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IRS further postpones new requirements for estates to report asset values

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Tax Hot Topics: Estates reporting asset valuesThe IRS issued guidance (Notice 2016-19) further postponing the new asset value reporting requirements for estates until March 31, 2016.

Legislation enacted last July imposed new reporting requirements on estates filing estate tax returns after July 31, 2015. These estates are required to report the value of assets for estate tax purposes on information returns that must be furnished to the IRS and beneficiaries within 30 days of filing Form 706. Beneficiaries must then use these values as the income tax basis for the inherited assets or face a penalty.

The IRS quickly issued Notice 2015-57 last year to postpone the reporting requirements until Feb. 29 so that it could create forms and guidance. Since then, the IRS released Form 8971, “Information Regarding Beneficiaries Acquiring Property from a Decedent” and its instructions, but acknowledged that further guidance is still needed. Notice 2016-19 postpones the filing deadline until March 31 and asks executors not to use Form 8971 until regulations are issued.

It’s important to note that the deadline relief doesn’t remove the reporting requirements; it merely defers reporting. Estates should still record and preserve asset values so that Form 8971 can be filed when regulations are issued and the transition relief expires.

The current Form 8971 instructions state that reporting is generally required only for estates that must file Form 706 because their assets exceed the lifetime estate and gift tax exemption, not for returns filed simply for portability or other elections. But reporting is also required of beneficiaries who are required to file Form 706 because the executor cannot file a complete estate tax return.

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