FOR LIVE PROGRAM ONLY
New Basis Reporting Requirements for Estates:
Meeting Form 8971, Schedule A, and New
Beneficiary Consistency Mandates
WEDNESDAY, JUNE 1, 2016, 1:00-2:50 pm Eastern
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New Basis Consistency Reporting Requirements
.
Keith Schiller, Esq
Schiller Law Group, a Professional Law Corporation
3201 Danville Blvd., Suite 285
Alamo, CA 94507
Tel: (925) 820-8500
E-Mail: kschiller@slg4law.com
Web sites: www.slg4law.com
www.EstatePlanningAtTheMovies.com
Presentation June 1, 2016, for
STRAFFORD CONTINUING EDUCATION WEBINARS1
Presenters:
1.
Keith Schiller, Esq.
Vincent F. Lackner, Jr. Esq.
Lackner Group
Carnegie Office Park, Suite 290
800 North Bell Ave.
Carnegie, PA 15106-4300
Tel: (809)-709-1041
BASIS CONSISTENCY AND FORM 8971 WITH SCHEDULE A
1.1
Treasury Strives for Income Tax Basis Consistency with Estate Tax Valuation
The Surface Transportation and Veterans Health Care Choice Act of 2015 (“Highway
Act”) established basis consistency rules and basic reporting requirements when the estate tax
return is filed after July 31, 2015. Code §1014(f) establishes the basis consistency rules while
Code §6035 imposes the requirements to inform the IRS and the beneficiaries of the estate tax
1
Copyright © Keith Schiller. April, 2016. These materials may not be reproduced, in whole or
part, without the prior written permission of Keith Schiller and Bloomberg BNA, the publisher of
Art of the Estate Tax Return—Estate Planning At The Movies® (“706 Art”). Estate Planning At
The Movies® is the registered trademark of Keith Schiller. Some portions of these materials
have been adapted from 706 Art. References to motion pictures are intended for educational
benefit to assist the recall of the reader of significant estate planning or tax considerations or to
otherwise aid professionals in their communication with clients for greater awareness and more
effective estate and tax planning. The author thanks Vince Lackner for his helpful input and
comments.
value. Form 8971 (first published as a draft in December 2015 and then in final form in January
2016) is used to report the estate tax values to the IRS and beneficiaries. The instructions to
Form 8971 and the proposed regulations issued under Code §§1014(f) and 6035 in March 2016
comprise the primary post-enactment guidance.
The law enacted in 2015 changes prior law regarding income tax basis consistency and
places additional administrative burdens on fiduciaries and the preparer of the federal estate tax
return. Beneficiaries who report valuations for income tax purposes contrary to the estate tax
values will cause a six-year statute of limitations to apply to the understatement of tax liability
arising from such inconsistency. Code §6501(e)(1)(B)(ii).
As of the date of these materials, the IRS has issued proposed regulations and
instructions to the Form 8971. These have both clarified the law and raised questions. The IRS
extended until June 30, 2016, the earliest filing date for Form 8971 and related Schedule A.
Notice 2016-19. This additional time is needed by the IRS and Treasury to respond to questions
from practitioners, including this author, regarding issues of compliance and uncertainties in the
authority issued to date.
1.2
Traditional Basis Consistency Rules and Exceptions
Whatever allowance exists for income tax basis change on the death of an individual
continues on the death of the first spouse irrespective of whether a portability election is made.
Internal Revenue Code §1014(a) provides:
“Except as otherwise provided in this section, the basis of property in the hands
of a person acquiring the property from a decedent or to whom the property
passed from a decedent shall, if not sold, exchanged, or otherwise disposed of
before the decedent’s death by such person, be—
(1) [DOD] the fair market value of the property at the date of the
decedent’s death,
(2) [Alt Val] in the case of an election under section 2032 …, its value at
the applicable valuation date prescribed by those sections,
(3) [Special Use] in the case of an election under section 2032A its value
determined under such section, or
(4) [Conservation Easement] tothe extent of the applicability of the
exclusion described in section 2031(c) the basis in the hands of the
decedent.”
Income in respect to a decedent (under Code §691 and referenced as “IRD”) represents
the most significant, but not the exclusive, exception to basis adjustments arising from death.
Reg. §1.1014-3 sets forth the central connection between estate tax valuation and
income tax value. That section states, “The value of property as of the date of the decedent's
death as appraised for the purpose of the Federal estate tax … shall be deemed to be its fair
market value.” The regulation does not require that any estate tax be paid. Similarly, the
regulation (which has not been updated since December 31, 1960) makes no reference to an
estate tax return filed solely to make the portability election. On the other hand, this regulation
states that in the event, “no estate tax return is required under Code §6018, the value of the
property appraised as of the date of the decedent's death for the purpose of State inheritance or
transmission taxes shall be deemed to be its fair market value.”
2
Aside: Code §6018 requires an estate tax return to be filed when the combination of the
gross estate plus adjusted taxable gifts exceeds the basic exclusion amount ($5,430,000
for deaths in 2015 and $5,450,000 for deaths in 2016) in the year of death. (Gifts made
after September 8, 1976 and before January 1, 1977 that used any of the decedent’s
specific exemption reduce the basic exclusion amount. Thus, the threshold test has
three parts: (1) gross estate + (2) adjusted taxable gifts + (3) use of the specific
exemption to compare against the unreduced basis exclusion amount.)
Impact of Basis Consistency Rules Enacted in 2015: Code §1014(f) applies only to
assets included in the gross estate, the value of which increases the estate tax liability, after
considering available credits. Thus, the new basis consistency rules do not apply to estate tax
returns filed for portability election purposes only. Reg. 1.6035-1(a)(2) provides that
notwithstanding Reg. §20.2010-2(a)(1) (which is a portability regulation that provides that an
estate tax return filed to make a portability election is a required return under Code §6018), an
executor does not have to file or furnish Form 8971/Schedule A if the executor is not required by
§6018 to file an estate tax return for the estate, even if the executor does file such a return for
other purposes, e.g., to make a generation-skipping transfer tax exemption allocation or
election, to make the portability election under §2010(c)(5), or to make a protective filing to
avoid any penalty if an asset value is later determined to cause a return to be required or
otherwise. As a result, at least from the standpoint of the scope of the new law, the “required
return” condition does not apply to an estate tax return filed solely to make a portability election.
Further Implication: Practitioners may deduce from the foregoing proposed regulation that
a portability-only return is not a “required return” except for purposes of the portability
election…i.e., that it will not be viewed as a required return for purposes of income tax basis
consistency rules under the traditional rules discussed in §§1.2.2 and 1.2.3, infra, of this outline.
1.2.1
Presumption of Value
Reg. §1.1014-3(a) provides that the value of property as of the date of the decedent's
death, as appraised for the purpose of the federal estate tax, shall be “deemed” to be its fair
market value. For the purpose of determining the basis at death (for determining gain or loss on
the sale thereof or the new base to establish the deduction for depreciation), the value of the
property as determined for the purpose of the federal estate tax shall be deemed to be its fair
market value at the time of acquisition. Thus, in the ordinary course of events, income tax basis
arising from death is consistent with the reported estate tax value. TAM 199933001 observes
that, except where the taxpayer is estopped by his previous actions or statements, such value is
not a conclusive but a presumptive value, which may be rebutted by clear and convincing
evidence.
In McMillan v. U.S., 64-2 U.S.T.C. ¶9720 (S.D. W.V. 1964), the court applied a duty of
consistency and found that the taxpayer had sufficiently participated in the estate tax valuation
of foreign stock. The decision adds language that may be helpful to taxpayers, particularly after
a return is reviewed, to estop the IRS from arguing for a valuation that is less than reported on
the estate tax return. The court states:
“So if a taxpayer who acquired gain in an exchange of property sets up as
its measure a value of what he received in which the Commissioner
acquiesces, that value is the basis to be taken in measuring a further gain
on a sale of the property in a later year. The taxpayer cannot say: 'I was
3
mistaken. The value was many times what I said it was. I therefore
realized less gain on the last sale,' without doing justice all around in
correcting his mistake. The reverse principle is also true if the
Commissioner, in reviewing the return, should correct the first valuation
and the taxpayer should acquiesce. The Commissioner could not
repudiate his action when that value again became a determining factor
…”
A duty of consistency has also been applied with special-use valuation property in Van
Alen v. Comr., T.C. Memo 2013-235. In that case, the court declined to follow Rev. Rul. 54-97,
which allows the taxpayer, who did not participate in the estate tax return, to overcome the
estate tax value by clear and convincing evidence. The enabling language in Code §1014
respecting special-use value applying for income taxes differs for assets generally in the gross
estate. Thus, the duty of consistency in Van Alen may not be presumed to apply to assets
generally.
1.2.2
The Estate Tax Return Must Be Required
The estate tax return does not establish a presumed valuation for income tax purposes
unless a return is required. Moreover, the taxpayer has the burden of establishing basis.
Establishing basis is a factual matter. If the taxpayer is unable to establish basis, the basis may
be deemed to be zero.
