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Guidance issued on how executors can elect to have carry over basis rules apply for deaths occuring in 2010

The Internal Revenue Service issued guidance on the treatment of basis for certain estates of decedents who died in 2010. The guidance assists executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply. Form 8939, the basis allocation form required to be filed by executors opting out of the estate tax, is due Nov. 15, 2011. Under the guidance issued, an executor must file Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, to opt out of the estate tax and have the new carryover basis rules apply. The IRS expects to issue Form 8939 and the related instructions early this fall.
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. This recent law allows executors of the estates of decedents who died in 2010 to opt out of the estate tax, and instead elect to be governed by the repealed carry-over basis provisions of the 2001 Act. This choice is to be made by filing Form 8939.

Rev. Proc. 2011-41 provides optional safe harbor guidance under section 1022 of the Internal Revenue Code (Code), enacted by section 542 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), P.L. 107-16 (115 Stat. 76-81). Section 1022 determines a recipient’s basis in property acquired from the decedent (within the meaning of section 1022(e)) who died in 2010 if the decedent’s
executor elects to have section 1022 apply. Section 301(c) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312 (124 Stat. 3296) (TRUIRJCA), allows such an executor to elect to have the estate tax not apply and to have the carryover basis rules in section 1022 apply to propertytransferred as a result of the decedent’s death (Section 1022 Election). This revenue procedure does not address the time or manner in which such an executor makes the Section 1022 Election or allocates generation-skipping transfer (GST) exemption to transfers occurring as a result of such decedent’s death. Instead, taxpayers must see Notice 2011-66 for such guidance.

Notice 2011-66 provides guidance with regard to the time and manner in which the executor of the estate of a decedent who died in 2010 elects, pursuant to section 301(c) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312 (124 Stat. 3296) (TRUIRJCA), to have the estate tax not apply and to have the carryover basis rules in section 1022 apply to property transferred as a result of the decedent’s death. This notice also addresses how a donor may elect out of the automatic allocation of generation-skipping transfer (GST) tax exemption to direct skips occurring during 2010. It also clarifies the due dates for returns for the taxable year ending December 31, 2010, that report a generation-skipping transfer, that allocate GST exemption, or that opt out of the automatic allocation of GST exemption. In addition, the notice discusses the application of chapter 13 (the GST tax) to testamentary transfers during 2010. Finally, this notice addresses certain other collateral issues arising from the determination of basis under section 1022.  This notice applies to executors of the estates of decedents who died in 2010 and to recipients of property acquired from such decedents (within the meaning of section 1022(e)) (hereinafter, acquired from the decedent), if the executors make the election under section 301(c) of TRUIRJCA. This notice also applies to donors who made a gift during 2010 that is a generation-skipping transfer or an indirect gift for purposes of the GST tax.

Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at the Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

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