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June 30 Deadline for Some Form 8971s is Coming Like a Freight Train. Are You in the Train’s Path Now or Later?
Breaking News!! During tax season, IRS planted a couple of nuclear bombs in its newly issued Form 8971 Basis Consistency Regulations:
1. IRS’ all new ZERO BASIS rule: If tax matters are mishandled at the estate level, the
beneficiary’s basis (for income tax purposes) in an inherited asset is zero!!
2. SUBSEQUENT TRANSFER rule: Any later transfer by a beneficiary (of an asset originally subject to Form 8971 reporting) itself must be reported on a newly generated Form 8971. IRS Form 8971, of course, is the controversial brand new form IRS requires an estate to
complete to report basis of inherited assets to (IRS and) beneficiaries. The due date of Forms 8971 (that were otherwise due) has been put off by IRS until June 30, 2016. Penalties for non compliance can be financially disastrous. Where is all of this coming from? The Highway Funding Bill (P.L. 114-41) created basis mania with 3 new statutes:
• New IRC §1014(f) – Heirs must use the estate tax value of assets received from an
estate as their income tax basis
• New IRC §6035 – Executors must report estate tax value of assets to IRS and heirs
• IRC §6501 – 6 year statute of limitations (on assessment) expanded to apply where
overstatement of asset basis omits more than 25% of gross income stated on return
IRS issued Form 8971 and prop/temp regs in response. There’s a whole lot to it than meets the eye and some unanswered questions to boot.
Highway Funding Bill Basis Mania
§6501 – Extension of 6 Year Statute of Limitations to Basis Overstatements
New IRC §1014(f) – Basis Consistency Requirement
New IRC §6035 – Basis Reporting to IRS and Heirs
Congress Blocks the Trick Play
Treasury Response – Proposed and Temp Regs
Basis Consistency - Penalties for Non-Compliance
Zero Basis Rule
Later Adjustments to Value
Consistent Basis and Form 8971 – Future Outlook
To enlighten as to how Congress has mandated basis consistency in a broad variety of
contexts, including how the 3 year period of limitations for tax assessment is extended to 6
years, as well as basis of assets inherited by beneficiaries. To explore the timing and detail
of new IRS Form 8971 and the devastating consequences of failure to comply with the vast
array of Congress, Treasury and IRS’ new rules.
Those desiring to understand the broad, hard hitting impact and surprisingly far reach of
Congress’, Treasury and IRS’ new basis consistency rules. Income tax planners, estate
planners and affected taxpayers who desire to maintain advantage and comply with the
broadly applicable and potentially punishing new rules
|Event End Date||12-28-2018|