Decades ago, the IRS determined that an estate tax return that was filed despite the fact
that no return was required under the threshold of Code §6018(a) was ineffective for purposes
of making the alternate valuation (AV) date election. Rev. Rul. 56-60. (As a historic note, the
IRS had previously ruled that AV date elections could be made even if the impact was to
increase value and not reduce estate tax. This old rule was reversed by statutory change to
Code §2032. Current law allows the AV date election to be made only to reduce the estate tax
liability.) While the AV date discussion reflects the core of Rev. Rul. 56-60, the ruling concludes
with the following statement of broader application:
“Accordingly, it is held that where the value of the decedent's gross estate
at the date of death does not exceed the statutory exemption of $60,000,
a Federal estate tax return, Form 706, filed with respect to the estate is
not a return as contemplated by section 26 USC 6018(a)(1) of the Code.
[Typo in the ruling which stated 6918.] Because the return will not be
recognized for Federal estate tax purposes, it follows that any material
contained therein would have no force or effect with respect to its
application in the determination of any other Federal tax liability.
(Emphasis added.)”
1.2.3
Is Portability Return a Required Return to Deem the New Income Tax Basis?
Code §2010(c)(5) and Reg. §20.2010-2(a)(1) require a timely filed federal estate tax
return in order to make a portability election with regulator reference to Code §6018. This
spawned debate regarding whether a Form 706 filed solely to make a portability election must
be filed within the time and in the manner required for estate tax returns generally. Reg.
§20.2010-2(a)(1)-(7) establishes particular rules for making portability elections and creates a
regulatory requirement for a timely filed and properly prepared estate tax return.
Distinction: Portability elections may be made on estate tax returns in which filing is
required under general filing rules or on returns below the filing threshold.
4
Example 1: Abe dies in 2014 with a gross estate of $6 million and secured or general
debts on Schedule K of $5 million, a portability election of as much as $4,340,000 ($5,340,000
less $1 million taxable estate) may be available. Abe’s estate tax return is required under the
statutory mandate of Code §6018. Result: The presumption of income tax basis equal to the
federal estate tax value for assets subject to Code§1014(a) applies.
Example 2: Betty dies in 2014 with a gross estate of $2 million and little or no material
debt. Her DSUEA on this return filed solely to make the portability election may range from
$3,340,000 ($2m taxable) to $5,340,000 (marital/charitable deductions for full $2m). Betty’s
estate is not subject to any state death tax. Betty’s estate tax return is required solely under the
statutory mandate of Code §6018. Result: The presumption of income tax basis equal to the
federal estate tax value for assets subject to Code §1014(a) may not apply. This is an open
issue, at least under Reg. §1.1014-3(a). Moreover, the position taken by Proposed Regulation
§1.6035-1(a)(2) that a portability return is not a return under Code §6018 for purposes of basis
consistency reporting requirements under the Highway Act provides insight that the IRS would
likely assert a similar position for purposes of traditional basis consistency rules, thus
concluding that valuation on a portability return is not presumptively the income tax value.
Example 3: Carla dies in 2014 with the identical estate values and debts as Betty,
though her estate is subject to some state death tax. Although no estate tax return is due under
the federal filing requirements, Reg. §1.1014-3(a) extends presumptive value to the valuation
reported on the state death tax return to apply for purposes of establishing date of death value
for income tax basis under Reg. §1.1014-1.
As a basic rule, portability elections are available only with the timely filing of a “complete
and properly-prepared estate tax return.” Estates qualifying for “simplified reporting” may use
good faith estimates of value rather than fair market value for the reporting of assets that
receive the estate tax marital deduction or charitable deduction when the estate tax return is not
required under the general rules (i.e., is filed solely for the portability election) and certain other
tests are met. However, a good-faith estimate of value does not report fair market value.
Accordingly, the good faith estimate does not support a consistency argument under traditional
valuation principles.
(See, 706 Art, §7A.9 for discussion of requirements and practical commentary with
simplified reporting.)
Estate tax returns filed solely for portability election purposes have entered unchartered
waters relative to the impact of “deeming” of value for purposes of income tax basis adjustment.
The ability to file a return with simplified reporting while hoping to apply a good-faith estimate of
value may have been undermined by two references in the simplified reporting regulations:
(1)
The general rules established for simplified reporting under Reg.
§20.2010-2(a)(7)(ii)(A) provide, in relevant part, “an executor is not required to report a value for
such property on the estate tax return” (except to the extent of the good-faith estimate of value
later described in the regulation with rounding up to the next $250,000 increment). Thus, the
general rule states that the reporting of value in the traditional manner on the return is not
required, but it does not expressly state that traditional reporting of fair market value cannot be
indicated in some manner on the return.
(2)
Example #1 under subparagraph (B) in the regulation considers real
property, bank accounts and life insurance passing outright to the surviving spouse and
reported in the simplified manner. In applying simplified reporting, the example applies the facts
so that the executor “files an estate tax return on which these assets are identified on the proper
schedule, but … provides no information on the return with regard to the date of death value.”
5
One approach toward simplified reporting would be to report assets without values on
the schedules, indicate the rounded up good faith estimates of value on lines 10 and 23 of the
Recapitulation, attach an appendix to the return with the executor stating fair market value with
actual valuations, and attach appraisals to support those valuations of fair market value.
Nevertheless, it would appear safest when trying to fall within the framework of a
“required return” in light of Rev. Rul. 56-60, for purposes of establishing an evidentiary basis
and greater stability for income tax reporting, to file the Form 706 for portability-only purposes
and replicate traditional estate tax return practice. In other words, traditional reporting of value
and forsaking use of simplified reporting provides the best position to assert the presumption
that the reported value on the Form 706 applies for income tax basis for date of death value
under Reg. §1.1014-1.
1.3
Summary of Changes under Code §§1014(f) and 6035
Code §1014(f) provides that the basis of certain property acquired from a decedent
cannot exceed that property’s value as finally determined for federal estate tax purposes (i.e.,
the “final value”). Final value is a described term. If no final value has been determined when
the taxpayer’s basis in the property becomes relevant, the taxpayer uses the value reported on
the Statement (Schedule A to the Form 8971) required by Code §6035(a) (the fair market value
reported on the federal estate tax return) to determine the taxpayer’s basis for federal tax
purposes. Code §1014(f)(2) provides that §1014(f)(1) applies only to property included in the
decedent’s gross estate when that property increases the estate’s liability for federal estate tax
(reduced by credits allowable against the tax other than a credit for the prepayment of estate
tax).
Early Alert of Terms: Schedule(s) A is attached to the Form 8971 filed with the IRS.
Schedule A is also referred to as a “Statement” when furnished to the beneficiaries or
respective beneficiaries. It is a defined term in §1.4, infra.
Code §6035 requires the reporting, both to the IRS and to the beneficiary, of the value of
property included on a federal estate tax return required under Code §6018. Code §6018(a)(1)
imposes an estate tax return filing requirement in the estate of a citizen or resident alien when
the combination of the gross estate plus adjusted taxable gifts exceeds the basic exclusion
amount in the year of death. Code §6018(a)(2) imposes an estate tax return filing requirement in
the estate of a non-resident alien (NRA) when the gross estate exceeds $60,000. Thus, in the
estate of a U.S. citizen or resident alien, reporting under Code §6035 is not required when the
estate tax return is filed solely to make a portability election. As noted, Code §1014(f) applies
only with respect to any property that, when included in the decedent’s estate, increases the
estate tax liability (reduced by allowable estate tax credits against that tax other than credit for
the prepayment of estate tax). Accordingly, situations will often arise in which informational
reporting is required under Code §6035 yet the consistency rule under Code §1014(f) will not
apply because the value of the property does not increase the estate tax liability. In addition,
property in the gross estate passing fully under a marital deduction and charitable deduction
must be reported and furnished under Code §6035 even if the basis consistency rules do not
apply to that property when the estate return is required to be filed under Code §6018.
1.4
Described and Defined Terms
The following is a summary of described or defined terms, which provide a shortcut to
later discussion of the regulations under Code §§1014(f) and 6035:
6
(A) Final Value: The determination of “final value” is established by an order of priority
under Reg. §1.1014-10(a)(2). Accordingly, it is classified in this text as a “described term” rather
than a “defined term.” The final value of property reported on a return filed pursuant to Code
§6018 is its value as finally determined for estate tax purposes. Reg. §1.1014-10(c) recites the
definition of final value. That final value is: (1) the value reported on a return filed with the IRS
that is required by Code §6018 once the period of limitations for assessment of the estate tax
under Chapter 11 has expired without that value having been timely adjusted or contested by
the IRS; (2) if the foregoing item (1) does not apply, then the value is the value determined or
specified by the IRS once the periods of limitations for assessment and for claim for refund or
credit of estate tax have expired without that value having been timely contested; (3) if neither of
the foregoing applies, the value is the value determined in an agreement, once that agreement
is final and binding on all parties (i.e., a settlement agreement with the IRS); or (4) if none of the
foregoing apply, the value is the value determined by a court, once the court’s determination is
final.
