The Internal Revenue Service released proposed and temporary regulations to further consistency in the reporting of the tax basis of certain property received by a beneficiary of an estate or trust. These regulations provide guidance regarding the basis consistency requirements under IRC 1014(f) and reporting requirements under IRC 6035.
For estates with tax due after July 31, 2015, the executor or trustee is required to file Form 8971 indicating information about the beneficiaries, the property to be acquired by the beneficiaries, and the estate tax value of the property. The initial basis of the beneficiary may not exceed the basis reported to the IRS on such form. The executor is also required to furnish a statement (Schedule A of Form 8971) to each beneficiary who will acquire property from the estate including the value of the property. Estates filing tax returns to elect portability for a surviving spouse are not required to file the basis consistency reports. The regulations also establish penalties for inaccurate basis reporting and failures to furnish correct statements.
Generally, Form 8971 must be filed with the IRS no later than 30 days after the estate tax return is due or filed and is required to be filed separately from the estate tax return. Effective March 23, 2016, the IRS announced that additional time will be granted to estates currently required to file Form 8971 and delayed the time to file and furnish the statement to beneficiaries until June 30, 2016.
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