New Law Steps Up Reporting Requirements for Executors

By S. Eva Wolf

The laws addressing the basis of property acquired from a decedent were revised on July 31, 2015. Generally, property acquired from a decedent receives a basis equal to its fair market value at the decedent’s date of death, or if elected, the alternate valuation date. This basis adjustment is advantageous to beneficiaries receiving appreciated property, because the pre-death appreciation is not subject to capital gains tax. However, under new Section 1014(f)(1) of the Internal Revenue Code, this basis adjustment cannot exceed the final value of the property as determined for federal estate tax purposes. Furthermore, only the property included in the decedent’s gross estate and which increased the estate tax liability (reduced by credits allowable against the estate tax) is subject to this new restriction.

The laws addressing the basis of property acquired from a decedent were revised on July 31, 2015. Generally, property acquired from a decedent receives a basis equal to its fair market value at the decedent’s date of death, or if elected, the alternate valuation date. This basis adjustment is advantageous to beneficiaries receiving appreciated property, because the pre-death appreciation is not subject to capital gains tax. However, under new Section 1014(f)(1) of the Internal Revenue Code, this basis adjustment cannot exceed the final value of the property as determined for federal estate tax purposes. Furthermore, only the property included in the decedent’s gross estate and which increased the estate tax liability (reduced by credits allowable against the estate tax) is subject to this new restriction.

Pursuant to new Section 6035 of the Internal Revenue Code, an executor* of an estate who is required to file an estate tax return must provide a statement to the IRS and to each beneficiary of the estate. The statement must identify the value of each interest in property received by the beneficiary as reported on the estate tax return. The executor must furnish the statement to the beneficiary no later than the earlier of 30 days after the due date of the estate tax return or 30 days after the date the estate tax return is filed. Additionally, the executor is required to furnish a supplemental statement if there is an adjustment to the information required to be included on the statement within 30 days after the adjustment is made.

New Internal Revenue Code Section 6724(d)(1)(D) imposes a failure to file penalty on an executor who fails to file such statements, and new Section 6662(b)(8) imposes an accuracy-related penalty on a beneficiary who later overstates the basis.

*The term “executor” includes the executor or administrator of the decedent, or, if there is no executor or administrator appointed, qualified, and acting within the United States, then any person in actual or constructive possession of any property of the decedent.

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