2010 Form 8939 is Due Nov. 15; Reporting Option Applies to Many Large Estates

[Y2KEA]

Don't you just love this? The 8939 is not available yet but is due 11/15.
The lunatics truley are running the asylum.

http://www.irs.gov/newsroom/article/0,,id=243617,00.html

[S T]

Another Post

While the IRS form 8939 is only in Draft Form and Final Form is not available
AICPA sent a letter on 8/8/11 outllining and requesting that the deadline for Filing Form 8939 be delayed
Link [www.aicpa.org/.../estatetaxreformadvocacydocuments/letter_to_irs_treasury[/urll] not sure as the link will work, as I had a "devil" of a time opening.
There is a word document that will open - but I don't know how to paste in. Going to give it a try! Well I can't figure out how to give any one the link to the PDF Word Document or attach it- can someone give me a clue?

Sandy

[JohnH]

I read on a blog that the filing deadline for the 8939 has been extended beyond the Nov 15 date, but now I can't find that post. Since the 8939 still isn't available, I assume the deadline is likely to be extended beyod Nov 15 - has anyone seen anything on this?

[Gary2]

See http://www.irs.gov/newsroom/article/...245663,00.html

[JohnH]

Thanks Gary.
I'm still a little puzzled by the rules when a small estate is involved.

If the estate of an unmarried person who died in 2010 consisted of $200K in cash, no securities, and a house with a FMV of $150,000 but a cost basis of $100K, it appears that the 8939 would need to be filed in order to lock in the $150,000 FMV as the basis in the hands of the heirs.

Am I off base on this?

[appelman]

Form 8939

It is only required if you are opting out of the estate tax. Otherwise, you just follow the 2011 rules.

[JohnH]

That's my point (I think).
Wouldn't it be better to opt out in the case I described? A step-up in basis under the old rules would be preferable in this situation, rather than the 2011 rules. Or am I reading it incorrectly?

(As you can see, I don't do much estate tax work. But this is a situation I have to help out with.)

[Maribeth]

That's my point (I think).
Wouldn't it be better to opt out in the case I described? A step-up in basis under the old rules would be preferable in this situation, rather than the 2011 rules. Or am I reading it incorrectly?

(As you can see, I don't do much estate tax work. But this is a situation I have to help out with.)

Yes, that is where I am confused also. You only use the form if you are electing out of the estate tax. There is no estate tax in 2010. I want the stepped-up basis. So aren't I electing out of the estate tax and therefore Form 8939 is required????

Can anyone clarify this for me?

Maribeth

[JohnH]

Thanks Maribeth.
I'm glad to know I'm not the only one struggling to understand this.

[JohnH]

I'm still confused about this. If a small estate does not file the 8939, do the assets get stepped up basis? The filing deadline for the 8939 has been extended to Jan 17, 2012, but still there is some confusion about whether a small estate should file it.

[Maribeth]

I'm still confused about this. If a small estate does not file the 8939, do the assets get stepped up basis? The filing deadline for the 8939 has been extended to Jan 17, 2012, but still there is some confusion about whether a small estate should file it.

John, I cannot explain it to you clearly but the simple answer is that NO, you do not have to file 8939 for your little estate.

Maribeth

[nwtaxlady]

confused about form 8939

I am glad I am not the only one confused as well. So if the form is not required in that example, then when is it required? Can someone give me a simple example when the form 8939 would be required? Or how about this, what is going to be the most common situation that this form would be required?

[Gary2]

I am glad I am not the only one confused as well. So if the form is not required in that example, then when is it required? Can someone give me a simple example when the form 8939 would be required? Or how about this, what is going to be the most common situation that this form would be required?

It's never specifically required, but large estates are required to choose between filing 706 or 8939; they must file one or the other.

The 706 is the traditional estate tax return, where you have to pay the estate tax but the stepped up basis works the way it always worked.

The 8939 lets the executor choose section 1022 treatment, which means no estate tax but the stepped up basis is limited.

Estates that aren't required to file either will get the 706 treatment by not filing at all, i.e. traditional stepped up basis. In theory, they could choose to file the 8939, but I don't think there are any cases where they'd want to.

[JohnH]

Gary2, newtaxlady, and Maribeth:

Thanks for all the responses. That makes me feel better about "doing nothing" in this situation. I did finally round up one written source, although it's in a Publication and we know they aren't always reliable. (In this case I take it to be reliable, but only because my friends on this forum have validated it).

Pub 4895 (October 2011), has a note in the middle of the second page which says. "If the executor does not make a valid and timely Section 1022 Election, the rules in effect for determining basis in property acquired from a decedent who died immediately before 2010 will apply."

[JG EA]

This helped me for 2010 deaths

2011 Jennings Advisory Group, LLC

For deaths occurring in 2010 or 2011 the applicable exclusion amount is
$5,000,000 adjusted for inflation multiples of $10,000 annually beginning in
2012. Beneficiaries of such estates will receive a step-up in basis to date of
death value or the alternate valuation date if elected.

By election for 2010, the taxpayer may elect to apply the zero percent 2010
tax rate for estates. Beneficiaries would receive a basis of the decedent’s
cost plus an allocated step-up of up to $1,300,000 in gains (total) not to
exceed FMV. Spouses would receive up to an additional $3,000,000 in FMV
step up allocated gains.

but I am unsure if I need to do this in a hus/wife situation for 2011...

2011 Jennings Advisory Group, LLC

A new rule applies in the event of the first spouse’s death. A new
corrective provision allows the surviving spouse to electively use any unused
exclusion from the estate of the first spouse to die in addition to the full
exclusion available to the second spouse to die. A return must have been
filed for the first to die to use this special rule, and the executor of that
estate must make the applicable election. This new rule applies to estates
and gifts after 12/31/2010. This does away with the need for the old bypass
trust.

Bolds are mine.