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August 1, 2017

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DSUE (di-sue-ee) Revisited (by the IRS)

November 22, 2017

The Internal Revenue Code provides each taxpayer's estate with an estate tax exemption of $5,490,000 (adjusted annually), and allows the estate of a taxpayer whose spouse has survived to elect to "transfer" or "port" (subject, of course, to limitations and exceptions in certain circumstances). 

 

In Estate of Minnie Lynn Sower, the US Tax Court upheld - under the facts of this case - the IRS' statutory authority to re-visit the estate tax return of the pre-deceased spouse and adjust the calculation of the amount of exemption ported to the surviving spouse's estate.  

 

The Court noted that the IRS may not be able to "audit" the pre-deceased spouse's return to change the tax due, but can change the prior return for the specific purpose of re-calculating the exemption carried over.  

 

It is therefore important to retain not only the estate tax return of the pre-deceased spouse, but also the appraisals and file calculations, so as to be able to defend the return, perhaps many years later.

 

This case also points up one more reason to prepare the return "by the book" even though it may be a "zero-tax" return.

 

This blog is not intended to constitute, and does not constitute, legal advise to anyone or any specific situation.  See also our legal notices.

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