Question

Which of the following is true regarding estate tax portability election? A) Allows a decedent's unused unified federal gift and estate tax exemption to be passed to his or her surviving spouse. B) Allows the estate executor to pick a decedent's state of residence for state death tax purposes. C) Allows any liability for federal estate tax to be transferred to a decedent's heirs. D) Allows the taxpayer's unified federal gift and estate tax exemption to be transferred to an ex-spouse in divorce proceedings.

Answer 1

ANS: following statement is true

A) Allows a decedent's unused unified federal gift and estate tax exemption to be passed to his or her surviving spouse.

Dear Students please refer following paragraph for more clarity.

As of January 1, 2018, the estate tax exemption for individuals is $11.18 million, adjusted for inflation. In other words, if your assets are worth $11.18 million or less at the time of your death (and you have not used any of your combined estate and gift tax exemption), your estate owes no estate tax.

But upon the death of the first spouse, the surviving spouse can elect to use the deceased spouse's unused exemption amount (also known as "DSUE"), effectively doubling the estate tax exemption for married couples to $22.36 million. This election is known as estate tax portability.

If you read that last paragraph closely, you probably noticed that there is a big if when it comes to portability: the surviving spouse can use the DSUE if the decedent's estate elects to do so.

To make a portability election, the decedent's estate must file IRS Form 706, which is the "United States Estate (and Generation-Skipping Transfer) Tax Return." On that form, the estate can elect to transfer the DSUE to the surviving spouse.

While somewhat confusing, the form offers helpful instructions for completing and filing the return. For further guidance, we recommend you consult a tax professional.