SECTION 1. PURPOSE

The 2010 amendment of § 2010(c) of the Internal Revenue Code (Code) allowing an executor of an estate to make an election under § 2010(c)(5)(A) (a portability election) may influence the decision of whether to make a qualified terminable interest property (QTIP) election under § 2056(b)(7) (a QTIP election). A QTIP election would reduce the decedent’s taxable estate and thereby maximize the amount of unused exclusion available to be used by the decedent’s surviving spouse. Thus, the executor of an estate electing portability of the decedent’s unused applicable exclusion amount (deceased spousal unused exclusion amount, or DSUE amount) may wish to make a QTIP election without regard to whether the QTIP election is necessary to reduce the estate tax liability to zero.

Rev. Proc. 2001–38, 2001-1 C.B. 1335, provides a procedure by which the IRS will disregard and treat as a nullity for federal estate, gift, and generationskipping transfer tax purposes a QTIP election made in cases where the election was not necessary to reduce the estate tax liability to zero. Rev. Proc. 2001–38, when issued, provided relief to the surviving spouse of a decedent whose estate received no benefit from the unnecessary QTIP election. With the availability of portability elections, however, the procedure to void and nullify QTIP elections in Rev. Proc. 2001–38 may bring into question the ability of a decedent’s estate to make an otherwise unnecessary QTIP election to maximize the available unused exclusion amount.

This revenue procedure modifies and supersedes Rev. Proc. 2001–38. Although this revenue procedure confirms the procedures by which the IRS will disregard a QTIP election, it excludes from its scope those estates in which the executor made the portability election in accordance with the regulations under § 2010(c)(5)(A).