Estate Tax Return Values May Not Be Beneficiary Basis: ACTEC

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By Diane Freda

Jan. 28 — The American College of Trust and Estate Counsel wants the IRS to confirm that only the value of assets as reported on an estate tax return are required to be identified on a new form designed to ensure consistency in basis reporting.

The Internal Revenue Service needs to clarify the scope of the information required to be identified on Schedule A of the new Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent.

The form as currently drafted could cause confusion among beneficiaries, ACTEC said in a letter on Notice 2015-57.

“The value reported on the estate tax return isn't necessarily the beneficiary's basis in the asset,” Gregg Simon, principal with Much Shelist P.C., told Bloomberg BNA Jan. 28. Simon led an ACTEC task force that wrote to the IRS Jan. 19, expressing its concerns.

“We will tell beneficiaries what was reported on the estate tax return, but it will cause confusion, because the beneficiary will very likely use that as their basis and it may not be,” he said.

Depreciation and other factors such as income on a partnership interest could change the value of the property being transferred, Simon said.

In Notice 2015-57, the IRS asked executors to delay reporting the finally determined value of estates until it can come up with further guidance (163 DTR G-3, 8/24/15).

Optional Post-Death Basis Adjustments

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 said beneficiaries must be told what the value of transferred assets is on the Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.

The law was designed to ensure consistency in basis reporting between estates and beneficiaries that receive property from an estate.

New tax code Section 1014(f) provides that a beneficiary's basis in an asset shall not exceed what was reported on the estate tax return.

To make it easier for fiduciaries to report values, ACTEC also requested that Schedule A include a section in which the executor may—but isn't required to—report any post-death basis adjustments that have occurred as of the time Schedule A is furnished to the beneficiary.

Too Much Information

The scope of the Form 8971 and Schedule A were just one of many areas of uncertainty highlighted in ACTEC's 17-page letter.

Among them were what to report on the form when, as of the due date, the assets the beneficiary will receive haven't been determined. This could occur when the beneficiary's interest is by a formula bequest, residuary gift, or pecuniary amount that can be funded in-kind, rather than by specifically identified assets.

The IRS draft instructions provided that such beneficiaries should be given information on every asset that could possibly be used to fund the bequest, ACTEC said. But then a beneficiary won't only be receiving information on assets the beneficiary will never receive (which may well cause confusion), but often there may be concern about a decedent's confidentiality in situations where the beneficiary would not previously have received “more information than needed.”

Leave Cash, IRD Out

ACTEC also requested that assets that don't have a change in basis, such as cash; items related to income in respect of a decedent; retirement plan benefits; and similar assets be excluded from having to be reported on a Form 8971.

The group asked for confirmation that the portability rules don't make the return a return required to be filed and therefore subject to Section 6035, if otherwise not subject to it.

It also asked for guidance on to whom a Schedule A is to be provided, particularly when a will pours over to a trust that then divides into subtrusts. The executor may not know what assets the trustee will use when funding the subtrusts, and whether information must be provided to the trustee or the beneficiaries.

To contact the reporter on this story: Diane Freda in Washington at

To contact the editor responsible for this story: Brett Ferguson at

For More Information

Text of ACTEC's letter is in TaxCore.

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