Prior to the determination of final value under the foregoing definition, the recipient of
that property may not claim an initial basis in that property in excess of the value reported on the
Statement required to be furnished under Code §6035(a) (i.e., the Schedule A provided to the
recipient with respect to a Form 8971 filed by the executor). If the final value is subsequently
adjusted from the value reported on the prior Schedule A provided under Code §6035(a), then
the taxpayer may not rely on the Schedule A initially furnished under Code §6035(a) for the
value of the property, and the taxpayer may have a deficiency and underpayment resulting from
this difference.
Reg. §1.1014-10 (3) recognizes that the estate may discover property or the omission of
property after the estate tax return is filed. In the event that property is discovered after a
mandated estate tax return is filed (i.e., a return required under Code §6018) and property to
which the consistency requirement applies is discovered after the required estate tax return has
been filed or otherwise is omitted from that return (after-discovered or omitted property), the
final value of that property is determined as follows:
1.
The final value of the after-discovered or omitted property is determined in
accordance with the above-described final-value rules if the executor, prior to the
expiration of the period of limitation on assessment of estate tax, files with the
IRS an initial or supplemental estate tax return under Code §6018 reporting the
property.
2.
On the other hand, if no reporting of the omitted or after-discovered property is
made on an initial or supplemental estate tax return prior to the expiration of the
assessment period for estate tax, the final value is zero. If no required estate tax
return under Code §6018 is filed, and if the inclusion in the decedent’s gross
estate of the after-discovered or omitted property would have generated or
increased the estate’s estate tax liability, the final value, for purposes of Code
§1014(f), of all property subject to the basis consistency rules is zero until the
final value is determined
(B)
Executor: The term executor includes both the executor as that term is defined
generally for estate tax purposes under Code §2203 plus any other person who is required
under Code §6018(b) to file a return. Reg. §1.1014-10(d) uses the same terms to define
executor as does Reg. §1.6035-1(g)(1). This term appears in lower case when used in the
regulations.
(C)
Information Return: An Information Return is defined to mean Form 8971,
including each beneficiary’s Statement (Schedule A) required to be furnished, or any successor
form issued by the IRS for this purpose. Reg. §1.6035-1(g)(2).
7
(D)
Statement: The term “Statement” means the payee’s statement described as
Schedule A of the Information Return furnished to a beneficiary or any successor form or
schedule issued by the IRS for this purpose. Reg. §1.6035-1(g)(3).
(E)
Beneficiaries: See §1.6, infra, for a description of beneficiaries. It is not
otherwise an expressly defined term. This term appears in lower case when used in the
regulations.
1.5
Form 8971 and Statement (Schedule A)
Form 8971 must be filed by an executor of an estate or other persons required to file
Form 706 or 706-NA under Code §§6018(a) or 6018(b) or qualified heir who must file Form 706A under Code §2032A after July 31, 2015 (whether timely or late). Form 8971 is used to report
the estate tax value to the IRS and all Schedules A relevant to the estate (or those being
supplemented) filed with the IRS as part of Form 8971. The respective Schedule A is to be sent
to each beneficiary to inform that beneficiary of the estate tax value applicable to property being
distributed to that beneficiary. Accordingly, the date on which the estate tax return is filed
determines whether the basis consistency and reporting requirements enacted under the
Highway Act apply to the given estate.
Example 1: D-1 died in 2012 and the estate tax return was filed 8/1/15 for an estate
required to file under Code §6018(a) or 6018(b). Result: the Executor must file an Information
Return (Form 8971 with its Schedule(s) A) with the IRS and furnish a Schedule A to each
respective recipient beneficiary.
Example 2: D-2 died in December 2014 and the estate tax return was filed 7/31/15.
Result: No filing of Form 8971 or service of the Schedule A is required.
Example 3: D-3 died on February 1, 2014 for which the estate tax return was filed on
April 10, 2015 and required under Code §6018(a) or 6018(b). On September 4, 2015 (after the
extended due date for the filing of the Form 706 has expired) a supplemental estate tax return is
filed because additional assets are identified and/or missing appraisal information is received.
Analysis: The estate tax return was filed before August 1, 2015. By regulation, an
estate tax return cannot be amended once the due date, including extension has expired. Reg.
§20.6081-1(d). The term “supplemental return” is misleading. The document by regulation
constitutes supplemental information. Result: Thus, the late supplement is not a return and
compliance with the Highway Act should not be triggered.
Example 4: The conditions are the same as in Example 3, above, except that D-3 died
on June 5, 2015, and the executor filed a timely extension of time for Form 706 through
September 5, 2015. Result: Form 8971 with its Schedule A must be filed and served under
§6035 because the supplement is considered a return. Reg. §20.6081-1(d).
1.5.1
Protocol for Filing Form 8971 and Transmitting Schedule(s) A
A return that is as complete as possible must be filed before the expiration of the
extension period. The return thus filed will be the return required by Code §6018(a), and any tax
shown on the return will be the amount determined by the executor as the tax referred to in
Code §6161(a)(2), or the amount shown as the tax by the taxpayer upon the taxpayer's return
referred to in Code §6211(a)(1)(A). The return cannot be amended after the expiration of the
extension period, although supplemental information may subsequently be filed that may result
in a finally determined tax different from the amount shown as the tax on the return. Reg.
§20.6081-1.
The instructions state that Form 8971 and Schedule A do not apply to an executor of an
estate that is not required to file an estate tax return under Code §6018 but who does so for the
8
sole purpose of making an allocation or election respecting GST tax. Reg. §1.6035-1(a)(2)
confirms that the Form 8971 and Schedule A is similarly not required in either the foregoing
instance or when the return is filed solely to make a portability election.
Form 8971 (with all attached Schedule(s) A) must be filed with the IRS no later than the
earlier of:
1.
Within 30 days after the date on which Forms 706, 706-NA, or 706-A is required
to be filed (including extensions granted, if any) with the IRS; or
2.
Within 30 days after the date on which any of the Forms 706, 706-NA, or 706-A
is filed with the IRS.
If the first Form 706, 706-NA, or 706-A is filed after the due date (including extensions)
and after July 31, 2015, then Form 8971 and Schedule(s) A are due 30 days after the filing date.
The IRS initially extended the time, if otherwise earlier due, for the filing of this return and
beneficiary information until February 29, 2016, then March 31, 2016, and finally to June 30,
2016. Notice 2016-19.
A beneficiary may be provided with his/her/its Schedule A by mail, e-mail, in-person
delivery, or private delivery service. The executor of the estate (or other person required to file)
certifies on Form 8971 the date on which the Schedule A was provided to each beneficiary and
must retain proof of mailing, proof of delivery, acknowledgement of receipt, or other relevant
information of delivery and content. Acceptable private delivery services are recited in the
instructions.
If the executor is the beneficiary, the executor must still issue the Schedule A to that
beneficiary. The Schedule A supports the knowledge of the IRS even if the executor-beneficiary
knows the facts independently.
1.5.2
Included and Excluded Assets
Property to which the Information Return (which is a defined term and discussed in §1.4,
supra) requirement applies includes all property reported or required to be reported on an estate
tax return except for property excluded from the reporting requirements for the Informational
Return. This includes, for example, any other property in which basis is determined in whole or
in part by reference to that property (for example as the result of a like-kind exchange or
involuntary conversion). In the estate of a non-resident alien, this requirement applies only to
the property that is subject to U.S. estate tax. Only the deceased spouse’s one-half interest in
community property is subject to the Information Return requirements.
The following property is excluded from the reporting requirements:
1.
Cash (other than a coin collection or other coins or bills with numismatic value);
2.
Income in respect to a decedent (“IRD”) (as defined in Code §691);
3.
Tangible personal property for which an appraisal is not required under Reg.
§20.2031-6(b); and
4.
Property sold, exchanged, or otherwise disposed of (and therefore not distributed
to a beneficiary) by the estate in a transaction in which capital gain or loss is
recognized.
Example 5: The gross estate for which an estate tax return is required under Code
§6018 includes an IRA with a value of $5 million, tangible personal property in several rooms in
the house none of which has articles with a value greater than $100, a painting with a value of
$6,000 as determined by an independent and competent appraiser in the field or disinterested
dealer in that class of property, and a home with a value of $2 million. Only the painting and
9
residence are subject to the filing and furnishing of the Information Return and Statement. Reg.
§1.6035-1(a)(2).
Example 6: The same facts apply as shown in Example 5 except that the IRA is a Roth
IRA with respect to which distributions would be qualified distributions under Reg. §1.408A-6. In
that instance, the Roth IRA is not an asset generating IRD. Thus, the Roth IRA in addition to the
painting and residence are subject to the filing and furnishing of the Information Return and
Statement.
Alert: At the time of this presentation, several uncertainties exist under the proposed
regulations issued in March 2016 and the instructions to Form 8971. In view of the
extended due date of June 30, 2016, the author anticipates that many of these
uncertainties will be resolved in final regulations or other announcements. Some
examples include, whether to include assets on Schedule A if the asset has some
income tax basis greater than zero (such as a contract for sale pending close of escrow
to which contingencies have been fulfilled, an installment sale, life insurance if subject to
Code §101 for which basis exists and an IRA with some non-deductible contributions)
and the distinction with Roth IRAs between those that satisfy the qualified distribution
rule (generally a 5-year hold) versus those that do not (to which IRD applies in part).
Thus, we defer discussion to see what developments may arise so that these can be
addressed in class.
