Estate of Billy S. Rowland v. Commissioner, T.C. Memo. 2025-76 (U.S.T.C. July 15, 2025) illustrates the scope of the special reporting rule for portability returns under Treasury Regulations Section 20.2010-2(a). That rule relaxes the reporting requirement for marital and charitable property for certain estates filing for portability.
When Fay Rowland died, her executor filed for an automatic extension of her federal estate tax return but failed to file the Form 706 by the extended deadline. Eventually, it did file the return late. At the top of the return, it noted that it was filed pursuant to Revenue Procedure 2017-34 to elect portability. That revenue procedure provides a safe harbor for portability returns that were complete, properly prepared and filed before Jan. 2, 2018. The portability return wasn’t filed by its own extended deadline but was filed by Jan. 2, 2018.
However, when examining her surviving husband’s estate tax return, the IRS issued a notice of deficiency asserting that his estate was unable to use her deceased spousal unused exemption amount because her portability return wasn’t complete or properly prepared and therefore couldn’t take advantage of the safe harbor and wasn’t timely filed.
The regulations provide that if the estate is under the federal filing threshold and files for portability, the executor isn’t required to detail on the Form 706 the value of property that’s eligible for the marital or charitable deduction. Instead, the return need only describe the deductible property and its owner and beneficiary.
Fay’s estate tax return showed an estimated gross estate of $3 million and included various schedules listing assets but showing no values for those assets. Her will left certain bequests to individuals, and her trust included a formula directing 20% of the trust to a charitable foundation and a certain formula percentage to her surviving husband. The residue of the trust passed to trusts for her grandchildren.
The regulations relax the reporting requirement for the marital and charitable property but not when the value of such property affects or is needed to determine the value of property passing to other, non-deductible, beneficiaries. Here, it wasn’t possible to determine the value of the property passing to the trusts for grandchildren without having a clear total value of the estate showing the value of the portion of trust property passing to charity and her surviving husband.
The Tax Court held for the IRS, finding that Fay’s return was clearly incomplete. No values were provided for any particular items of property; only an estimate of the gross estate was listed. As a result, it didn’t qualify for the safe harbor and wasn’t timely filed. The portability election was invalid.
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