Thursday, September 29, 2016
The 2010 amendment of IRC § 2010(c) allowed an estate executor to make a portability election; therefore, influencing the decision to make a qualified terminable interest property (QTIP) election. A QTIP election reduces the decedent’s taxable estate, further maximizing the amount of unused exclusion available for the decedent’s surviving spouse. Accordingly, the executor electing portability of the decedent’s unused applicable exclusion amount may wish to make a QTIP election, regardless of whether the QTIP election reduces the estate tax liability to zero.
Rev. Proc. 2001-38, 2001-24 I.R.B. 1335 details a procedure for which the IRS will disregard and nullify federal estate, gift, and generation-skipping transfer tax for purposes of a QTIP election made when the election was unnecessary to reduce the estate tax liability to zero. With the use of portability elections, the ability to void and nullify QTIP elections in Rev. Proc. 2001-38 may bring questions over the ability of the decedent’s estate to make an unnecessary QTIP election for the sake of maximizing the available unused exclusion amount. Subsequently, this revenue procedure modifies and supersedes Rev. Proc. 2001-38. It confirms the IRS procedures for disregarding a QTIP election, but excludes those estates that made a portability election in accordance with § 2010(c).