The IRS has published a new revision of the estate taxreturn form (Form 706) to be used for decedents dying in 2011. http://www.irs.gov/pub/irs-pdf/f706.pdf. For decedents dying in 2011, Form 706 must be filed by theexecutor for the estate of every U.S. citizen or resident: Whose gross estate, plus adjusted taxablegifts and specific exemption, is more than $5,000,000; or, Whose executor wants to make by the electionto permit the decedent's surviving spouse to use the decedent's unusedexclusion amount, regardless of the size of the decedent's gross estate. The applicable exclusion for decedent's dying in 2011 consistsof a basic exclusion amount of $5,000,000 and the unused exclusion amount of apredeceased spouse (who died after December 31, 2010). This means that even ifyou determine filing a return for the estate is not required, you nonethelessshould file a return if you intend to elect to allow the decedent's survivingspouse to use the decedent's unused exclusion amount for estate and gift taxpurposes. A timely and completeForm 706 filed for the predeceased spouse's estate is required, even if thereis no tax due, to allow the surviving spouse to use the last predeceasedspouse's unused exclusion (DSUE) amount. Note that the Form 706 filing due date is 9 months after the date of the decedents death, which means it falls in October 2011 for decedents who died in January 2011. If you are unable to file Form 706 by the due date, you may file for an extension of the time to file. Use IRS Form 4768 to apply for an extension. Upon the later death of the survivor spouse, his or herexecutor will be required to attach a copy of the Form 706 filed in the estateof the predeceased spouse along with a calculation of the DSUE in order toclaim the first spouse's unused exclusion amount. The DSUE portability provisions are found at 26U.S.C. Section 2010 (c)(4). Under the Tax Relief Act of 2010 they apply todecedents dying in 2011 and 2012. They create a significant trap for the unwaryexecutor. See my earlier posts for moreinformation on portability: Estateand Gift Tax Portability Law Creates some Unconventional Planning Opportunities PortabilityProvision of Estate Tax law may be "Wolf in Sheep's Clothing"
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