Practice Hint with Problematic Beneficiaries: Some beneficiaries are naturally
antagonistic toward other loved ones of the decedent. If the beneficiary of a pecuniary
bequest and nothing else were to see valuations and assets going to other beneficiaries,
that beneficiary might start litigation or accentuate the stresses in life. If a beneficiary’s
bequest is funded in cash, particularly before the Form 8971 is filed, or can be funded
only in cash under the terms of the trust, then the executor need not furnish a Schedule
A to that beneficiary. This follows from the first exception in the list of exceptions above
listed from Reg. §1.6035-1(a)(2).
The Statement (Schedule A) provided to a given beneficiary shall indicate all property
acquired (or expected to be acquired) by that beneficiary from the estate. If the beneficiary
receives a partial interest in the property that is less than the total interest valued in the gross
estate, indicate on Schedule A for that beneficiary both that interest (as a dollar figure) and the
percentage of the full gross estate value that this beneficiary’s distribution represents.
Example 7: The gross estate owns 100% of Blackacre valued for $500,000, and
distributed one half to each of Son and Daughter. Schedule A for each child would indicate a
50% interest and $250,000 value for income tax purposes.
If the executor has not determined which beneficiary is to receive an item of property as
of the due date of the basis reporting information, the executor must list all items of property that
may be used, in whole or part, to fund the beneficiary’s distribution on that beneficiary’s
Schedule A. The IRS recognizes that the same property may be reflected on more than one
Schedule A. The regulations provide that executor may, but is not required to, file and furnish a
supplemental Information Return and Statement (i.e., file Form 8971 and furnish Schedule[s] A)
after the executor determines the identity of property subject to the information return
requirement when the prior Information Return and Statement were filed and furnished listing all
10
property that a given beneficiary might receive.2
However, if the beneficiary cannot be located after due diligence and that beneficiary is
later located after the initial Form 8971/Schedule A is filed, the executor must file a
supplemental Information Return and furnish the Statement (Schedule A) within 30 days after
locating the beneficiary.(See §1.6, infra, and Reg. §1.6035-1(c)(4).)
Example 8: Decedent’s (D) estate makes a specific gift of a home to B-1, and leaves the
residue to be divided in equal shares among B-1, B-2 and B-3. In addition, B-3 is the surviving
joint tenant of an asset fully included in D’s gross estate. The estate tax return is required under
Code §6018. After the estate tax return has been filed and more than 30 days thereafter, the
executor determines the assets to be distributed to each of the three residuary beneficiaries.
Result: The executor must timely file Form 8971 and all Schedules A with the IRS within
30 days of filing the estate tax return. The Schedule A for each beneficiary appears below. “R”
below represents all assets that may included in the residue that were part of the gross estate or
that passed as a result of the death of D
B-1: R plus home
B-2: R
B-3: R plus joint tenancy property
The executor is not required to file or furnish a supplemental Information Return (Form
8971) and Statement (Schedule A) after the allocation of assets to fund the residue is made.
The executor may, however, choose to file and furnish the Form 8971 and Schedule A.
Corollary: If the executor did not have information regarding the joint tenancy sufficient
to report that asset on the estate tax return but was aware that B-3 had the information, the
executor could notify the IRS of that fact and B-3’s contact information in accordance with Code
§6018(b), and B-3 would be required to file an estate tax return and comply with Code §6035
with respect to that asset.3
Assets valued using the alternate valuation (AV) date under Code §2032 or special-use
valuation under Code §2032A will report income tax basis using the changes arising under
these sections.
Example 9: The gross estate owns 100% of XYZ Corp. with an estate tax value of $4
million as of the date of death and $3.5 million value on the AV date. Form 8971/Schedule A
reporting will use the $3.5 million AV date value.
Example 10: The gross estate reports a value of $2.9 million as the special-use value
for a farm, which otherwise would have a fair market value of $4 million. The Form
8971/Schedule A reporting will use the $2.9 million special-use value. However, if a recapture
event later arises so that the income tax basis adjusts as a result of the recapture event and an
election to make the income tax basis adjustment,4 supplemental Information Return (Form
2
See, Reg. §1.6035-1(c)(3), example 1. The initial instructions to Form 8971 provide that once
distribution is made, a supplemental Schedule A is required. However, that rule was changed in
the regulations.
3
Reg. §1.1014(d); Reg. §1.6035(g) and see §14 of the Notice of Proposed Rulemaking and
Notice of Proposed Rulemaking by cross-reference to temporary regulations dated 3/2/16,
published 3/4/16, Reg-§127923-15.
4
See, §1016(c).
11
8971) and Statement (Schedule A) should be filed with the IRS and furnished to the recipientbeneficiary. Reg. §1.6035-1(e)(2).
For estate tax returns in which the filing of an Information Return (Form 8971) and
furnishing to the recipient(s) of Schedule A is required, each asset in the estate must have its
schedule and line item reference on the estate tax return so that information can be placed on
the Schedule A for a particular beneficiary. Accordingly, each asset within the reporting
requirement of Reg. §1.6035-1(a)(1) must have its own federal estate tax return schedule and
item number reference. If you combine several assets within one descriptor on the Form 706
(such as with an exhibit that has one item number on a Schedule but which lists several
securities in the exhibit), there will not be a separate item number to reference in Schedule A to
the Form 8971. While that approach can continue to be used for purposes of the Form 706, it
will not generally be efficient when any of the listed securities must be reported on a Schedule A
to the Form Schedule 8971. Thus, a protocol of entering separate item numbers for each asset
provides greater efficiency.
The easier method of combining several items in one attachment should not be used
unless all 25 of the items will be distributed to the same beneficiary or will be distributed as part
of the residue among known beneficiaries (among whom the shares will be divided). In any
event, each item listed as an attachment (such as an EstateVal report) needs to be separately
numbered so that cross-references can be included with the Statement(s) furnished to the
recipient(s) of the assets listed. Therefore, list each security separately on Schedule B, E or G
as applicable in order to facilitate later compliance with Form 8971 and its respective
Schedule(s) A.
1.5.3
Describing Assets on Schedule A
The instructions for the preparation of Schedule A to Form 8971 direct that the same
description in column B be recited as the one that the executor used for the property on the
Form 706, Form 706-NA, or Form 706-A be recited. In addition, include in column B the
schedule and item number in which the property was reported on Form 706, Form 706-NA, or
Form 706-A, as applicable. This instruction may be clear on its face, yet it may be unduly
cumbersome. For example, descriptors in the estate tax return commonly reference exhibits and
identify those exhibits, including appraisals. However, these cross-references are not critical to
the identification of the asset or interest for purposes of Schedule A. Moreover, the appraisals
are not provided to the beneficiary as part of the Schedule A transmittal or filing.
Consult the instructions to the Form 706, Form 706-NA, or Form 706-A for the particular
descriptors required to a given class of asset. If the beneficiary acquired (or is expected to
acquire) a joint interest, a fractional interest, or any other interest in property that is less than
100%, indicate the interest in the property the beneficiary will acquire.
Comment: It will be helpful to use reporting software that integrates completing
Form 706 with the descriptors and references needed to complete Schedule A to the
Form 8971. The instructions to Form 8971 require the same descriptor in Schedule A
that is used for the description of the asset in the Form 706. The Instructions for the
Form 706 and, as specifically stated on Forms B, E, F and G, call for the reporting of
CUSIP numbers when available. Unless your selected software system exports
those numbers from the third column in Schedule B of the Form 706 into the
respective Schedule A to the Form 8971, your staff will be required to input those
numbers manually. Thus, unless your reporting software program automates this
process, you should enter those CUSIP numbers as part of the descriptor in the
12
second column of Schedule B; this will save time. The author suggests that, for
efficiency, preparers leverage software that assists in reporting both Forms 706 and
8971, integrating the two. This comment also applies to the reporting of CUSIP
numbers and taxpayer identification numbers on Schedules E and F.
1.5.4
Supplementing Form 8971 and Schedules A
The executor must file the supplemental Information Return (Form 8971 and Schedule
A) within 30 days after (1) the final value is determined; (2) the executor discovers that
previously provided information on the Information Return or Statement is incorrect; or (3) a
supplemental estate tax return is filed reporting property not reported on a previously filed estate
tax return. (See, Reg. §1.1014- 10(c)(3)(i) relating to after-discovered or omitted property). In
this case, a copy of the supplemental Statement provided to each beneficiary of an interest in
this property must be attached to the supplemental Information Return.
With respect to property in the probate estate or held by a revocable trust at the
decedent’s death, if an event described in the foregoing paragraph occurs after the decedent’s
date of death but before or on the date the property is distributed to the beneficiary, the due
date for the supplemental Information Return and corresponding supplemental Schedule A is
the date that is 30 days after the date the property is distributed to the beneficiary. If the
executor chooses to furnish to the beneficiary a Schedule A that includes information regarding
any changes to the basis of the reported property (within Reg. §1.1014-10(a)(2)) that occurred
after the date of death but before or on the date of distribution, that basis adjustment information
(which is not part of the requirement under Code §6035) must be shown separately from the
final value required to be reported on that Schedule A.
