Tuesday, April 26, 2016
Basis/Value reporting on IRS Form 8971
4:02 pm edt
With the new asset basis/value reporting
requirement for Estates, Form 8971 (Schedule A) is now being used to report to recipients the basis(value) of inherited assets
in compliance with the "consistency rule" of IRC 1014(f). With the consistency rule, heirs are provided with the
tax basis of assets they receive. For some this is a wonderful informational tool so that years will not pass and they suddenly
need to determine their own tax reporting basis upon disposition. For others who serve as the executor or personal representative
of a taxable estate it is a burden to them as they now must send Schedule A within 30 days after filing of the Estate's Form
706 or the due date of the 706 with extensions, whichever is earlier. Supplemental statements are also required for changes
in value that make the prior statement incomplete or incorrect.
If no estate tax is due, then the consistency rule does not apply to any assets in the estate.
However, if an estate tax is due, then the consistency rule applies to ALL assets in the estate not excepted. Exceptions include
assets for which there is a marital or charitable deduction and tangible personal property for which an appraisal is not required
(under $3K in value).
applies to returns filed after 7/31/15. A recent notice (IRS Notice 2016-27) provides that Forms 8971 due
prior to 6/30/16 are not due until 6/30/16. This provides a long extension for 706's filed between mid 2015 and mid 2016.
Other items not listed on a Schedule A include:
Cash (other than coin collections), IRD, property sold or disposed of by the estate where gain/loss is recognized.
The responsibility to report values does not
end until all values are "final". Caution is also to be used for a reporting requirement when there is a subsequent
transfer to a related transferee by a beneficiary.