Posted tagged ‘IRS Notice 2011-82’

Updates on the 2010 Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act

November 1, 2011

 By Ashley Alderman

On October 20, 2011, the IRS announced in a news release (IR-2011-104) that the estate tax basic exclusion will increase from $5 million to $5.12 million in 2012 because of inflation adjustments that were included in the 2010 Tax Relief Act. The 2010 Tax Relief Act included these annual inflation adjustments, which was an addition to any prior estate tax laws that were not indexed to inflation. Although the estate tax basic exclusion is increased due to inflation, the annual exclusion forgifts will remain at $13,000.

In addition, IRS Notice 2011-82, released at the end of September 2011, had requested comments for the proposed regulations to section 2010(c).

On October 21, 2011, The New York State Society of Certified Public Accountants filed its comments on IRS Notice 2011-82. The New York CPAs stated that their “primary objective is to propose solutions to eliminate the significant degree of uncertainty that a surviving spouse would otherwise face concerning the use of the [Deceased Spousal Unused Exclusion Amount] if he or she were to remarry after the executor of the deceased spouse’s estate has made a portability election under section 2010(c)(5)(A)(a “portability election”).” In particular, the New York CPAs proposed four situations that required clarification in the proposed regulations:

1. Guidance is Required Where the Wife Remarries After the Death of Husband 1 (For Whom a Portability Election Has Been Made), and Husband 2 Then Dies Without a Portability Election Being Made for Husband 2

2. The Surviving Spouse Should Be Treated as Using Her Deceased Spousal Unused Exclusion Amount First Before Using Her Basic Exclusion Amount

3. Guidance is Needed to Clarify That Neither Estate Tax Nor Gift Tax Can Result Through a “Clawback” of the Deceased Spousal Unused Exclusion Amount

4. The Proposed Regulations Should Clarify that the Scope of the Service’s Examination of the Estate Tax Return of the First Spouse to Die Is Limited to Determining the Amount of the Deceased Spousal Unused Exclusion Amount

On October 21, the same day that the New York CPAs responded to IRS Notice 2011-82 with their comments for the proposed regulations to section 2010(c), Catherine Hughes, attorney-adviser in Treasury’s Office of Tax Legislative Counsel stated that Treasury would like to release proposed regulations on the portability of the estate tax exclusion under section 2010(c) in the 2010 Tax Relief Act by the end of 2011. Until the proposed regulations are released several areas remain uncertain, and executors of decedents dying in 2011 should seek advise when deciding whether and how to complete an estate tax return.