Vernoia, Enterline + Brewer, CPA LLC

IRS delays uniform basis reporting for estate property until late February 2016

EstateThe IRS has delayed new uniform basis reporting requirements for estate tax property until February 29, 2016. The delay will give the IRS time to issue guidance so that executors, beneficiaries, and others can comply with the new reporting requirements.

Background

Under the stepped-up basis rules of Code Sec. 1014, the basis of property acquired from a decendent generally is the property’s fair market value, either at the date of death or six months later (the alternate valuation date). However, beneficiaries who receive estate property were not always required to use the same value (and the same basis) reported by the estate. Because there has been no consistency requirement, the recipient could claim that the property’s fair market value (and the basis) were higher than the estate tax value. Recent legislation imposed a consistency requirement, but left it to the IRS to prescribe reporting requirements and deadlines.

New Basis Requirement

The Administration’s 2016 budget proposals included a proposal to eliminate the inconsistency. In the Surface Transportation Act of 2015 (signed into law by President Obama on July 31, 2015), Congress enacted Code Sec. 1014(f) and Code Sec. 6035 to impose the consistency requirement with respect to valuation for estate tax purposes and for stepped-up basis used by the heirs and other beneficiaries. The consistency requirement, however, only applies to property that was includible in the gross estate and that increases estate tax liability.

New Reporting Requirement

Code Sec. 6035 requires executors who must file a return under Code Sec. 6018(a) or (b) to provide a statement of the property’s value to the recipient and to the IRS. The executor must furnish the statement to both the IRS and the recipient that identifies the value of the property and provides any other information required by the IRS. The statement must be furnished by the earlier of the date that is 30 days after the due date of the estate tax return (including extensions), or that is 30 days after the return was filed.

The statute authorizes the IRS to issue regulations to implement Code Sec. 6035. The new law also added penalties for inconsistent estate tax basis reporting and for failures to file correct information returns and furnish correct statements.

New Deadline

The new law applies to property for which a federal estate tax return is filed after July 31, 2015. For returns filed after July 31, 2015, the IRS delayed the requirement to file a statement under Code Sec. 6035 until February 29, 2016, if the statement would have been due before that date.

The IRS instructed executors and other persons required to file or furnish a statement under Code Sec. 6035 not to do so until it issues forms or other guidance to implement the reporting requirements. The IRS indicated that it expects to issue additional guidance under Code Sec. 1014(f) and 6035 and asked for comments.

Notice 2015-57

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