The Internal Revenue Service issued proposed and temporary rules for the reporting of estate assets that require consistency between the recipient’s basis in certain property acquired from the decedent and the value determined for federal estate tax purposes.
The Internal Revenue Service issued proposed and temporary rules for the reporting of estate assets.
The rules require consistency between the recipient’s basis in certain property acquired from the decedent and the value determined for federal estate tax purposes.
The proposed and temporary rules stem from a section of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. The section provides that the executor of any estate required to file a return must furnish a statement identifying the value to both the IRS and to the heir acquiring the property.
The statement must be filed no later than the earlier of 30 days after the estate tax return (or extension) was required to be filed or the estate tax return was filed.
Journal of Accountancy editor Sally Schreiber says the rule applies to property includible in the gross estate that “generates a federal tax liability in excess of allowable credits.” If no estate tax is imposed on the property due to allowable credits, then the statement does not need to be filed. The rules also exclude property that qualifies for the marital or charitable deductions because such property does not trigger estate taxes. Cash (other than currency with a numismatic value), household and personal effects valued at less than $3,000 and property sold or disposed by the estate in a taxable transaction and not distributed to a beneficiary are also excluded from the rule.
Schreiber says the IRS is concerned about an opportunity for taxpayers to circumvent the purpose of the rules. Specifically, the agency is concerned that the basis claimed by an heir may differ from the reported final value of the property for estate tax purposes.
The estate tax exemption was $5.43 million in 2015 and increased to $5.45 million in 2016.
Sources: “Estate Basis Consistency Reporting Rules Are Proposed,” by Sally Schreiber, J.D., Journal of Accountancy, March 3, 2016; and “Consistent Basis Reporting Between Estate and Person Acquiring Property from Decedent,” Internal Revenue Service, Federal Register, March 4, 2016.
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