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    Form 8971

    Although I don't file large estate tax returns, form 8971 could still be an area that I need to be aware of for my client, as a beneficiary, and potentially being required to file and/or ask for 8971 from an estate if not received. Without the proper filing of this form the basis of assets could end up being ZERO.
    This post is for discussion purposes only and should be verified with other sources before actual use.

    Many times I post additional info on the post, Click on "message board" for updated content.

    #2
    Originally posted by BOB W View Post
    Without the proper filing of this form the basis of assets could end up being ZERO.
    Where did you find that? I don't agree.

    From the form instructions:

    "Penalties for Inconsistent Filing
    Beneficiaries who report basis in property that is inconsistent with the amount on the Schedule A may be liable for a 20% accuracy-related penalty under section 6662."


    That is a far cry from basis being totally disallowed.
    "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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      #3
      • If required Form 706 is never filed, the basis of assets required to be reported will be zero for heirs • If asset improperly omitted from required 706 and statute of limitations expired, omitted property’s basis is zero for heirs • If asset improperly omitted from required 706 and statute still open, estate may report asset on supplemental estate tax return (heir gets basis in amount of estate tax reported value)
      This post is for discussion purposes only and should be verified with other sources before actual use.

      Many times I post additional info on the post, Click on "message board" for updated content.

      Comment


        #4
        BOB W

        see if article below provides any additional info: (THE ULTIMATE TAX TRAP: 'ZERO TAX BASIS')



        https://www.journalofaccountancy.com...appraisal.html
        Always cite your source for support to defend your opinion

        Comment


          #5
          TAXNJ;. That was a perfect article, thanks

          When a 706 is completed there is only 30 days to file the 8971. The IRS and each beneficiary must get a copy. The estate valuations is the only valuation that can be used by a beneficiary.
          This post is for discussion purposes only and should be verified with other sources before actual use.

          Many times I post additional info on the post, Click on "message board" for updated content.

          Comment


            #6
            Still wondering about the answer to the question I asked, "Where did you find that?" Post #3 looks like it might be a quote, but completely without attriburtion, and certainly not authoritative as it stands.

            Proposed regs are just that: proposed. However, I guess it's hard to argue with a conditional: "assets could have zero basis." Yes, they could., They could also have non-zero basis.

            Originally posted by BOB W View Post
            TAXNJ;. That was a perfect article, thanks
            Any article that doesn't provide the date it was written/published is not perfect.

            "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

            Comment


              #7
              Originally posted by BOB W View Post
              TAXNJ;. That was a perfect article, thanks

              When a 706 is completed there is only 30 days to file the 8971. The IRS and each beneficiary must get a copy. The estate valuations is the only valuation that can be used by a beneficiary.
              The IRC at 1014(f) should be reviewed. There is a requirement of consistency in value between the beneficiary and the value in the estate. I don’t see where there is any suggestion of a zero basis for the beneficiary if the Form 8971 is not present.

              Realistically I would presume it would be rare for one of your clients to receive the form given that it is required under iRC 6035 only when a Form 706 is required to be filed.

              Comment


                #8
                BOB W -

                If interested, see if this article provides any more insight:

                BASIS CONSISTENCY: HOW TO KILL A FLY WITH A BAZOOKA
                FLORIDA BAR JOURNAL

                https://www.floridabar.org/the-flori...ith-a-bazooka/
                Last edited by TAXNJ; 10-16-2020, 07:07 PM.
                Always cite your source for support to defend your opinion

                Comment


                  #9
                  Another great article ............. Thanks, it clears up any of my missing info..
                  This post is for discussion purposes only and should be verified with other sources before actual use.

                  Many times I post additional info on the post, Click on "message board" for updated content.

                  Comment


                    #10
                    Over the years, I've limited my practice to basic 1040's & can't recall a case that I've worked on where an estate of a decedent came even close the 706 filing exemption threshold.
                    Because they've used JTWROS, POD, TOD & BENE account designations, it is my understanding that most of them rarely even have the decedent's estate probated - until the last spouse to die passes & then probate is likely only required to pass on the family home to the kids.
                    I had always understood that an appraisal or certain other forms of reasonable documentation at the time of death would suffice to establish the "step-up" in basis.
                    Had not been aware of this issue. Thanks for the info.

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