Proposed Regulations Now Available on Basis Consistency

• Date: 01 October 2016
• DOI: http://doi.org/10.1002/jcaf.22197
• Author: Caroline D. Strobel
• Published date: 01 October 2016

103

© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22197

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IRS

Proposed Regulations Now Available

onBasis Consistency

Caroline D. Strobel

INTRODUCTION

Temporary and proposed

regulations have finally been

issued regarding the new estate

tax basis and consistency

reporting standards contained

in Sections 1014(f) and 6035,

which were enacted last year in

the Surface Transportation and

Veterans Health Care Choice

Improvement Act of 2015.

These regulations have been

long awaited, and their delay

caused a delay in the first filing

deadline until March 31, 2016.

The purpose of the two

reporting mandates contained

in the bill was to ensure that

the value used in an estate tax

return to determine tax liabil-

ity is the same one used by

heirs when inherited property

is sold to determine income

tax liability. The problem had

arisen because heirs would

use a higher basis than the

value reported on an estate tax

return, arguing that the value

on the estate tax return was

incorrect or just betting that

the IRS would never discover

the difference.

PROVISIONS TO BE FOLLOWED

BY THE EXECUTOR

An estate must furnish a

statement to the IRS identify-

ing the reported value of each

asset that was included in the

gross estate, as well as giv-

ing that information to each

person who acquired these

interests and identifying them

individually in a report to the

IRS. Form 8971 and the related

Schedule A to Form 8971 are

used to report assets and the

identity of the beneficiaries

receiving them. These rules

must be used by preparers of

estate tax returns as well as

preparers of income tax returns

when heirs dispose of inherited

property.

There is a major exception

to the reporting requirements.

This occurs when an estate tax

return is filed merely to meet

the portability requirements.

When a spouse dies and the

full estate tax exemption is not

used, an estate tax return must

be filed in order to transfer the

unused spouse’s exemption to

the surviving spouse. If not for

the portability filing require-

ment, no estate tax return

would be required to be filed

inthis case.

The requirements for the

value to be reported for assets

listed in an estate tax return

arepresented as a checklist.

The value is:

1. The value reported on the

estate tax return (Form 706);

2. The value determined or

specied by the IRS once

the period for assessment

or claims for refunds has

expired;

3. The value determined in an

agreement once that agree-

ment is nal and binding on

all parties; or

4. The value determined by

a court, once the court’s

determination is nal.

Obviously, most of the

timethe values to be reported

are determined at the time of

filing Form 706. A beneficiary

will be required to use the

numbers originally reported to

them until such time as there is

a change in value reported.