Friday, June 3, 2011

IRS Provides More Information on New Basis Form

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Estate planners and administrators have been anxiously awaiting the publication of new IRS Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, particularly after the 2010 Tax Relief Act confirmed the availability of carryover basis for 2010 estates. If the estate of a decedent who died in 2010 makes the election to use carryover basis (rather than pay estate tax), the election must be made on Form 8939, which will be used to allocate the estate's $1.3 million and (if the decedent were married) $3.0 million basis increases.

By statute, the due date for Form 8939 is April 18, 2011. After circulating a widely-criticized first draft last year, the IRS went back to the drawing board and has published a second draft on its website. With the filing deadline fast approaching, the IRS recently put up another website notice stating that Form 8939 and its instructions are still in development, but assuring practitioners that it will be allowing additional time for filing. The notice states that the filing deadline for Form 8939 will be at least 90 days after the final form is posted, meaning that estates will have at least until May 23, and probably later, to file. The notice states that the estate should not make the carryover basis election on the decedent's final income tax return, but should wait for the final Form 8939 to do so.

Harold W. Pskowski, Managing Editor for Estates, Gifts and Trusts

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