Basis Consistency Requirements

Print Friendly, PDF & Email

By, Susan A. Robb of First Republic Trust Company

On July 31, 2015, the President signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Highway and Transportation Funding Act of 2015, Part II”) into law. The new law, which extended the Highway Trust Fund expenditure authority, enacted Sections 1041(f) and 6035 of the Internal Revenue Code. These new rules address the basis of property received from a decedent and require personal representatives of taxable estates to provide a statement to both the IRS and to any person acquiring an interest in property included in the decedent’s gross estate for federal estate tax purposes.

Under the stepped up basis rules of § 1014, the basis of property acquired from a decedent is generally the property’s fair market value, either on the date of death or the alternate valuation date. In the past, beneficiaries receiving such property were not required to use the same value reported by the estate. Beneficiaries could claim the property’s fair market value (and therefore their basis) was higher than the estate tax value. § 1041(f) now provides that the basis of property received from a decedent shall not exceed the value of that property as finally determined for federal estate tax purposes or, if the value has not yet been determined for federal estate tax purposes, the value of that property as reported on a statement provided pursuant to § 6035.

The new law applies to property for which a federal estate tax return is filed after July 31, 2015. However, pursuant to Notice 2015-57, the § 6035 reporting requirements have been delayed until February 29, 2016. The delay should allow the IRS and Treasury Department to issue additional guidance regarding compliance with § 1041(f) and § 6035.

See Also: Internal Revenue Bulletin: 2015-36 (Notice 2015-57)