[WSBAPT] State Estate Tax Basis Return

Tue Aug 25 09:08:29 PDT 2015

John, the federal reporting requirement was mandated by Congress when it passed the highway law back in July (the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015; what does that have to do with basis???).  While the statute was effective immediately, the IRS Notice defers enforcement until next February.  Sounds to me like the IRS was caught a little off guard.

As you say, with no need to track basis, I can’t imagine why DOR or the Legislature would have any reason to impose a similar requirement. But I’ve been surprised before . . . .

________________________________________
THOMAS M. CULBERTSON  I  Lukins & Annis, PS
717 W. Sprague Ave, Suite 1600, Spokane, WA 99201
(509) 455-9555  I  fax (509) 363-2500  I  tculbertson at lukins.com<mailto:tculbertson at lukins.com>

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of sullaw at comcast.net
Sent: Monday, August 24, 2015 12:54 PM
To: WSBA Probate & Trust Listserv
Subject: [WSBAPT] State Estate Tax Basis Return

Listmates:

Did you notice this in today's news? Does anybody know whether the DOR will require a similar report on the state estate tax return? Doesn't seem like they should, given the lack of an income/capital gains tax in WA.

Notice 2015-57, 2015-36 IRB

In a Notice, IRS has announced a delayed due date for filing returns with IRS and providing statements to beneficiaries under the rules requiring consistent basis reporting for transfer tax and income tax purposes that were signed into law on July 31, 2015. For each such return or statement that would otherwise be required to be filed with IRS or furnished to a beneficiary before Feb. 29, 2016, the due date will be Feb. 29, 2016.

Background. The executor or administrator of a decedent's estate must file the estate tax return. (Code Sec. 6018(a))

If the executor or administrator is unable to make a complete return with respect to any part of the gross estate, he must include in his return all the information he has, including a description of such part and the name and address of every person holding a legal or beneficial interest in such part. If they are notified by IRS, such legal or beneficial owners must then file returns as to their parts of the estate. (Code Sec. 6018(b))

On July 31, 2015, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-41; the Act). Section 2004 of the Act enacted Code Sec. 1014(f) and Code Sec. 6035. (See Weekly Alert ¶ 2 08/06/2015 for more details.)

Under the Act, effective for property with respect to which an estate tax return is filed after July 31, 2015, the basis of any property to which Code Sec. 1014(a) (i.e., the rules for determining basis of property acquired from a decedent) applies can't exceed:

  1.  In the case of property, the final value of which has been determined for purposes of the estate tax on the estate of the decedent, such value.
  2.  In the case of property not described in (A), above, and with respect to which a statement has been furnished under new Code Sec. 6035(a) (see below) identifying the value of such property, such value. (Code Sec. 1014(f)(1))

Code Sec. 6035 imposes new reporting requirements with regard to the value of property included in a decedent's gross estate for federal estate tax purposes.

Code Sec. 6035(a)(1) provides that the executor of any estate required to file an estate tax return under Code Sec. 6018(a) must furnish, both to IRS and the person acquiring any interest in property included in the decedent's gross estate for federal estate tax purposes, a statement identifying the value of each interest in such property as reported on such return and such other information with respect to that interest as IRS may prescribe.

Under Code Sec. 6035(a)(2), each person required to file a return under Code Sec. 6018(b) must furnish, both to IRS and each other person who holds a legal or beneficial interest in the property to which such return relates, a statement identifying the information described in Code Sec. 6035(a)(1).

Code Sec. 6035(a)(3)(A) provides that each statement required to be furnished under Code Sec. 6035(a)(1) or Code Sec. 6035(a)(2) must be furnished at such time as IRS may prescribe, but in no case at a time later than the earlier of: (i) the date which is 30 days after the date on which the return under Code Sec. 6018 was required to be filed (including extensions, if any); or (ii) the date which is 30 days after the date such return is filed.

Code Sec. 6035(b) authorizes IRS to prescribe such regs as necessary to carry out Code Sec. 6035.

Returns, statements not due until February, 2016. Notice 2015-57 provides that, for statements required under Code Sec. 6035(a)(1) and Code Sec. 6035(a)(2) to be filed with IRS or furnished to a beneficiary before Feb. 29, 2016, the due date under Code Sec. 6035(a)(3) is delayed to Feb. 29, 2016.

This delay is to allow IRS to issue guidance implementing the reporting requirements of Code Sec. 6035. Executors and other persons required to file or furnish a statement under Code Sec. 6035(a)(1) or Code Sec. 6035(a)(2) should not do so until the issuance of forms or further guidance by IRS addressing the requirements of Code Sec. 6035.

References: For returns and statements for inherited property, see FTC 2d/FIN ¶ S-2309 . For rules limiting basis of property acquired from decedents, see FTC 2d/FIN ¶ P-4022.

Best regards,
JOHN J. SULLIVAN,
ATTORNEY

LYONS | SULLIVAN
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