Schedule A provides a box at the top of the schedule to check if the filing is
supplemental.
A supplemental Information Return and Statement(s) are not required to be filed in the
following instances: (1) to correct an inconsequential error or omission within the meaning of
Reg. §301.6722-1(b); or (2) to specify the actual distribution of property previously reported as
being available to satisfy the interests of multiple beneficiaries.
The regulations warn that changes requiring supplement under this rule are not
inconsequential errors or omissions within the meaning of Reg. §301.6722-1(b) (penalties for
failure to furnish a correct beneficiary Statement).
Form 8971 and Schedule(s) A may not be filed electronically.
In the event of an audit of an estate tax return, Form 8971 and Schedules A should be
provided to the IRS office conducting the audit.
1.5.5
Communication With the Return Preparer
Permission to discuss Form 8971 and attached Schedule(s) A is limited to information
reported or required to be reported on these forms. It does not authorize the return preparer to
represent the estate before the IRS or to enter into agreements with the IRS respecting these
forms. The taxpayer must complete and attach Form 2848 (Power of Attorney) if the executor
would like the return preparer to represent the estate before the IRS with respect to these forms
or other matters pertaining to the estate. If the executor would like the return preparer to receive
other confidential information pertaining to the estate, a Form 8821 (Tax Information
Authorization) should be completed.
A paid return preparer may sign the original or amended Form 8971 by rubber stamp,
mechanical device, or computer software program as alternatives to a handwritten signature.
13
1.5.6
Penalties
The IRS will impose penalties for late filed and/or incorrect Forms 8971 and Schedule(s)
A. Code §6721. Only one penalty will apply for all failures relating to a single filing of a single
Form 8971 and the Schedule(s) A required to be filed with that form. Each filing of a Form 8971
with Schedule(s) A is a separate filing, regardless of whether the filing is of the initial Form 8971
and Schedule(s) A or a supplemental Form 8971 and Schedule(s) A. The amount of the penalty
depends on when the correct Form 8971 and Schedule(s) A is filed. The penalty is:
•
$50 per Form 8971 (including attached Schedule(s) A) if it is filed within 30 days after
the due date. The maximum penalty is $500,000 per year (or $175,000 if the
taxpayer qualifies for lower maximum penalties).
•
$250 per Form 8971 (including attached Schedule(s) A) if it is filed more than 30
days after the due date or if it is not filed. The maximum penalty is $3 million per year
($1 million if the taxpayer qualifies for lower penalties.)
The executor or other person required to file qualifies for the lower maximum penalties if
their average gross receipts for the three most recent tax years (or for the period they were in
existence, if shorter) ending before the calendar year in which the information returns were due
total $5 million or less.
If any failure to file a correct Form 8971 or Schedule A is due to intentional disregard of
the requirements to file correct forms, the penalty is at least $500 per Form 8971 and the
Schedule(s) A required and no maximum penalty applies.
An inconsequential error or omission is not considered a failure. An inconsequential
error or omission does not prevent the IRS from processing the form or schedules. Errors and
omissions that are never considered inconsequential are those related to the taxpayer
identification number (social security number, individual taxpayer identification number, or other
number used by the IRS for administration), taxpayer’s surname, and the value of the asset the
beneficiary is receiving from the estate.
Foreign beneficiaries who do not have a taxpayer identification number and who receive
property subject to reporting on Schedule A will need to obtain an individual taxpayer
identification number (ITIN). The IRS has published guides for individuals to obtain an ITIN.5 If
the foreign beneficiary-recipient of an asset otherwise requiring Form 8971 and Schedule A
compliance does not want to obtain an ITIN, then the executor will likely have to fund the
bequest in cash or with other excluded assets before the Information Return is filed to avoid
issuing a Schedule A to that beneficiary. As a point of caution, the sale of a specifically
bequeathed asset (such as real property or other unique asset) to facilitate the avoidance of
obtaining an ITIN may be more difficult or unwelcome to the foreign beneficiary who wants to
receive the particular asset given. The executor may prefer to address these considerations
early in the administration process to promote understanding and offer choices where
appropriate.
A similar penalty schedule and terms described above apply for the failure to furnish
correct Schedule(s) A to beneficiaries by the due date. Code §6722.
Beneficiaries who report basis in property that is inconsistent with the amount on the
Schedule A may be liable for a 20% accuracy penalty. Code §6662.
Penalties for failing to file a correct Form 8971 or Schedule(s) A will not apply to any
5
See, Form W-7, Topic 857 - Individual Taxpayer Identification Number (ITIN) on the IRS
website, and for more information, refer to Publication 519, U.S. Tax Guide for Aliens, as to the
Individual Taxpayer Identification Number (ITIN).
14
failure that is shown to be due to reasonable cause and not willful neglect. See, Code §6724
and cross-references thereto in Reg. §§6035-1(h)(1) and (2). The IRS notes that in general it
must be shown that the failure was due to an event beyond the control of the taxpayer or due to
significant mitigating factors. It must further be shown that the executor or other person required
to file acted in a responsible manner and took steps to avoid the failure.
The penalty amount and ceilings are inflation adjusted. For example, see Rev. Proc.
2015-53.
1.6
Description of Beneficiaries and Relationship to Reporting Requirements
The executor must furnish the Statement (i.e., Schedule A) containing the required
information regarding that beneficiary’s property to each beneficiary (including a beneficiary who
is also an executor) receiving property that must be reported on the Information Return filed with
the IRS,. Reg. §1.6035-1(c). (See §1.4, supra, for the definition of Information Return and
Statement.)
The term “beneficiary” includes individuals, trusts, entities, estates, or other recipients of
property with respect to which the reporting requirements apply. Reg. §1.6035-1(c)(2). For
purposes of this rule, the beneficiary of a life estate is the life tenant; the beneficiary of a
remainder interest is the remainderman identified as if the life tenant were to die immediately
after the decedent; and the beneficiary of a contingent interest is a beneficiary, unless the
contingency has occurred prior to the filing of Form 8971. Reg. §1.6035-1(c)(1). If the
contingency subsequently negates the inheritance of the beneficiary, the executor must do
supplemental reporting to report the change of beneficiary.
If the beneficiary has not been determined by the due date for the Information Return, or
the executor has not determined what property will be used to satisfy the interest of each
beneficiary, the executor must report on the Schedule A for each such beneficiary all of the
property that the executor could use to satisfy that beneficiary’s interest.
The instructions and the regulations are inconsistent respecting the executor’s filing
responsibilities when the identification of which recipients will receive particular property or
interests therein is undetermined. Reg. §1.6035-1(c) states, “Once the exact distribution has
been determined, the executor may, but is not required to, file and furnish a supplemental
Information Return and Statement…” On the other hand, the instructions provide, “A
supplemental Form 8971 and corresponding Schedule(s) A should be filed once the distribution
to each such beneficiary has been made.”
However, the executor has a duty to Supplement the Information Return and
Statement(s) in the event of the discovery of additional or unreported assets or changes in
valuation. (See §1.5.4, supra, regarding the duty to supplement the Return Information and
Statement, and §1.8, infra, regarding unreported or omitted assets.)
The executor must use reasonable due diligence to identify and locate all beneficiaries. Reg.
§1.6035-1(c)(4). The IRS must be informed with the filing of the Form 8971 of any inability to
locate a beneficiary by the due date. In addition, the executor must explain the efforts the
executor has taken to locate the beneficiary and to satisfy the obligation of reasonable due
diligence. If the executor subsequently locates the beneficiary, the executor must furnish the
beneficiary with that beneficiary’s Schedule A and file a supplemental Information Return with
the IRS within 30 days of locating the beneficiary. A copy of the beneficiary’s Schedule A must
be attached to the supplemental Information Return. If the executor is unable to locate a
beneficiary and distributes the property to a different beneficiary who was not identified in the
Information Return as the recipient of that property, the executor must file a supplemental
Information Return with the IRS and furnish the substitute beneficiary with that beneficiary’s
Schedule A within 30 days after the property is distributed. Reg. §1.6035-1(c)(4).
15
The proposed regulations have added a controversial requirement in Reg. §1.6035(f) in
which certain transferees who receive carryover basis must file and furnish the Information
Return. (See §1.7, infra.) As discussed in the next section, the executor is not the only one with
a reporting requirement.
1.7
Subsequent Transfers by Recipients and Reporting Duties
Among the most controversial requirements under the proposed regulations is Reg.
§1.6035(f) that compels the beneficiary who receives property required to be reported on an
Information Return (see §1.4, supra, for the definition of Information Return) to provide the
Information Return to anyone who receives that property in a non-recognition event. This
imposes a reporting obligation on persons other than executors of the estate tax return (or
persons with greater knowledge about the value or nature of an asset than the executor and to
whom an estate tax reporting obligation applies). In this case, the duty would fall upon donees
of gifts or other related transferees6 who receive property in a non-recognition event.
Apart from the larger question regarding whether the regulations can expand reporting
requirements to include subsequent transferees, some more mundane issues arise:
1.
Does a beneficiary who establishes a revocable living trust have to file a Form
8971 and furnish the Schedule A to the trustee of that settlor’s trust? Given the
inclusion of any trust in which the grantor is treated as the owner within the
definition of a related transferee, this appears to be the case. If this is the case, it
will constitute a horrid trap for estate planners.
