IRS Issues Estate Tax Guidance Requested by AICPA

The Internal Revenue Service (IRS), acting on a request by the American Institute of CPAs (AICPA), has issued much needed guidance for executors of estates, clarifying the effect of making both a qualified terminable interest property (QTIP) election and a portability election. 

The AICPA called on the IRS in its May 12, 2016 letter (as well as in its 2014 and 2015 letters) commenting on the agency’s priority plan to “provide guidance, such as a revenue procedure, under section 2010(c) regarding the validity of a QTIP election on an estate tax return filed only to elect portability.”  The AICPA requested clarity regarding a 2001 Revenue Procedure that treated QTIP elections void and/or voidable if they were not needed to eliminate federal estate tax.  Estate planners have been needing this QTIP election guidance over the past few years as estates have been electing portability as they continued to face low state estate tax exemption amounts even though the federal exemption amounts have been higher since 2010.  With the new guidance, the IRS will not treat an unnecessary QTIP election as void if the executor has made a portability election.

The IRS promised this QTIP election guidance in the preamble to the January 2015 portability regulations, and on September 27 fulfilled that promise with the release of Rev. Proc. 2016-49, providing the necessary guidance sought by the AICPA.  

For details about the guidance, read the Journal of Accountancy story.