Form 8971

[BOB W]

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.

[Rapid Robert]

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.

[BOB W]

• 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)

[TAXNJ]

BOB W

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



https://www.journalofaccountancy.com...appraisal.html

[BOB W]

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.

[Rapid Robert]

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.

TAXNJ;. That was a perfect article, thanks

Any article that doesn't provide the date it was written/published is not perfect.

[New York Enrolled Agent]

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.

[TAXNJ]

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/

[BOB W]

Another great article ............. Thanks, it clears up any of my missing info..

[RWG1950]

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.