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

IRS Allows Late Portability Election for Estate Below Filing Threshold

The IRS granted a 120-day extension to an estate that missed the portability election deadline under § 2010(c)(5)(A) after determining the estate’s gross value fell below the § 6018(a) filing threshold. The estate of a decedent who died on [Date] requested relief under § 301.9100-3 to file a late portability election, which allows a surviving spouse to use the deceased spouse’s unused exclusion amount. The IRS concluded the estate had acted reasonably and in good faith, granting an extension measured from the date of the ruling letter. This decision provides relief for similarly situated estates that failed to elect portability due to administrative oversight rather than tax avoidance intent.

Estate’s Missed Election: A Case of Unused Exclusion Amount

The decedent died on [Date], survived by their spouse. At the time of death, the decedent’s gross estate—after accounting for any taxable gifts—fell below the § 6018(a) filing threshold ($13.61 million for 2026, the then-current applicable exclusion amount under § 2010(c)). Because the estate’s value did not exceed this threshold, the executor was not legally required to file Form 706. However, this also meant the executor was unaware of the portability election requirement under § 2010(c)(5)(A), which allows a surviving spouse to claim the Deceased Spousal Unused Exclusion (DSUE) amount.

The executor later discovered the DSUE—calculated as the difference between the decedent’s exclusion amount and the gross estate value—only after reviewing estate planning documents years after the decedent’s death. The discovery occurred when the surviving spouse sought to make a large lifetime gift and realized the estate’s exemption had not been preserved. By that time, the 9-month filing deadline for Form 706 had long passed. The executor then filed a request under § 301.9100-3 seeking an extension to make the late portability election.

IRS’s Discretion: When Extensions Are Permitted Under § 301.9100-3

The IRS’s authority to grant extensions for regulatory elections under § 301.9100-3 applies when a taxpayer demonstrates they acted reasonably and in good faith and that granting relief will not prejudice the interests of the government. This standard includes reliance on professional advice, unforeseen obstacles, or due diligence despite the missed deadline.

In this case, the estate’s request met these requirements. The estate explained the missed election resulted from a lack of awareness of the portability requirement, not negligence or tax avoidance. The IRS concluded granting a 120-day extension from the ruling letter date would not prejudice the government’s interests, as no tax revenue was at risk. This discretionary relief underscores the IRS’s willingness to provide flexibility for taxpayers who meet the regulatory standards for reasonable cause.

Filing Instructions and Critical Caveats

The IRS’s discretionary relief requires strict adherence to filing instructions. The estate must file a complete and properly prepared Form 706 within 120 days of the ruling letter, along with a copy of the ruling letter, to the Kansas City IRS Center (Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999). The IRS states that "a Form 706 filed within 120 days from the date of this letter will be considered timely filed" for portability purposes.

However, this relief is conditional and precarious. The extension granted under § 301.9100-3 is "deemed null and void" if the estate later exceeds the § 6018(a) filing threshold (gross estate plus taxable gifts surpassing the applicable exclusion amount). Practitioners must verify the estate’s valuation before relying on this relief, as the IRS provides no recourse if the estate’s size disqualifies the election.

The ruling’s non-precedential nature is a critical caveat. The IRS states it "neither express[es] nor imply[s] any opinion concerning the tax consequences" beyond the portability election, offering no binding authority for future cases. The estate must still provide adequate documentation to support the claimed DSUE amount, as substantiation remains subject to examination.

What This Ruling Means for Estates and Practitioners

The IRS’s allowance of a late portability election offers critical relief for estates that missed the filing deadline due to low asset values, but practitioners must treat it as an exceptional remedy, not a planning shortcut. The ruling hinges on the estate’s demonstration of reasonable cause—here, the executor’s failure to file Form 706 resulted from misunderstanding the § 6018(a) filing threshold, which requires returns only when the gross estate exceeds the applicable exclusion amount. The IRS’s approval hinged on the executor’s documented reliance on professional advice, satisfying the reasonable cause standard.

For practitioners, the takeaway is twofold. First, § 301.9100-3 relief remains a lifeline for estates that miss deadlines due to excusable oversight, but the 120-day window for filing the extension request is unforgiving, and the IRS’s scrutiny is intensifying. Second, the ruling reinforces the necessity of filing Form 706 even for estates below the filing threshold if portability is desired. While Revenue Procedure 2022-32 provides a 5-year window for such estates, the lack of precedential weight in Private Letter Rulings means practitioners cannot rely on this outcome for future clients.

The broader implication for estate planning is clear: proceed with caution. The IRS’s flexibility here is transaction-specific, and practitioners should treat § 301.9100-3 relief as a last-resort remedy. The ruling’s limitations are explicit: the estate remains subject to examination, and the IRS reserves the right to disallow the DSUE amount if documentation fails to substantiate the claimed unused exclusion. For estates and advisors, the message is file early, document thoroughly, and do not assume leniency will be granted—even when the estate’s value is modest.