Question

Which statement is incorrect with respect to portability?

1. The estate tax exemption is portable but the decedent’s remaining GST tax exemption is not.
2. A wife can add her deceased husband’s unused exclusion amount to her own basic exclusion amount to reduce her gift or estate taxes.
3. An executor must file IRS Form 706 to take advantage of portability even if the decedent’s estate is less than $11,580,000 in 2020.
4. Portability limits the amount of exclusion that can be “ported” to the surviving spouse to $5,000,000.

Answer 1

A.The estate tax exemption is portable but the decedent’s remaining GST tax exemption is not.

Ans: Portability applies for federal gift and estate tax purposes, but not for federal generation skipping transfer (‘‘GST’’) tax purposes. Thus, transfers made to younger generations may still result in GST tax, even if portability applies for gift and estate tax purposes

B. A wife can add her deceased husband’s unused exclusion amount to her own basic exclusion amount to reduce her gift or estate taxes.

Yes, The concept of portability was introduced to the law by the 2010 Act's amendment of Section 2010(c) of the Internal Revenue Code of 1986, as amended (‘‘I.R.C.’’), to provide that the estate tax applicable exclusion amount is (i) the basic exclusion amount plus (ii) for a surviving spouse, the ‘‘deceased spousal unused exclusion amount,’’ or ‘‘DSUE amount.’’ Thus, A wife can add her deceased husband’s unused exclusion amount to her own basic exclusion amount to reduce her gift or estate taxes.

C. An executor must file IRS Form 706 to take advantage of portability even if the decedent’s estate is less than $11,580,000 in 2020.

Ans: The Internal Revenue Service announced Nov 6, 2019 the official estate and gift tax limits for 2020: The estate and gift tax exemption is $11.58 million per individual, up from $11.4 million in 2019. Thus Form 706 must be filed on behalf of a deceased U.S. citizen or resident whose gross estate, adjusted taxable gifts, and specific exemptions exceed $11,580,000 in 2020. Therefore, if the decedent's estate is less than $ 11,580,000 in 2020 then IRS Form 706 is not required.

D. Portability limits the amount of exclusion that can be “ported” to the surviving spouse to $5,000,000.

Ans: No tax law doubled the federal estate tax exemption amount to a base level of $10 million.