2.
Are trustees who receive property subject to Information Return reporting
required to file and furnish Form 8971/Schedule A when distributing property to a
related transferee? While such would appear to be the case, Reg. §1.6035-1(f)
does not expressly include a trustee within the definition of a related transferee.
3.
Recipients of part-exchange, part-sale transactions.
The related transferee who becomes a recipient/transferor must, no later than 30 days
after the date of the distribution or other transfer, file with the IRS a supplemental Information
Return (i.e., Form 8971 and each Schedule A related to that recipient/transferor) and furnish the
Statement (i.e., Schedule A; see §1.4, supra, for the definition of this term), and a copy of the
same supplemental Statement to the transferee. The requirement to file a supplemental
Statement and furnish a copy to the transferee similarly applies to the distribution or transfer of
any other property the basis of which is determined in whole or in part by reference to that
property (for example as the result of a like-kind exchange or involuntary conversion).
In the case of a supplemental Statement filed by the recipient/transferor before the
recipient/transferor’s receipt of the Statement from the executor, the supplemental Statement
will report the change in the ownership of the property and need not provide the value
information that would otherwise be required on the supplemental Statement.
In the event the transfer occurs before the final value is determined, the transferor must
provide the executor with a copy of the supplemental Statement filed with the IRS and furnished
to the transferee in order to notify the executor of the change in ownership of the property.
When the executor subsequently files any return and issues any Statement required by
6
Reg. §1.6035-1(f): A related transferee means any member of the transferor’s family as
defined in Code §2704(c)(2); any controlled entity (a corporation or any other entity in which the
transferor and members of the transferor’s family [as defined in Code §2704(c)(2)], whether
directly or indirectly, have control within the meaning of Code §2701(b)(2)(A) or (B)), and any
trust of which the transferor is a deemed owner for income tax purposes.
16
paragraphs (a) or (e) of Reg. §1.6035-1, the executor must provide the Statement (or
supplemental Statement) to the new transferee instead of to the transferor.
If the transferor chooses to include, on the supplemental Statement provided to the
transferee, information regarding any changes to the basis of the reported property that
occurred during the transferor’s ownership of the property, then that basis adjustment
information (which is not part of the requirement under Code §6035) must be shown separately
from the final value required to be reported on that Statement.
1.8
Problems with Omitted or Unreported Assets
Note that the starting point for income tax basis under the definition of “final value” is the
value of assets within the scope of Code §1014(f) as reported on the estate tax return.
Accordingly, the filing of an estate tax return is required to establish the final value unless the
final value is determined by a subsequent event described in §1.4, supra . See, Reg. §1.101410(c)(1). The filing of the estate tax return with values reported is the first step in establishing
income tax basis when an estate tax return is required. Thus, it appears under Reg. §1.101410(c)(1) that if an estate tax return is required but the fair market value as of the filing of the
estate tax return is not shown on the estate tax return, then the income tax basis is zero (unless
a later event determines final value).
The principle of a zero-income-tax basis applies potentially to after-discovered or omitted
property that falls within property to which the basis consistency rules apply. (See Reg.
§1.1014-10(b) for the definition of property within the basis consistency rules.) In the event that
property to which the basis consistency rules apply is discovered after the required estate tax
return has been filed or is omitted from that return (after-discovered or omitted property), the
final value of that property is determined under the following rules:
•
First, the final value of the after-discovered or omitted property is determined in
accordance with the final value rules discussed under the described and defined
terms in §1.4, supra, if the executor, prior to the expiration of the period of limitation
on assessment of the estate tax, files with the IRS an initial or supplemental estate
tax return under Code §6018 reporting the property.
•
Second, if the executor does not report the after-discovered or omitted property on
an initial or supplemental estate tax return filed prior to the expiration of the period of
limitation on assessment of the estate tax, the final value of that unreported property
is zero.
•
Third, if no estate tax return required under Code §6018 has been filed, and if the
inclusion in the decedent’s gross estate of the after-discovered or omitted property
would have generated or increased the estate’s tax liability, the final value, for
purposes of Code §1014(f), of all property to which the basis consistency rules apply
is zero until the final value is determined under the general rule. Specifically, if the
executor files a return pursuant to Code §§6018(a) or (b) that includes this property
or the IRS determines a value for the property, the final value of all property within
the scope of Code §1014(f) includible in the gross estate then is determined in
accordance with the definition of final value.
Example 11: The executor files a required Form 706 but omits an asset, or later
discovers that an asset exits. The executor files and furnishes Form 8971 and Schedule(s) A as
required based on the known assets. After the foregoing filing, the executor determines that
another asset exists (assuming in this instance a fair market value of $400,000 as of the date of
death). If the executor supplements the estate tax return and files and furnishes Form 8971 and
Schedule(s) A within the statute of limitations for assessment of estate tax, the basis to the
recipient is $400,000. If, on the other hand, the executor does not supplement the estate tax
17
within the limitations period and file and furnish Form 8971 and Schedule(s) A within the
assessment period, the income tax basis for the after-discovered or omitted asset is zero.
If executors are uncertain of value when the estate tax return is filed, the safer course
would be to take the best estimate feasible. Indicate the uncertainty of value and that the
obtaining of a qualified appraisal is in process. This disclosure may assist with later penalty
abatement if the valuation is low and avoid the valuation being successfully asserted as an
admission if the value is too high. Then, supplement the estate tax return and supplement any
Information Returns and Statement(s) provided under Code §6035. If no value is indicated on
the initial return, the income tax basis will also be zero under the initial definition of final value.
The foregoing reflects one of the most significant consequences of the basis consistency
rules. Prior to the consistency rules of Code §1014(f) and proposed regulations, no requirement
existed by which basis adjustment to date of death value was dependent on the filing of an
estate tax return. Reg. §1.1014-2(a) (par. (5) and (6)) and §1.1014-2(b). Estate tax returns
cannot be amended once filed unless time remains to file the return, as extended. Reg.
§20.6081(d) provides that an estate tax return “may” be supplemented. It does not mandate the
supplementing of the estate tax return. Under Code §6501(a), the IRS generally has three years
from the filing of the estate tax return to assess tax. That period is extended to six years in the
event that assets representing greater than 25% of the value of the gross estate are not
reported. Code §6501(e(2). In Woods (Estate of Williamson) v. Comr., T. C. Memo 1996-426, T.
C. Memo 1997-77 the tax court concluded that the IRS had sufficient information regarding
uncertainty of assets in the gross estate as a result of disclosures in the application for
extension of time to file the estate tax return to determine that the three-year statute applied, not
the longer assessment period. The IRS was prohibited from assessing additional estate tax, and
the estate tax was not sanctioned for failing to file a supplemental return even though the
additional assets in the gross estate were resolved to be part of the gross estate within the
three-year assessment period. Under this regulation the income tax basis for the undisclosed
asset is zero.
Comment: As a general observation, it is preferable to file a Form 706 if the estate is
close to the filing requirement to avoid penalties for late filing or late payment if facts––
including but not limited to later-discovered property or additional adjusted taxable gifts–
–would compel the filing of the return, if known. The IRS recognizes that executors may
want to file estate tax returns even if it appears that the return is not required under
Code §6018. Reg. §1.6035-1 expressly excludes such protective estate tax returns from
the reporting and furnishing requirements (i.e., Form 8971 and Schedule(s) A) for estate
tax returns the values of which are below the filing threshold of Code §6018. If assets
are later discovered such that it is determined that a filing requirement did, in fact, exist
for the decedent’s estate, then all elements apply: basis consistency, filing the
Information Return, and furnishing the Statement to the beneficiaries.
1.9
Post-Death Basis Adjustments and Impact of Other Law That Establish Income
Tax Basis
The final value determines the initial basis. Adjustments, however, to basis of property
may arise from post-death events or other provisions of law. Such adjustments are not
prohibited adjustments and do not result in accuracy-related penalties. Reg. §1.1014-10(a)(2)
respects that basis adjustments subsequent to death or the determination of the final estate tax
value may arise and should be respected for these purposes. Thus, the taxpayer’s initial basis
18
in that property may be adjusted due to the operation of other provisions of the Code governing
basis without violating the general rule of Reg. §1.1014-10(a)(1).
For example, post-death adjustments may include gain recognized by the decedent’s
estate or trust upon distribution of the property, post-death capital improvements and
depreciation, and post-death adjustments to the basis of an interest in a partnership or S
corporation. In response to an issue raised by this author, the regulations conclude that the
existence of recourse or non-recourse debt secured by property at the time of the decedent’s
death does not affect the property’s basis, whether the gross value of the property and the
outstanding debt are reported separately on the estate tax return or the net value of the property
is reported.7 Therefore, post-death payments on such debt do not result in an adjustment to the
property’s basis.
Non-recourse debt and partnership or limited liability company (LLC) interests subject to
debt provide examples in which the income tax basis can exceed the estate tax value. The
problem created by Code §1014(f)(1) is its limitation of income tax basis to not exceed the
estate tax value. To get around that result while enabling the recipient to receive the benefit
from lawful basis adjustments, the regulations allow for the debt to be included on Schedule A
value when the debt is non-recourse and is against the property owned by the estate; and the
regulations allow the beneficiary to use debt with basis when allowed by income tax law in the
situation of the partnership.
