Posted tagged ‘Job Creation Act’

IRS Issues Guidance on 2010 Estate Tax Return Filing Requirements and Deadlines

September 14, 2011

 By Ashley Alderman

On September 8, 2011, the IRS released the updated Form 706, “United States Estate (and Generation-Skipping Transfer) Tax Return” for decedents dying in 2010.  A link to the Form 706 and the accompanying instructions appears below.  The Form incorporates the changes made to the Estate and Generation-Skipping Transfer Taxes in the 2010 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act.  According to the Instructions for the Form 706, estates of decedents who died in 2010 with a gross estate (including adjusted taxable gifts and specific exemptions) in excess of $5,000,000 must file a Form 706, unless the Executor of the Estate makes an election to apply the modified carryover basis treatment.

The deadline for filing the Form 706 is September 19, 2011, but the Executor may apply for an automatic six-month extension by filing Form 4768, “Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes.”  A link to this form is also included below.  The automatic extension extends the deadline for filing the Form 706 and paying the tax to March 19, 2012.

If the Executor elects to apply the modified carryover basis treatment, then Form 706 does not have to be filed, but the Executor must file a Form 8939, “Allocation of Increase in Basis for Property Acquired from a Decedent” instead.  This Form 8939 has not been finalized by the IRS.  The Form 8939 was originally due on November 15, 2011, but pursuant to Notice 2011-76 issued on September 13, 2011, the deadline is now January 17, 2012.  In accordance with earlier guidance in Rev. Proc. 2011-41 and Notice 2011-66, in Notice 2011-76, the IRS stated that it would not allow extensions for time to file this Form 8939, to make a carryover basis election or to amend or revoke such election except under certain specific exceptions.  We will update the Blawg when that final form becomes available on the IRS website.

Because a Form 8939 will not have another extension period, it is important that Practitioners and Executors quickly determine whether it is beneficial for the estate to elect the modified carryover basis treatment (and file such election by January 17, 2012) or file an extension to file the Form 706 by September 19, 2011 and then proceed with the filing of a Form 706 prior to the final deadline of March 19, 2012.  This determination may be more complex in situations where the estate is over the $5,000,000 exemption amount, but due to very low basis assets in the estate it may be beneficial for the Estate to pay some estate tax in order to receive a stepped-up basis rather than elect into the carryover basis treatment and eliminate any estate tax due.

 Resources: Forms

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return

Instructions for Form 706

Form 4768: Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes

Instructions for Form 4768