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

IRS Grants 120-Day Extension for Portability Election After Untimely Filing

The IRS granted a 120-day extension under § 301.9100-3 of the Procedure and Administration Regulations to an estate seeking a portability election under § 2010(c)(5)(A) of the Internal Revenue Code. The estate, which was not required to file Form 706 (United States Estate Tax Return) under § 6018(a) due to the decedent’s gross estate falling below the filing threshold, requested relief to claim the Deceased Spousal Unused Exclusion (DSUE) amount for the surviving spouse. This non-precedential ruling provides relief for estates that missed the filing deadline but sought to preserve the DSUE for future tax planning.

The Question: Can an Estate Late to File Still Claim Portability?

The estate in question sought clarification on whether it could retroactively elect portability under § 2010(c)(5)(A) of the Internal Revenue Code after missing the deadline to file Form 706 (United States Estate Tax Return). Portability, established by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRA 2010), allows a surviving spouse to inherit the Deceased Spousal Unused Exclusion (DSUE)—the portion of the deceased spouse’s federal estate tax exemption that remains unused at death.

The estate’s request hinged on § 301.9100-3 of the Treasury Regulations, which permits the IRS to grant an extension of time for regulatory elections, including portability, if the taxpayer demonstrates reasonable cause for the late filing. The estate had not filed Form 706 within the 9-month deadline (with a possible 6-month extension) because the decedent’s gross estate fell below the filing threshold under § 6018(a), which requires a return only if the estate exceeds the applicable exclusion amount. However, the estate sought to preserve the DSUE for the surviving spouse’s future tax planning, arguing that the failure to file was unintentional and that relief under § 301.9100-3 was warranted. The legal basis for the request rested on the IRS’s authority to grant discretionary relief when the taxpayer acted in good faith and the government’s interests were not prejudiced.

The Facts: Why the Estate Missed the Deadline

The decedent died on March 15, 2025, survived by a spouse. Based on the value of the decedent’s gross estate and after accounting for any taxable gifts, the estate was not required to file an estate tax return under § 6018(a), which mandates a return only if the estate exceeds the applicable exclusion amount. The estate’s gross estate was valued at $11.2 million, below the $13.61 million exclusion threshold for 2025.

Despite the estate’s size, the executor later discovered an unused portion of the decedent’s applicable exclusion amount, totaling $2.41 million, which could be preserved for the surviving spouse through a portability election. A portability election under § 20.2010-2(a)(2) of the Estate Tax Regulations is made by filing a timely, complete Form 706, unless the estate qualifies for an opt-out. However, no estate tax return was filed within the 9-month deadline, and the portability election was not made.

Upon realizing the oversight, the estate’s representative submitted a request for an extension of time under § 301.9100-3 to retroactively make the portability election. The estate acted to correct the missed deadline only after the discovery of the unused exclusion and the potential tax planning benefits for the surviving spouse.

The Ruling: IRS Grants 120-Day Extension Under § 301.9100-3

The IRS granted the estate a 120-day extension to file a portability election under § 301.9100-3, which authorizes the Commissioner to grant relief for late regulatory elections when the taxpayer demonstrates reasonable cause, acted in good faith, and granting relief does not prejudice the government’s interests. The estate’s request relied on § 301.9100-1 (general rules for regulatory elections) and § 301.9100-3, which requires the estate to establish that its failure to timely file was due to reasonable cause and not willful neglect.

The IRS concluded that the estate met these requirements based on the submitted information and representations. The estate’s delay in filing the portability election was explained through affidavits and supporting documentation, which the IRS accepted as sufficient to demonstrate reasonable cause and good faith. The IRS emphasized that its decision was conditional on the estate’s representations regarding the value of the gross estate and any adjusted taxable gifts. If it is later determined that the estate was required to file an estate tax return under § 6018(a)—meaning the gross estate exceeded the applicable exclusion amount—the Commissioner’s authority to grant the extension under § 301.9100-3 would be void, and the extension would be deemed null and void.

The estate must file a complete and properly prepared Form 706 within 120 days from the date of the IRS letter, along with a copy of the letter, to make the portability election. The filing should be sent to the Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999. The IRS explicitly stated that a Form 706 filed within this 120-day window would be considered timely for purposes of electing portability. The ruling is explicitly tied to the estate’s representations and is subject to revocation if those representations are later found to be incorrect.

Implications: What This Means for Other Estates and Taxpayers

The IRS’s decision to grant a 120-day extension for the portability election in this case underscores both the strictness of filing deadlines and the limited circumstances under which relief may be granted under § 301.9100-3. For other estates, this ruling highlights the critical importance of timely filing Form 706 to elect portability, even when the estate falls below the filing threshold under § 6018(a). The IRS’s willingness to grant relief in this instance stems from the estate’s reasonable and good-faith efforts to comply, despite missing the initial deadline. However, the ruling’s non-precedential nature—explicitly stated in the letter—means it cannot be cited as binding authority for future cases. The IRS’s conditional approval is tied to the estate’s specific facts, including its representations about the Deceased Spousal Unused Exclusion (DSUE) amount, which must be fully substantiated to withstand future audits.

Taxpayers should not assume that similar relief will be granted in other cases, as the IRS emphasized that each late-filing request will be evaluated on its own merits. The agency’s warning that the DSUE amount is subject to audit serves as a reminder that estates claiming portability must maintain detailed records to support the claimed exclusion. For estates with values near the filing threshold, this ruling reinforces the need for proactive planning to avoid missing deadlines, while for smaller estates, it offers a limited safety net under Rev. Proc. 2022-32 for late elections. The IRS’s explicit statement that the ruling is subject to revocation if representations are later found incorrect further cautions taxpayers against relying on such relief without thorough documentation.