, the estate’s gross estate—including taxable gifts—fell below the threshold requiring a Form 706 filing under § 6018(a), which mandates estate tax returns only when the gross estate exceeds the applicable exclusion amount (then $13.61 million in 2024). Despite this, the estate later discovered an unused portion of the decedent’s applicable exclusion amount, known as the deceased spousal unused exclusion (DSUE) amount. Because the DSUE amount can only be claimed by the surviving spouse if the executor files a Form 706 and makes an explicit portability election under § 2010(c)(5)(A), the estate’s failure to timely file the return meant the election was never made.

The estate did not file Form 706 within the nine-month deadline under § 20.2010-2(a)(1), nor did it request an extension under § 301.9100-3 at the time. Months after the deadline passed, the estate became aware of the missed opportunity and subsequently submitted a request for an extension to make the portability election. The untimely filing stemmed from the estate’s initial assessment that no return was required, combined with the absence of a formal process to claim the DSUE amount without filing.

IRS Grants Extension Under § 301.9100-3: The Rationale

The IRS granted the estate’s request for a 120-day extension under § 301.9100-3, which authorizes discretionary relief for taxpayers who miss deadlines for regulatory elections. This section of the Procedure and Administration Regulations permits the Commissioner to extend the time to make an election when the taxpayer acted reasonably and in good faith, and granting relief would not prejudice the government’s interests.

To qualify for relief under § 301.9100-3, the estate had to demonstrate three elements: (1) it acted reasonably and in good faith in failing to timely file the portability election, (2) the failure did not prejudice the government’s ability to assess tax, and (3) the request was submitted promptly after discovery of the missed deadline. The IRS concluded the estate met these requirements based on the representations provided, which explained the estate’s initial assessment that no return was required and the subsequent realization of the missed portability opportunity.

The IRS determined that the estate’s reliance on its own assessment—without consulting formal IRS guidance at the time—constituted reasonable cause rather than willful neglect. Additionally, the estate’s prompt request for relief after becoming aware of the error supported a finding of good faith. The government’s interests were not prejudiced, as the estate’s gross estate fell below the filing threshold under § 6018(a), meaning no tax liability was at risk.

As a result, the IRS granted a 120-day extension from the date of the ruling letter, allowing the estate to file Form 706 and make the portability election within that period. The relief is conditional: if the estate is later determined to be required to file under § 6018(a), the extension is void, and portability cannot be elected.

How to Make the Portability Election: IRS Instructions

The IRS outlined a clear path for the estate to finalize the portability election within the granted 120-day window. To comply, the estate must file a complete and properly prepared Form 706—the federal estate tax return—along with a copy of the PLR granting the extension. The filing must be sent to the Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999.

The IRS emphasized that, for purposes of electing portability, a Form 706 submitted by the estate within the 120-day period will be treated as timely filed. However, this relief is contingent on the estate not being later determined to be subject to the Form 706 filing requirement under § 6018(a), which mandates returns for estates exceeding the applicable exclusion amount. If the estate is found to be required to file under § 6018(a), the Commissioner’s authority to grant the extension under § 301.9100-3 is nullified, and the portability election cannot be made.

Implications for Estates and Surviving Spouses

The IRS’s decision to grant a late portability election under § 301.9100-3 underscores the critical importance of the Deceased Spousal Unused Exclusion (DSUE) amount for maximizing estate tax savings, particularly for high-net-worth couples. The DSUE allows a surviving spouse to inherit their deceased spouse’s unused estate tax exemption, effectively doubling the surviving spouse’s exemption. For example, if a deceased spouse’s taxable estate is $5 million and the applicable exclusion amount is $13.61 million, the surviving spouse inherits a $8.61 million DSUE, increasing their own exemption to $22.22 million. Missing the portability election deadline—typically tied to the filing of Form 706—risks forfeiting this benefit permanently, unless relief under § 301.9100-3 is granted.

The IRS’s willingness to extend relief under § 301.9100-3 highlights a key safeguard for estates that miss the deadline, but the ruling also serves as a cautionary tale. Estates not required to file Form 706 under § 6018(a)—which mandates returns for estates exceeding the applicable exclusion amount—may still seek relief if they fail to elect portability within the 120-day period. However, if the estate is later determined to be subject to the Form 706 filing requirement, the Commissioner’s authority to grant an extension under § 301.9100-3 is nullified, and the portability election cannot be made. This underscores the need for precision in determining filing obligations, as misclassification can result in irreversible loss of the DSUE amount.

The PLR also clarifies that relief under § 301.9100-3 is non-precedential, meaning it does not set a binding rule for future cases. While the IRS’s approach in this instance provides guidance on its interpretation of reasonable cause and the scope of discretionary relief, other estates should not assume similar outcomes. The IRS explicitly disclaimed any opinion on the DSUE amount’s validity, emphasizing that the surviving spouse must substantiate the claimed amount during an audit. This reinforces the importance of maintaining thorough records, including appraisals, death certificates, and prior gift tax returns, to support any portability claim.

For surviving spouses and estates, the implications are clear: the portability election is a powerful but fragile tool. Proactive planning—such as filing Form 706 even when not strictly required, documenting reasonable cause for late filings, and consulting tax professionals—can mitigate the risk of losing the DSUE amount. The IRS’s decision in this case offers a lifeline for those who miss the deadline, but it is not a guarantee. Estates must still navigate the stringent requirements of Treas. Reg. § 20.2010-2(a)(1) and § 20.2010-3(c)(1), which govern the substantiation and determination of the DSUE amount. The ruling serves as a reminder that while relief is possible, the burden of proof remains firmly on the taxpayer.