As a general reference, the regulations direct that property in the gross estate to which
non-recourse debt applies shall be reported on a net-asset value method. On the other hand,
when recourse debt exists, the gross value is reported on the relevant schedule and the
deduction is shown on Schedule K of Form 706. Reg. §20.2053-7 and instructions to Form 706
(see Schedule A). If the beneficiary or estate is limited to the estate tax value, there would be
no basis arising from the non-recourse debt. That would not be right. The regulations correct for
that fact.
A partnership or LLC interest may be valued on a net-asset value method to which debt
reduces value. Debt, however, is added to basis when the partner or member bears the
economic risk associated with that debt. Different rules apply under Code §742 and Reg.
§1.742-1 for the determination of economic risk. Reg. §1.1014-10(e)(i) provides for the
adjustment to basis for debt and availability for that debt in the determination of income tax
basis by the beneficiary. The same result applies if the debt is recourse in the partnership or
LLC setting and the partner/member bears the economic risk.
The following three examples are included in Reg. §1.1014-10(e) to illustrate the
foregoing points concerning (1) post-death events and (2) application of other law changing
basis.
(1)
Partnership Interest with Non-Recourse Debt. The first example assumes that
the decedent (D) owns 50% of a general partnership, which has $2 million of non-recourse debt,
and that the partnership has a value of $8 million, and that D’s interest has a reported (and
accepted) estate tax value of $4 million. D’s sole beneficiary is C, D’s child. C sells the interest
for $6 million in cash shortly after receipt of the partnership interest. Result: Under these facts,
the final value of D’s interest is $4 million. Under §742 and Reg. §1.742-1, C’s basis in the
interest in the general partnership at the time of its sale is $5 million (the final value of D’s
interest [$4 million] plus 50% of the $2 million nonrecourse debt). Following the sale of the
7
Schiller, Estate Planning At The Movies®: Due to Technical Difficulties, Your New Statute on
Consistency with Basis Reporting Cannot Be Viewed in Its Entirety, Leimberg Information
Services, Inc. Newsletter #2346, published 9/23/2015. See Crane v. Comr., 331 U.S. 1 (1947),
aff'g 153 F.2d 504 (2d Cir. 1945), rev'g 3 T.C. 585 (1944).
19
interest, C reports a taxable gain of $1 million. C has complied with the consistency requirement
of paragraph (a)(1) of Code §1014(f).
Had the 50% interest been finally determined to have a value of $4.5 million (such as
with an audit adjustment increasing in the value of the real property), C could claim a basis of
$5.5 million at the time of sale and report gain on the sale of $500,000 in the foregoing example,
as modified for the increase in value.
(2)
Additions Made to Property. The second example under this regulation
considers post-death improvements to property. In this instance, D’s unencumbered residence
is left to C. D’s executor reports the value of the residence on the estate tax return at $600,000
and pays the tax liability. The IRS timely contests the reported value and determines that the
value of the residence is $725,000. The parties enter into a settlement agreement that provides
that the value of the residence for estate tax liability is $650,000. The final value of the
residence is $650,000. Some years later, C adds a master suite to the residence at a cost of
$45,000. As a result of Code §1016(a), C’s basis in the residence is increased by $45,000 to
$695,000. Subsequently, C sells the residence to an unrelated third party for $900,000. C
claims a basis in the residence of $695,000 and reports a gain of $205,000 ($900,000 –
$695,000). C has complied with the consistency.
(3)
Non-Recourse Debt. In this example, D’s gross estate includes a residence
valued with a gross value of $300,000 encumbered by nonrecourse debt in the amount of
$100,000. Title to the residence is held jointly by D and C (D’s daughter) with rights of
survivorship, and under §2040 the property is fully included in D’s gross estate since D provided
all the consideration for the residence. The executor reports the value of the residence as
$200,000 on the return and claims no other deduction for the debt. The Statement required by
Code §6035 reports the value of the residence as $300,000. C sells the residence before the
final value is determined for $375,000 and claims a gain of $75,000 on C’s Federal income tax
return.
As a corollary to these facts, if the court subsequently determines that the value of the
residence was $290,000 and the time for contesting this value in any court expires before the
expiration of the period for assessing C’s income tax for the year of C’s sale of the property, the
final value of the residence is $290,000, which is below the initially reported value. Because C
claimed a basis in the residence that exceeds the final value, C would have a deficiency and
underpayment arising from the increased gain over the corrected basis.
The following comments apply to the foregoing example(s):
•
First, example (1) does not address whether C is able to make depreciation
deductions based on the $5 million value assuming that a Code §754 election or
Code §732(d) election is in effect. It would appear that basis adjustment would be
allowable for depreciation purposes because that is a post-death event of tax
consequence.
•
Second, Treasury and the IRS took the most direct approach in dealing with nonrecourse debt when a liability exists against an asset in the gross estate yet neither
the decedent nor the estate is personally liable for the debt. In this example, the
executor can report the gross value and is not left to report only net asset value.
However, in example (1), in the foregoing regulation, the debt is not included in the
reported value on the Information Return or Statement. Instead the beneficiary is
provided that information as an item apart from what is required to be included on
Schedule A. It is important for the executor to provide the information regarding debt
to the beneficiary and the executor can refer the beneficiary to his or her tax advisor
to determine the application of that debt to basis or other tax elections. In the
20
alternative, the executor could provide this information in a separate letter. The
author prefers that the information be included in an attachment to the Schedule A so
that the IRS is also aware of this fact. It may make life easier for the beneficiary to
explain such treatment to the IRS and to make the information part of the permanent
record under a reported form.
Finally, the regulation’s illustration of the partnership (or LLC debt) does not answer the
question respecting whether the estate (or trust) can benefit from the increase in basis as a
result of the debt. This consideration can apply both with respect to inside basis (for example if
an election is made under §754 before the interest is distributed to the beneficiary) or in the
event that the estate sells the entity interest. In both situations, the estate/trust is simply seeking
to apply other provisions of the Code that allow for basis adjustment. The §754 election is a
post-death event. The adjustment to the outside basis of the partnership/entity interest arises as
a result of death. It appears to the author that the following sentence of Reg. §1.1014-10(a)(2)
allows for the estate/trust to benefit from the basis adjustment arising from the application of
§742 and Reg. §1.742-1:
The final value within the meaning of paragraph (c) of this section is the
taxpayer’s initial basis in the property. In computing at any time after the
decedent’s date of death the taxpayer’s basis in property acquired from the
decedent or as a result of the decedent’s death, the taxpayer’s initial basis in that
property may be adjusted due to the operation of other provisions of the Internal
Revenue Code (Code) governing basis without violating paragraph (a)(1) of this
section.
The author believes it would be helpful for Treasury or the IRS to clarify the allowance
for the estate/trust to take advantage of the increase in basis irrespective of whether post-death
events (such as a §754 election is made) when the basis adjustment arises under other
sections of the Code irrespective of post-death events. The author believes the second
sentence of the quote above supports a favorable interpretation and result of this issue as the
intent of the new law is to promote consistency in basis reporting, not to deprive taxpayers of
lawful basis adjustment.
1.10
Non-Resident Aliens
The basis consistency and reporting requirements apply to the estates of non-resident
aliens who are not United States citizens with respect to property situated in the United States
under Code §2016. Reg. §1.1014-10(b)(1). Estate tax returns are required returns for nonresident aliens who are not United States citizens once the value of the gross estate of property
situated in the United States is greater than $60,000 in value. Code §6018(b).
1.11
Helpful Practice Tool
As a practical matter, you will find it much easier to work with software that integrates the
preparation of the Form 706 with Form 8971. The author understands that the software
programs offered by The Lackner Group, Inc. www.lacknergroup.com (809-709-1041), GEMS
(http://www.gillettpublishing.com/gem706.php), and LaCerte contain this feature. Vince Lackner,
President of the Lackner Group, was of assistance to this author with comments regarding
limitations with the proposed regulations, and I provided comments for the inter-active work-flow
tree offered by the Lackner Group (available at http://us8971.visual.legal). To view these
valuable interactive forms, it works best if you use the internet browsers Chrome, Firefox, or
Safari. Internet Explorer does not yet support the graphics that these charts require. Attached as
“Appendix 1” is a copy of the 13 elements in the flow-chart for your reference or that of the
executor, the utility of which you will best experience on the inter-active platform:
21
(1) who must file
(2) asset increases estate tax liability (“basis consistency”)
(3) estate tax value
(4) final value
(5) after-discovered or omitted property
(6) what property to include
(7) beneficiary defined
(8) beneficiary not an individual
(9) beneficiary not determined
(10) beneficiary not located
(11) when to file
(12) supplemental filing
(13) subsequent transfers
Inclusion of Exhibit 1 is with the permission of The Lackner Group, Inc., which holds the
copyright on these materials.
22
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Basis Consistency
Form 706 and 8971
Samples
Proposed Regulations
by
Vincent F. Lackner, Jr., Esq.
