Probate & Trust Law Section Conference Manual ... - Minnesota CLE

(5) Special rules.
(A) Election required. A deceased spousal unused exclusion amount may not be
taken into account by a surviving spouse under paragraph (2) unless the executor of the
estate of the deceased spouse files an estate tax return on which such amount is
computed and makes an election on such return that such amount may be so taken into
account. Such election, once made, shall be irrevocable. No election may be made
under this subparagraph if such return is filed after the time prescribed by law (including
extensions) for filing such return.
Because the executor cannot know whether and to what extent the surviving spouse will need
or utilize the DSUE Amount, the executor in most cases will want to make a portability election.
That means we can expect a significant increase in the number of federal estate tax returns
filed, and many of those will be filed solely for the purpose of making the portability election.
Temporary regulations adopted in June, 2012, confirm that an estate claiming the
portability election must file an estate tax return within nine months of the decedent's death
(unless an extension of time for filing has been granted), regardless of the size of the gross
estate and regardless of whether an estate tax return would otherwise be required to file a
return. But in the case of smaller estates, the temporary regulations provide that estates not
otherwise required to file a Form 706 do not have to report the value of certain property that
qualifies for the marital or charitable deduction. Instead, the personal representative must
estimate the total value of the gross estate (including the values of the property that do not
have to be reported on the estate tax return under this provision), based on a determination
made in good faith and with due diligence regarding the value of all of the assets includible in
the gross estate. It is anticipated that the instructions accompanying the revised Form 706 will
provide ranges of dollar values from which the personal representative would select the range
that includes his or her best estimate of the total gross estate.
5. Statute of Limitations on the Review of the First Deceased Spouse’s Return
The new § 2010(c)(5) continues:
(B) Examination of prior returns after expiration of period of limitations with
respect to deceased spousal unused exclusion amount. Notwithstanding any period of
limitation in section 6501, after the time has expired under section 6501 within which a
tax may be assessed under chapter 11 or 12 with respect to a deceased spousal unused
exclusion amount, the Secretary may examine a return of the deceased spouse to make
determinations with respect to such amount for purposes of carrying out this
subsection.
This language permits the Service to examine the estate tax return of the first deceased spouse
at any time, provided the examination is for the purpose of determining the DSUE Amount
available to the surviving spouse. Since both the composition and value of assets included in
the decedent’s taxable estate are both significant factors in determining whether the DSUE
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