Executors of taxable estates required to file an estate tax return (Form 706) after July 31, 2015 are now subject to a new tax basis reporting requirement, intended to ensure consistency between the estate and its beneficiaries.
New Tax Basis Reporting
The new reporting was created because the IRS was concerned that values reported on Form 706 were not always used by beneficiaries as the tax basis of the inherited assets, potentially understating gains when the assets were sold.
To avoid this issue, the IRS now requires the executor of the estate to file:
- An “Information Return” with the IRS reporting the final value of certain property and the recipient of that property, and
- A “Statement” reporting the property and its final value to both the IRS and to each beneficiary who has received (or will receive) property from a decedent’s estate.
The Information Return is furnished by filing Form 8971, and the Statement is furnished by filing Schedule A of Form 8971.
The due date for filing these forms is normally 30 days after filing Form 706. However, the IRS has extended the due date for filing the first wave of the new forms to June 30, 2016.
At first glance this reporting requirement sounds simple, but there are numerous intricacies and exceptions to which estates are required to comply, which assets are required to be reported, and the appropriate values to be used.
The Family Wealth Planning Group at ASL can help navigate the complexities of these new reporting requirements. Don’t hesitate to contact us if you have any questions or concerns about these tax basis reporting requirements, or any other estate or trust matters.