To elect portability of the Deceased Spousal Unused Exclusion (DSUE) amount to benefit the surviving spouse, the estate's representative must follow these steps:
- File Form 706: The executor of the decedent's estate must file Form 706, "United States Estate (and Generation-Skipping Transfer) Tax Return." This form must be filed to elect portability of the DSUE amount.
- Timely Filing: The estate tax return (Form 706) must be filed within nine months of the decedent's date of death. An automatic six-month extension of time to file the return is available by filing Form 4768, "Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes," on or before the due date of the estate tax return.
- Complete and Properly Prepared Return: The estate tax return must be complete and properly prepared. This includes providing all necessary information and computations as required by the instructions for Form 706. For estates not required to file an estate tax return under section 6018(a) but filing solely to elect portability, certain simplified reporting requirements apply, particularly for marital and charitable deduction property.
- Election by Default: Upon the timely filing of a complete and properly prepared Form 706, the executor will have elected portability of the DSUE amount unless the executor explicitly opts out of the election. To opt out, the executor must affirmatively state on the estate tax return or in an attachment that the estate is not electing portability.
- Irrevocability: Once the due date for filing the estate tax return (including extensions) has passed, the portability election becomes irrevocable.
- Special Rules for Non-Resident Decedents: The executor of a nonresident decedent who was not a U.S. citizen at the time of death cannot elect portability.
- Computation of DSUE Amount: The DSUE amount is computed on the estate tax return. The computation must be included to satisfy the requirements of section 2010(c)(5)(A).
- Examination of Prior Returns: The IRS has the authority to examine the returns of the deceased spouse to determine the DSUE amount, even if the period of limitations on assessment has expired.
By following these steps, the executor can ensure that the DSUE amount is properly elected and available for the benefit of the surviving spouse.
Sources:
Instructions for Form 706 (09/2023)
§ 2010. Unified credit against estate tax
§ 20.2010-2. Portability provisions applicable to estate of a decedent survived by a spouse.
IRM Part 21. Customer Account Services. Chapter 7. Business Tax Returns and Non-Master File Accounts. Section 5. Estate and Gift Tax Returns
IRM Part 4. Examining Process. Chapter 25. Estate and Gift Tax. Section 6. Report Writing Guide for Estate and Gift Tax Examinations
T.D. 9725
