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IRS Announces Changes to Estate Tax Closing Letter Procedures

Tax and Estates Alert | July 7, 2015
By: Suzanne A. Prybella

The IRS issues an estate tax closing letter once it is satisfied that an estate tax return (Form 706) is accepted as filed or that any required adjustments are completed. Although the issuance of a closing letter does not terminate the IRS’s ability to open or reopen an estate tax audit in the case of material misstatement or fraud, it does provide a level of comfort that the required estate tax obligations are met. Generally, an estate’s personal representative will wait until an estate tax closing letter is received (assuming an estate tax return was required to be filed) before proceeding to finalize and close the estate. 

The IRS has announced that, commencing with estate tax returns filed after June 1, 2015, it will only issue estate tax closing letters upon request by the taxpayer. Taxpayers should wait at least four months after filing the return before requesting a closing letter in order to allow sufficient time for the IRS to process the return.

The IRS has also clarified whether it will, under various circumstances reflecting the portability rules, issue a closing letter with respect to estate tax returns filed after January 1, 2015 and before June 1, 2015. For example, no estate tax closing letter will be issued for such a return if: (i) the estate did not meet the filing threshold and the portability election was denied due to a late filing; or (ii) the return was filed pursuant to Revenue Procedure (Rev. Proc.) 2014-18 and the portability election was denied due to failure to meet Rev. Proc. 2014-18’s requirements.

Regardless of the IRS’s revised position on issuing estate tax closing letters, White and Williams will continue to request estate tax closing letters with respect to every eligible estate administration in which it represents the estate’s personal representative and would advise other personal representatives to do the same.

If you would like to discuss estate administration issues, or if you have any other tax or estate planning questions, please contact Bill Hussey (215.864.6257; husseyw@whiteandwilliams.com), John Eagan (212.868.4835; eaganj@whiteandwilliams.com), Warren Kauffman (215.864.7092; kauffmanw@whiteandwilliams.com), Kevin Koscil (215.864.6827; koscilk@whiteandwilliams.com) or Suzanne Prybella (215.864.7188; prybellas@whiteandwilliams.com). The Tax and Estates Practice Group at White and Williams is committed to keeping our friends and clients up to date with important tax developments. 

IRS Circular 230 Notice: To ensure compliance with certain regulations promulgated by the U.S. Internal Revenue Service, we inform you that any federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code, or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein, unless expressly stated otherwise.

This correspondence should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation and legal questions.
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