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Congress is requiring a new informational return to be filed with the IRS to ensure there is a consistent reporting of the basis of assets between the estate tax return and the beneficiary receiving the asset. The IRS has finalized the Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent. An executor or personal representative of an estate who filed a Form 706 (Estate and Generation -Skipping Transfer Tax Return) for a decedent, will be required to file Form 8971 with both the IRS and the beneficiaries of the estate. Form 8971 is only required for those estates where the total gross estate value exceeded the filing threshold requiring it to file a 706 return.

Form 8971 requires the executor to indicate who will receive the assets, including name address and Social Security number and also list the value of the assets as reported on the 706 return. There is a separate schedule to be completed for each beneficiary which lists out the assets they are to receive with similar information. This separate listing (Schedule A) is then to be given to the beneficiary so they know what their cost basis is for the assets they will receive from the estate.

The due date of the Form is the earlier of a) 30 days after filing the 706 return or b) 30 days after the date the Form 706 is required to be filed, including extensions. This return is required for estates that would have filed their 706 return after July 31, 2015 regardless of when the return was originally due. Since this Form was just released, the IRS is giving extra time until March 31, 2016 to file the Form for those estates that filed their 706 after July 31, 2015 and before March 1, 2016. If an estate tax return (Form 706) was filed before July 31, 2015, Form 8971 would not apply. There are significant penalties for non-filing of Form 8971.

Although the Congress's intentions are good (to inform the beneficiaries of their cost basis on inherited property), they have some inherent problems regarding the filing of this Form. First of all, the executor most likely doesn't know who will be receiving the assets within 30 days of filing the 706 return, other than specific bequests. Second, the values of the estate could change based on the review of the return by the IRS during its audit stage. Finally, the IRS is requiring a supplemental filing of the schedule A be completed whenever there is a change in the value as reported on the 706 return or when there is a change in the beneficiary who will receive a particular asset. This can create a large amount of additional administration time to administer the estate.

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