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In Notice 2016-27, 2016-15 IRB 1, the IRS has again delayed the initial due date for providing statements to the IRS and to beneficiaries under the “consistent basis reporting” rules for estate and income tax purposes until June 30, 2016.  The action follows upon the heels of at least one comment to the IRS that the income tax filing season for the year ending in 2015 and the new reporting requirements imposed too much of a burden on tax practitioners.

The executor or administrator of a decedent’s estate must file the estate’s federal estate tax return, as required by law.  If the executor or administrator is unable to make a complete return with respect to any part of the gross estate, that person must include in the return all the information the person possesses, including a description of such part and the name and address of every person holding a legal or beneficial interest in such part.  If they are notified by IRS, such legal or beneficial owners must then file returns as to their parts of the estate. (Internal Revenue Code (“IRC”) §6018)

On July 31, 2015, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-41; the Act). Section 2004 of the Act enacted IRC §1014(f) and IRC §6035. Under the Act, effective for property with respect to which an estate tax return is filed after July 31, 2015, the basis of any property to which IRC §1014(a) (i.e., the rules for determining basis of property acquired from a decedent) applies can’t exceed:

  • In the case of property, the final value of which has been determined for purposes of the estate tax on the estate of the decedent, such value.
  • In the case of property not described above, and with respect to which a statement has been furnished under new IRC §6035(a) (see below) identifying the value of such property, such value. (IRC §1014(f)(1))

IRC §6035 imposes new reporting requirements with regard to the value of property included in a decedent’s gross estate for federal estate tax purposes.  IRC §6035(a)(1) provides that the executor of any estate required to file an estate tax return under IRC §6018(a) must furnish, both to IRS and the person acquiring any interest in property included in the decedent’s gross estate for federal estate tax purposes, a statement identifying the value of each interest in such property as reported on such return and such other information with respect to that interest as IRS may prescribe.

Under IRC §6035(a)(2), each person required to file a return under IRC §6018(b) must furnish, both to the IRS and each other person who holds a legal or beneficial interest in the property to which such return relates, a statement identifying the information described in IRC §6035(a)(1).

IRC §6035(a)(3)(A) provides that each statement required to be furnished under IRC §6035(a)(1) or IRC §6035(a)(2) must be furnished at such time as IRS may prescribe, but in no case at a time later than the earlier of: (i) the date which is 30 days after the date on which the return under IRC §6018 was required to be filed (including extensions, if any); or (ii) the date which is 30 days after the date such return is filed.

The Notice marks a change in the reporting date, originally set at the end of February, then changed to the end of March, and now set for the end of June.

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