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As Estate Basis Deadline Looms, Executors’ To-Do List Spirals

To do listUpdate: Since this blog post was published, the IRS extended the due date for Form 8971 basis reporting from Feb. 29 to March 31. For more informaiton, see Notice 2016-19.

Who thinks being an executor (or trustee) of an estate is a glorified and envied position? Have you always dreamed of being an executor and having that wonderful title – and I guess a few fees?  Have you ever served as an executor or trustee and wished to never be in that role again? 

In case you didn’t know it already, executors have many duties and responsibilities, including:

  • Setting up a bank account for incoming funds and paying any ongoing bills;
  • Maintaining property until it can be distributed or sold, and then distributing assets and disposing of other property;
  • Dealing with the probate court – filing the will and an inventory of the estate’s assets with the probate court, and representing the estate in court; and
  • Dealing with liabilities and taxes – providing notice to creditors, paying the estate’s debts and taxes, and, starting at the end of February, preparing and filing estate basis statements with the IRS and beneficiaries.

And don’t think you’re off the hook if you’re a trustee instead of an executor, as the IRS treats the trustee in charge of the assets as an executor for estate tax purposes.

Well, now executors (and trustees) – and their tax practitioners – will have an additional responsibility: reporting estate basis information to the IRS and to beneficiaries. Congress passed a new law that requires consistent basis reporting between estates and persons acquiring property from a decedent. 

The IRS issued Notice 2015-57 to delay the due date until Feb. 29 for filing with the IRS and providing to the beneficiary the new statement of the beneficiary’s basis in inherited assets.  Without that transition relief, executors (and their tax practitioners) would have had the 30-day estate basis reporting requirement for any federal estate tax return (Form 706 or Form 706NA) that was filed after July 31, 2015. 

As soon as the new reporting rules were enacted, the AICPA Tax Division’s Trust, Estate, and Gift Tax Technical Resource Panel (TRP) started identifying issues and offered 13 pages of comments to consider in developing guidance, including a request for IRS and Treasury to:

  • Extend the Feb. 29 implementation date until at least 60 days after the regulations are released;
  • Provide penalty relief if the executor acts in good faith and to provide reasonable cause penalty relief;
  • Clarify the time period (if any) that the executor has continuing responsibilities after providing the original statement;
  • Treat trusts as the beneficiary; and
  • Provide a de minimis exemption to the information reporting rules for assets or groups of assets that are not publicly traded and are of de minimis value, such as $3,000.

In addition, as soon as the IRS posted the draft  Form 8971 (Information Regarding Beneficiaries Acquiring Property from a Decedent), and instructions, the TRP offered eight suggestions for improvement. For example, it asked the IRS and Treasury to:

  • Clarify that if Form 706, S. Estate (and Generation-Skipping Transfer) Tax Return, is filed solely for electing portability, then Form 8971 is not required;
  • Allow processing of the form if “unknown” is an appropriate answer, so long as the form is accompanied by an explanation, so that it is not considered incomplete, which could subject the estate to penalties; and
  • Add a column to the form asking if the estate tax value is used for income tax purposes.

As the Feb. 29 estate basis reporting deadline is fast approaching for estate tax returns that were filed since August 2015 (or are being filed now), I’m sure all the practitioners with estate tax clients and executors are awaiting proposed regulations and further guidance. 

The official form and instructions are now available. We hope that the IRS and Treasury will consider our recommendations and issue the guidance that practitioners and executors need to carry out the intent of the law, and also make changes to the forms and instructions.

In addition to our regulatory recommendations, the AICPA is considering requesting a legislative proposal that would change the filing deadline for estate basis reporting to 30 days after the property is distributed to beneficiaries rather than 30 days from filing the Form 706. We are also reviewing the Administration’s proposal (in the fiscal 2017 budget) to add property qualifying for the marital deduction, as well as property transferred by gift, to this reporting requirement.

The AICPA will continue to monitor and advocate on this estate basis issue to help estate tax practitioners and executors understand and ease their compliance burdens.

Eileen Reichenberg Sherr, CPA, CGMA, MT Senior Technical Manager, Tax Advocacy-Taxation, American Institute of CPAs. 


To do list courtesy of Shutterstock. 


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