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Tuesday, April 26, 2016

Basis/Value reporting on IRS Form 8971

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). 

This 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.  

4:02 pm edt 


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Lewis Law Office, P.A. was founded in 1998 to provide dedicated counsel and highly personal legal services to individuals and businesses. Having practiced law over 25 years, Kay Lewis strives to provide the highest quality of legal service with consideration of the client’s desires to take care of their current and future needs and their planning objectives. Kay Lewis has frequently lectured on topics including, Estate Planning, Federal and State Taxation, Corporations, and Estates, Wills and Trusts. Before beginning her law practice Kay Lewis practice tax preparation and accounting, and in 1990 she became a Certified Public Accountant (CPA) in Mississippi and in Florida in 1997. Following an internship as a prosecutor with the Leflore County District Attorney’s Office in Greenwood, Mississippi, Mrs. Lewis began the private practice of law in 1989 with a Firm in Jackson, Mississippi, later relocating to Southeast Florida where she has maintained her law practice since 1996.

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