Articles

Updated – New Basis and Reporting Rules for Estates and Beneficiaries by Jeff Mutnik, CPA/PFS


Posted on October 08, 2015 by Jeffrey Mutnik

Under legislation enacted on July 31, 2015, recipients of assets from a decedent’s estate must abide by the basis of acquired property included and reported in the estate’s tax return. As a result, beneficiaries may not value inherited property any higher than the basis reported by the estate, and such basis will remain in effect for all future years and purposes. This eliminates the potential for a beneficiary to claim a higher value (and thus higher basis) for property that the estate previously valued and reported.

In the past, beneficiaries to an estate have prevailed in court when claiming a higher basis on inherited property than that which was reported on Form 706, Estate Tax Return, after the statute of limitation had expired. Such a move barred the IRS from increasing the value and related tax on Form 706. Similarly, beneficiaries have, in the past, successfully claimed more basis for an asset than the reported estate tax value when an estate plan was structured to use other assets inherited by other beneficiaries to pay any increase in estate taxes. Under the new rules requiring consistent reporting based on the estate tax value, these strategies will no longer be viable.

To ensure compliance with consistent basis reporting, the legislation further requires executors of estates, and in some cases beneficiaries, to provide to the IRS and each person acquiring an interest in estate property a statement identifying the value of each estate assets at the time of the tax return filing. Following several extension, the due date for filing these statements is now June 30, 2016.

The consistent basis reporting requirements apply to estate tax returns filed after July 31, 2015.

About the Author: Jeffrey M. Mutnik, CPA/PFS, is a director with the Taxation and Financial Services practice of Berkowitz Pollack Brant Advisors and Accountants, where he provides tax and estate-planning counsel to high-net-worth families, closely held businesses and professional services firms. He can be reached in the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email at info@bpbcpa.com.