New Law Establishes Additional Reporting Requirements for Estates
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Pub. L. No. 114-41, was signed into law by President Obama July 31, 2015. To fund the bill, lawmakers looked into improving tax compliance. Within the revenue provisions of the Act, Pub. L. No. 114-41, tit. II, 2004, requires consistent basic reporting for property passed from estates to their beneficiaries. You may remember that the President included this as one of his tax proposals for the fiscal year 2016 budget. The President can check one more thing off his list.New Law Establishes Additional Reporting Requirements for Estates.
Subsection 1014(f), newly added to the Code, states that a beneficiary who receives property acquired from a decedent must report a basis for the property no higher than the basis previously reported by the estate for estate tax purposes. To ensure compliance with this new provision, estate executors now have an additional reporting requirement.
Under the new law 6035, executors of estates that are required to file an estate tax return must furnish as statement to the IRS and to a beneficiary who acquires an interest in each property from the estate. As one might expect, the statement must identify the value of each property interest that was reported on the estate tax return and received by that beneficiary. Statements are due the earlier of: (1) 30 days after the date the estate tax return is required to be filed (including extensions), or (2) 30 days after the date the estate tax return is actually filed. The new law is designed to prevent a beneficiary from the overstating an inherited property’s basis on
his or her income tax return when the beneficiary eventually sells the property, possibly several years alter. Thus, under 6662(b)(8), a beneficiary will be subject to a 20% penalty on the amount of the understated gain if he or she later overstates the basis.
The new law is effective immediately, which means that executors with an estate tax return required to be filed after July 31st, 2015 must be mindful of these new requirements. However, at this time, there is no form available for reporting the property basis. In the future, as noted in the statue, you can expect to see Treasury regulations addressing the application of 6035 when no estate tax return is required to be filed, and addressing situations in which a surviving joint tenant or other recipient may have better information than the executor regarding the basis or fair market value of the property.
Reference: Michelle L. Vesole, Esquire, Bloomberg BNA (August 4, 2015)
Filed Under: Estate Tax, Reporting Requirements
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