Section 303 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 authorized estates of decedents dying on or after January 1, 2011, to elect to transfer any unused exclusion to the surviving spouse. The amount received by the surviving spouse is called the deceased spousal unused exclusion, or DSUE, amount. If the executor of the decedent’s estate elects transfer, or portability, of the DSUE amount, the surviving spouse can apply the DSUE amount received from the estate of the last deceased spouse (defined later) against any tax liability arising from subsequent lifetime gifts and transfers at death.

Caution: Complete Schedule A before beginning Schedule C.

Note: A nonresident surviving spouse who is not a citizen of the United States may not take into account the DSUE amount of a

deceased spouse, except to the extent allowed by treaty with the surviving spouse’s country of citizenship.

Last Deceased Spouse Limitation The last deceased spouse is the most recently deceased person who was married to the surviving spouse at the time of that person’s death. The identity of the last deceased spouse is determined as of the day a taxable gift is made and is not impacted by whether the decedent’s estate elected portability or whether the last deceased spouse had any DSUE amount available. Remarriage also does not affect the designation of the last deceased spouse and does not prevent the surviving spouse from applying the DSUE amount to taxable transfers.

When a taxable gift is made, the DSUE amount received from the last deceased spouse is applied before the surviving spouse’s basic exclusion amount. A surviving spouse who has more than one predeceased spouse is not precluded from using the DSUE amount of each spouse in succession. A surviving spouse may not use the sum of DSUE amounts from multiple predeceased spouses at one time nor may the DSUE amount of a predeceased spouse be applied after the death of a subsequent spouse.

When a surviving spouse applies the DSUE amount to a lifetime gift, the IRS may examine any return of a predeceased spouse whose executor elected portability to verify the allowable DSUE amount. The DSUE may be adjusted or eliminated as a result of the examination; however, the IRS may make an assessment of additional tax on the return of a predeceased spouse only within the applicable limitations period under section 6501.

Restored Exclusion Amount. Prior to the decision of the Supreme Court in United States v . Windsor, 570 U.S. 744, 133 S. Ct. 2675 (2013), the Defense of Marriage Act (DOMA), Public Law 104-199 (110 Stat. 2419), required that marriages of couples of the same sex should not be treated as being married for federal tax purposes. As a result, taxpayers in a same-sex marriage were not entitled to claim a marital deduction for gifts or bequests to each other. Those taxpayers were required to use their applicable exclusion amount to defray any gift or estate tax imposed on the transfer or were required to pay gift or estate taxes, to the extent the taxpayer’s exclusion previously had been exhausted.

In Windsor, the Supreme Court declared that DOMA was unconstitutional. For federal tax purposes, marriages of couples of the same sex are treated the same as marriages of couples of the opposite sex. The term “spouse” includes an individual married to a person of the same sex. However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that isn’t considered a marriage under state law aren’t considered married for federal tax purposes.

Under a new procedure, a donor who made a transfer to the donor’s same-sex spouse, which resulted in a reduction of the donor’s applicable exclusion amount, can now recalculate the remaining applicable exclusion. This procedure is only available to transfers that did not qualify for the marital deduction for federal gift tax purposes at the time of the transfer, based solely on the application of DOMA. If the limitations period has expired, the donor may recalculate the remaining applicable exclusion. However, once the limitations period on assessment of tax has expired, neither the value of the transferred interest nor any position concerning a legal issue (other than the existence of the marriage) related to the transfer can be changed. Similarly, no credit or refund of the gift taxes paid on the donor’s transfer to the donor’s same-sex spouse can be given once the limitations period on claims for credit or refund has expired.

Instructions for Form 709 (2025) 19

The first step of the procedure is to determine the amount of applicable exclusion that was expended on a taxable gift to a same-sex spouse. In any given year, the amount of applicable exclusion expended on a taxable gift to a same-sex spouse is equal to the amount of applicable exclusion expended on all taxable gifts multiplied by the ratio of the amount of taxable gifts to the same-sex spouse over total taxable gifts. The amount of applicable exclusion expended on all taxable gifts is equal to the lesser of the available applicable exclusion or the amount of all taxable gifts.

