Burr Alert: IRS Issues Guidance on Portability
Last week the IRS issued final regulations that provide guidance on the federal estate and gift tax applicable exclusion amount, in general, as well as the requirements for making a "portability" election.
In the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 Congress introduced the concept of portability and made it permanent through the passage of the American Taxpayer Relief Act of 2012. The portability rules affect the estates of married decedents dying on or after January 1, 2011, and the surviving spouses of those decedents. Portability (which can be found at Internal Revenue Code § 2010(c)) makes a decedent's unused estate and gift tax exclusion amount "portable" to his/her surviving spouse. In other words, the unused estate tax exclusion amount of a decedent can pass to the decedent's spouse to increase the available estate tax exclusion of the surviving spouse. In contrast, before portability was enacted, a person's estate tax exclusion amount expired to the extent it was unused at that person's death. Here is a simple example:
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