Estate Tax Repeal ???

[Bees Knees]

Imagine this:

5 years from now someone coming to you saying they sold stock. You say, what is the basis? Clients says I inherited from granny in 2010. You say, what did the executor assign to the stock as its basis? Client says: I don't know anything about an executor.

Now what do we do?

What about pay on death accounts? What if there was no executor who made the election, and it is now 5 years later? Are we going to use FMV or the decedent's basis?

What about 10 years from now...LONG after anyone remembers what happened in 2010? Is the executor step up of basis going to be one of those tax laws everyone conveniently forgets to follow?

[Kram BergGold]

Form 8939

The Form to show basis step up is, 8939. A draft is available.
Basis will be whatever is on this form or for any stock that you can show had a higher cost than FMV on date of death it is FMV. If you don't have the 8939 or records to show cost was higher than FMV I think you are stuck with zero as the basis.

[DMICPA]

Basis Step Up

So basically it is up to the executor to make the election.

Boy, is this a disaster waiting to happen. In a family deal, the brother-sister who ends up in charge had better obtain a good taxperson immediately. I have talked to surviving relatives who "don't think they need to spend the money" on a tax advisor. They just start transferring titles around.

So if the assets are 1.3 million and no election is filed (why spend the funds), they could end up with a whopping tax liability! Smart. real smart.

[DonPriebe]

The Form to show basis step up is, 8939. A draft is available.

The 8939 draft has been retracted. The 'draft' now is a notice to disregard all previous drafts.

http://www.irs.gov/pub/irs-dft/f8939--dft.pdf

[JohnH]

This can be a disaster for anyone who doesn't do the paperwork (whatever that turns out to be). But for estates under $1.3 million, is it accurate to say that things a pretty much the same as they were under the old law, provided the paperwork is completed?

[mactoolsix]

Mom's basis . . .

[QUOTE=DMICPA;109503]

Mom (97) passes on and leaves daughter farm land. Mom got it from who knows what relative dating back to the civil war.

Appraised land value at date of death is $800,000.

Question - What is daughter's "cost" when she sells the land? It would seem to me to be $800,000. There are no other assets.

The daughter's basis is the lesser of FMV or Mom's basis. Mom probably inherited the property sometime after the civil war - probably within the last 30-40 years, and she probably got a step up at that time to FMV. This would make it a bit easier to ascertain.

[JohnH]

Are you sure about that? I think the daughter's basis is FMV at the date of mom's death, provided the paperwork is filled out correctly whenever it becomes available.

[Bees Knees]

Are you sure about that? I think the daughter's basis is FMV at the date of mom's death, provided the paperwork is filled out correctly whenever it becomes available.

The problem is, the paperwork is not going to be filled out correctly. The daughter doesn't know she needs to have an executor fill out the form. She just hires an attorney to get the land transferred into her name. We all know attorneys do not necessarily understand tax issues. The courts aren't going to care about basis. They will just do the transfer. We won't know about it until the daughter sells the land, long after the due date for the executor to file the form and elect to step up the basis.

[Bees Knees]

The point being, the $1.3 million step up of basis is an election. It is not automatic. What happens when the election is not made on time?

[BOB W]

I found this article very interesting:

http://www.cafetax.com/2010/07/18/2010-modified-basis-treatment/

[JON]

If under $1.3

Would you not file anyway to take advantage of the step-up. $10,000 if not done to the IRS, more than $10,000 when a client sues you for under $1.3, but you did not tell them of the option???