February 29th Deadline Looming for New Basis Information Reporting Requirements

Under new law, estate executors are now required to provide basis information to estate beneficiaries as well as the IRS within 30 days of filing the Estate Tax Return. With a deadline of February 29th rapidly approaching, executors who fail to timely file correct Basis Reporting Forms could be subject to egregious penalties.

The Surface Transportation Reauthorization and Reform Act, which was signed into effect in July 2015, imposes new basis reporting requirements on inherited property reported on Estate Tax Returns filed after July 31, 2015.

For example, if beneficiaries inherit a vacation home that was originally purchased for $150,000 20 years ago, but is now worth $500,000, the executor must inform both the beneficiaries and the IRS that the basis is now $500,000. To facilitate compliance with the Act’s reporting requirements, the IRS recently issued Form 8971 – Information Regarding Beneficiaries Acquiring Property from a Decedent, as well as instructions.

The delayed due date, applicable to Estate Tax Returns already filed after July 31, 2015,  for providing basis information is the last day of February. Many questions still remain regarding the mechanics of completing the new form. For instance:

  • Is an executor required to provide basis information if the only reason to file the Estate Tax Return is to elect portability?
  • Does the executor have a reporting requirement for items of income in respect of a decedent (IRD), such as IRAs or Qualified Pension Plans, which have no basis?

Given the fact that we are so close to the reporting deadline, quick clarification or an extension is required. Contact an Anders advisor to discuss how this new reporting requirement could affect you.

UPDATE 2/15/16- deadline extended to March 31, 2016. Learn more.