Page 574 - TaxAdviser_2022

ESTATES, TRUSTS & GIFTS

■ Be prepared, signed, and dated by a agreement is contracted for adequate Portability extension of
person who is qualified to appraise and full consideration in money or time
the claim being valued, but not (1) a money’s worth. For instance, the regu- In Rev. Proc. 2022-32, the IRS updated
member of the decedent’s family, a lations would require a claim based on a simplified method to obtain an exten-
related entity, or a beneficiary of the the decedent’s personal guaranty of sion of time to file a return to elect
decedent’s estate or revocable trust; another’s debt to satisfy the applicable portability of the deceased spousal un-
(2) a beneficiary’s family member or requirements in Sec. 2053(c)(1)(A) and used exclusion (DSUE) amount.22 The
related entity; or (3) an employee or Regs. Sec. 20.2053-4(d)(5). That is, the revenue procedure applies to estates not
owner of any of these individuals or guaranty must have been bona fide and normally required to file estate tax re-
entities; and in exchange for adequate and full con- turns because the gross estate’s value falls
■ Describe the basis for the appraiser’s sideration in money or money’s worth. below the Sec. 6018(a) filing threshold.
qualifications to appraise the claim. A bright-line rule would deem a de- The revenue procedure extends the time
The apparent reason for these pro- cedent’s guaranty of a bona fide debt of in which a decedent’s estate may make
posed regulations is twofold: (1) the re- an entity that the decedent controlled the portability election under the simpli-
alization that the definition of qualified when the guaranty was made to satisfy fied method to on or before the fifth
appraiser and qualified appraisal under the adequate-and-full-consideration anniversary of the decedent’s death.
Sec. 170 pertain to charitable contribu- requirement.21 The requirement would
tions of property and not to claims also be met if, when the guaranty is Background
against the estate (and, therefore, are not given, the decedent’s maximum liability Before 2011, married couples could not
entirely compatible); and (2) the require- under the guaranty did not exceed preserve any unused lifetime applicable
ment that the appraiser consider, and the the fair market value (FMV) of the exclusion amount of the first-to-die
appraisal reflect, post-death events in decedent’s interest in the entity. To spouse. The Tax Relief, Unemployment
determining the amount deductible as a the extent that the estate had a right Insurance Reauthorization, and Job
claim against the estate. of contribution or reimbursement for Creation Act of 201023 (the 2010 Tax
the decedent’s guaranty, the deductible Act) amended Sec. 2010(c) to allow
Deducting amounts paid amount would be reduced under Regs. portability of the applicable exclusion
pursuant to a decedent’s Sec. 20.2053-1(d)(3). amount between spouses. When a
personal guaranty In short, the proposed regula- spouse died in 2011 or 2012, the 2010
A commenter on the 2007 proposed tions provide guidance as to whether Tax Act allowed the surviving spouse
regulations suggested the final regula- a payment made on a decedent’s to add to his or her own applicable
tions confirm that payments made personal guaranty is deductible as a exclusion amount the deceased spouse’s
based on a decedent’s personal guar- claim against the estate. The main unused applicable exclusion amount
anty are deductible in the same manner requirement is that it be bona fide and available at death. This provision was
as payments made to satisfy any other that the decedent receive adequate set to expire on Dec. 31, 2012, but
deductible claim against the estate. For and full consideration in money or the American Taxpayer Relief Act of
a claim that is based on a decedent’s money’s worth — e.g., the decedent 201224 made portability permanent.
guaranty to meet the “adequate and receives a guaranty fee for his or her In June 2012, Treasury and the
full consideration in money or money’s personal guaranty. In many instances IRS issued temporary and proposed
worth” requirement, the preamble to involving personal guaranties among regulations25 on the requirements for
the new proposed regulations notes family members or related parties, the electing portability of a DSUE amount.
that the guaranty must have provided guarantor is uncompensated for his or Final regulations26 were issued in June
the decedent with “a benefit reducible her personal guaranty. If that is true, 2015 on the estate and gift tax appli-
to money value.” the decedent’s estate would not be able cable exclusion amount, as well as the
The new proposed regulations to deduct the claim associated with requirements for electing portability
therefore provide guidance on whether, the personal guaranty even if the dece- of a DSUE amount to the surviving
for Sec. 2053 purposes, a guarantor dent’s estate had to pay the claim. spouse. Largely adopting the proposed

21. Under Sec. 2701(b)(2). 24. American Taxpayer Relief Act of 2012, P.L. 112-240.
22. See Regs. Sec. 301.9100-3 and Sec. 2010(c)(5)(A). 25. T.D. 9593 and REG-141832-11.
23. Tax Relief, Unemployment Insurance Reauthorization, and Job Creation 26. T.D. 9725.
Act of 2010, P.L. 111-312.

32 November 2022 The Tax Advise