The IRS issued guidance (Notice 2016-19) further postponing the new
asset value reporting requirements for estates until March 31,
2016.
Legislation enacted last July imposed new reporting requirements on
estates filing estate tax returns after July 31, 2015. These
estates are required to report the value of assets for estate tax
purposes on information returns that must be furnished to the IRS
and beneficiaries within 30 days of filing Form 706. Beneficiaries
must then use these values as the income tax basis for the
inherited assets or face a penalty.
The IRS quickly issued Notice 2015-57 last year to postpone the
reporting requirements until Feb. 29 so that it could create forms
and guidance. Since then, the IRS released Form 8971, “Information Regarding
Beneficiaries Acquiring Property from a Decedent” and its instructions, but acknowledged that further
guidance is still needed. Notice 2016-19 postpones the filing
deadline until March 31 and asks executors not to use Form 8971
until regulations are issued.
It’s important to note that the deadline relief doesn’t
remove the reporting requirements; it merely defers reporting.
Estates should still record and preserve asset values so that Form
8971 can be filed when regulations are issued and the transition
relief expires.
The current Form 8971 instructions state that reporting is
generally required only for estates that must file Form 706 because
their assets exceed the lifetime estate and gift tax exemption, not
for returns filed simply for portability or other elections. But
reporting is also required of beneficiaries who are required to
file Form 706 because the executor cannot file a complete estate
tax return.
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