Example. In 2011, Alex made $5 million of taxable gifts. Alex made a $3 million taxable gift to Pat, same-sex spouse, and a $2 million taxable gift to Max, another individual. Alex’s marriage to Pat was recognized by the state where they got married, but was not recognized by the federal government. The transfer to Pat would qualify for the marital deduction if Alex’s marriage to Pat was recognized by the federal government. Alex has a basic exclusion of $5 million. Alex had previously used $1 million of the applicable exclusion on other gifts in previous years. This means that Alex had $4 million of applicable exclusion available in 2011. Since Alex’s available applicable exclusion ($4 million) is less than the amount of all taxable gifts for the year ($5 million), Alex expended all $4 million of the available applicable exclusion on all taxable gifts during the year.

Example of Calculation of Restored Exclusion

Amount

Applicable exclusion expended on all taxable gifts

x

Taxable gifts to B

____________ Applicable exclusion

Total taxable allocable to gifts to B gifts

$3 million

________ = $2,400,000 $5 million

$4 million x

In 2011, Alex expended $2,400,000 of the applicable exclusion on the taxable gift to Pat.

The second step of the procedure is to repeat the first step for every year when the donor made a taxable gift to a same-sex spouse.

The third step of the procedure is to add up the result for all the years. The result is the total amount of applicable exclusion expended on the same-sex spouse. This amount of applicable exclusion will be restored to the donor for use on future gifts and bequests and is known as the Restored Exclusion Amount. Enter this amount on line 3 of Schedule C.

Attach a statement to Form 709 detailing the calculation of the above procedure on the first Form 709 on which you claim a Restored Exclusion Amount.

Caution: The Restored Exclusion Amount will have to be accounted for the donor on every subsequent Form 709 (and Form 706) that will be filed. This means that on all future Forms 709 that will be filed, the Restored Exclusion Amount will need to be entered on Schedule C. (The Restored Exclusion Amount will be entered on line 9c of Part II—Tax Computation on Form 706.) In addition, the Worksheet for Schedule B, Column (c) (Credit Allowable for Prior Periods) should reflect the Restored Exclusion Amount. For the period when the applicable exclusion was first restored, and on every subsequent period listed on the worksheet, add the Restored Exclusion Amount to the total DSUE amount (if any) and enter the sum in column H.

Completing Schedule C Complete Schedule C if the donor is a surviving spouse who received a DSUE amount from one or more predeceased spouses, or if the donor is a taxpayer who made a taxable

transfer to a same-sex spouse which resulted in a reduction of the taxpayer’s available applicable exclusion amount (or both).

Schedule C requests information on all DSUE amounts received from the donor’s last deceased spouse and any previously deceased spouses. Each line in the chart should reflect a different predeceased spouse. Attach proof of each portability election reported on Schedule C.

Part 1. DSUE Received From Last Deceased Spouse

In this Part, include information about the DSUE amount from the donor’s most recently deceased spouse (whose date of death is after December 31, 2010). In column (e), enter the total of the amount in column (d) that the donor has applied to gifts in previous years and is applying to gifts reported on this return. A donor may apply DSUE only to gifts made after the DSUE arose.

Part 2. DSUE Received From Predeceased Spouse(s)

Enter information about the DSUE amount from the spouse(s), if any, who died prior to the donor’s most recently deceased spouse (but not before January 1, 2011) if the prior spouse’s executor elected portability of the DSUE amount. In column (d), indicate the amount of DSUE received from the estate of each predeceased spouse. In column (e), enter the portion of the amount of DSUE shown in column (d) that was applied to prior lifetime gifts or transfers. A donor may apply DSUE only to gifts made after the DSUE arose.

Caution: Any remaining DSUE from a predeceased spouse cannot be applied against tax arising from lifetime gifts if that spouse is not the most recently deceased spouse on the date of the gift. This rule applies even if the last deceased spouse had no DSUE amount or made no valid portability election, or if the DSUE amount from the last deceased spouse has been fully applied to gifts in previous periods.

Determining the Applicable Credit Amount Including DSUE and the Restored Exclusion Amount

On line 1, enter the donor’s basic exclusion amount; for 2025, this amount is $13,990,000. Add the amounts listed in column (e) from Parts 1 and 2 and enter the total on line 2. On line 3, enter the Restored Exclusion Amount. On line 4, enter the total of lines 1, 2, and 3. Using the Table for Computing Gift Tax, determine the donor’s applicable credit by applying the appropriate tax rate to the amount on line 4. Enter this amount on line 5 and on line 7 of Part II—Tax Computation.