The Lackner Group, Inc.
Pittsburgh, PA
Strafford
June 1, 2016
Table of Contents
706 and 8971
DOD Value ................................................................................................
All Cash .....................................................................................................
Alternate Value ..........................................................................................
Supplemental ............................................................................................
1
30
39
55
Proposed Regulations
Table of Contents (unofficial) .................................................................... 65
Introduction ............................................................................................... 70
Background ............................................................................................... 74
1.1014-10 Basis of property acquired from a decedent ............................ 93
1.6035-1 Basis information to persons acquiring property .................... 100
8971
(DOD Value)
1
706
Form
(Rev. August 2013)
United States Estate (and Generation-Skipping
Transfer) Tax Return
OMB No. 1545-0015
Estate of a citizen or resident of the United States (see instructions).
To be filed for decedents dying after December 31, 2012.
1a Decedent’s first name and middle initial (and maiden name, if any)
1b Decedent’s last name
Department of the Treasury
Internal Revenue Service
Part 1. – Decedent and Executor
3a
City, town, or post office; county; state or province; country; and ZIP or
foreign postal code.
Decedent’s Social Security No.
3b Year domicile established
4 Date of birth
5 Date of death
01-01-2016
, PA
6a
Name of executor (see instructions)
6c
Executor’s social security number (see instructions)
6b
Executor’s address (number and street including apartment or suite no.; city, town,
or post office; state or province; country; and ZIP or foreign postal code) and phone no.
Phone no.
6d If there are multiple executors, check here
7a Name and location of court where will was probated or estate administered
8
1
2
3a
b
c
4
5
6
7
8
9a
9b
7b Case number
X and attach a certified copy of the will. 9
If decedent died testate, check here
11
10
Part 2. — Tax Computation
2
8971
Total gross estate less exclusion (from Part 5, Recapitulation, item 13).................................................................
Total allowable deductions (from Part 5, Recapitulation, item 24))..........................................................................
Tentative taxable estate (subtract line 2 from line 1)...............................................................................................
Deduction for state death taxes...............................................................................................................................
Taxable estate (subtract line 3b from line 3a)..........................................................................................................
Adjusted taxable gifts (see instructions)...................................................................................................................
Add lines 3c and 4....................................................................................................................................................
Tentative tax on the amount on line 5 from Table A in the instructions...................................................................
Total gift tax paid or payable (see instructions)........................................................................................................
Gross estate tax (subtract line 7 from line 6)...........................................................................................................
Basic exclusion amount...................................................................................
9a
5,450,000.00
Deceased spousal unused exclusion (DSUE) amount from predeceased spouse(s), if
any (from Section D, Part 6 - Portability of Deceased Spousal Unused Exclusion) ..........
9c Applicable exclusion amount (add lines 9a and 9b).........................................
9d Applicable credit amount (tentative tax on the amount in 9c from Table A
in the instructions)............................................................................................
10 Adjustment to applicable credit amount (May not exceed $6,000. See
instructions.).....................................................................................................
23,667,430.00
100,000.00
23,567,430.00
1
2
3a
b
c
4
5
6
7
23,567,430.00
23,567,430.00
9,372,772.00
8
9,372,772.00
9b
9c
5,450,000.00
9d
2,125,800.00
10
11
12
Allowable unified credit (applicable credit amount) (subtract line 10 from line 9d)..................................................
Subtract line 11 from line 8 (but do not enter less than zero)..................................................................................
11
12
2,125,800.00
7,246,972.00
13
14
15
16
17
18
19
20
0.00
Credit for foreign death taxes (from Schedule(s) P). (Attach Form(s) 706-CE.) 13
0.00
14
Credit for tax on prior transfers (from Schedule Q)..........................................
Total credits (add lines 13 and 14)...........................................................................................................................
Net estate tax (subtract line 15 from line 12)...........................................................................................................
Generation-skipping transfer (GST) taxes (from Schedule R, Part 2, line 10) .....................................................
Total transfer taxes (add lines 16 and 17)................................................................................................................
Prior payments. Explain in an attached statement...................................................................................................
Balance due (or overpayment) (subtract line 19 from line 18).................................................................................
15
16
17
18
19
20
0.00
7,246,972.00
0.00
7,246,972.00
7,246,972.00
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, it is true, correct, and complete. Declaration of preparer other than the executor is based on all information of which preparer has any knowledge.
Sign
Here
Signature of executor
Date
Signature of executor
Print/Type preparer's name
Paid
Preparer
Use Only
Firm's name
Firm's address
For Privacy Act and Paperwork Reduction Act Notice, see instructions.
Copyright 2015 form software only The Lackner Group, Inc.
RGA
Date
Preparer's signature
Date
Check
if
self-employed
PTIN
Firm's EIN
Phone no.
Form
706
(Rev. 8-2013)
2
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 01/01/2016
Part 3 -- Elections by the Executor
Note. For information on electing portability of the decedent's DSUE amount, including how to opt out of the election, see Section A of
Part 6-Portability of Deceased Spousal Unused Exclusion.
Note. Some of these elections may require the posting of bonds or liens.
Yes No
Please check the “Yes” or “No” box for each question (see instructions).
1 Do you elect alternate valuation? .............................................................................................................................................................. 1
2 Do you elect special-use valuation? If “Yes,” you must complete and attach Schedule A-1 .................................................................... 2
3 Do you elect to pay the taxes in installments as described in section 6166?.............................................................................................
If “Yes,” you must attach the additional information described in the instructions.
Note. By electing section 6166, you may be required to provide security for estate tax deferred under section 6166
and interest in the form of a surety bond or a section 6324A lien.
3
4 Do you elect to postpone the part of the taxes attributable to a reversionary or remainder interest as described in section 6163?......... 4
Part 4 -- General Information
(Note. Please attach the necessary supplemental documents. You must attach the death certificate.)
(see instructions).
Authorization to receive confidential tax information under Regs. sec. 601.504(b)(2)(i); to act as the estate’s representative before the IRS; and to make written or
oral presentations on behalf of the estate:
Name of representative (print or type)
State
Address (number, street, and room or suite no., city, state, and ZIP code)
I declare that I am the
attorney/
certified public accountant/
enrolled agent (check the applicable box) for the executor. I am not under suspension or
disbarment from practice before the Internal Revenue Service and am qualified to
in the state shown above.
Signature
CAF number
Date
Telephone number
1 Death certificate number and issuing authority (attach a copy of the death certificate to this return).
2 Decedent’s business or occupation. If retired, check here
3a Marital status of the decedent at time of death:
Widow/widower
Married
and state decedent’s former business or occupation.
Single
Legally separated
Divorced
3b For all prior marriages, list the name and SSN of the former spouse, the date the marriage ended, and whether the marriage ended by
annulment, divorce, or death. Attach additional statements of the same size if necessary.
4a Surviving spouse’s name
4b Social security number
4c Amount received (see instructions)
None
5 Individuals (other than the surviving spouse), trusts, or other estates who receive benefits from the estate (do not include charitable beneficiaries
shown in Schedule O) (see instructions).
Name of individual, trust, or estate receiving $5,000 or more
Identifying number
Relationship to decedent
Amount (see instructions)
All unascertainable beneficiaries and those who receive less than $5,000......................................................................
Total..........................................................................................................................................................................................
If you answer “Yes” to any of the following questions, you must attach additional information as described.
6 Is the estate filing a protective claim for refund? ............................................................................................................................................
If “Yes,” complete and attach two copies of Schedule PC for each claim.
7 Does the gross estate contain any section 2044 property (qualified terminable interest property (QTIP) from a prior gift or estate)
(see instructions)? .........................................................................................................................................................................................
8 a Have federal gift tax returns ever been filed? ................................................................................................................................................
If “Yes,” attach copies of the returns, if available, and furnish the following information:
b Period(s) covered
c Internal Revenue office(s) where filed
Yes No
9 a Was there any insurance on the decedent’s life that is not included on the return as part of the gross estate? ...........................................
b Did the decedent own any insurance on the life of another that is not included in the gross estate? ............................................................
(continued on next page)
Copyright 2015 form software only The Lackner Group, Inc.
3
Page 2
Form 706
(Rev. 8-2013)
Estate of:
8971 01/01/2016
Decedent's Social Security Number
Part 4 - General Information (continued)
If you answer “Yes” to any of the following questions, you must attach additional information as described in the instructions.
10 Did the decedent at the time of death own any property as a joint tenant with right of survivorship in which (a) one or more of
the other joint tenants was someone other than the decedent’s spouse, and (b) less than the full value of the property is included
on the return as part of the gross estate? If “Yes,” you must complete and attach Schedule E ...................................................................
Yes No
11a Did the decedent, at the time of death, own any interest in a partnership (for example, a family limited partnership), an
unincorporated business, or a limited liability company; or own any stock in an inactive or closely held corporation?.................................
b If “Yes,” was the value of any interest owned (from above) discounted on this estate tax return? If “Yes,” see the instructions on
reporting the total accumulated or effective discounts taken on Schedule F or G ........................................................................................
12 Did the decedent make any transfer described in section 2035, 2036, 2037, or 2038 (see the instructions)? If "Yes," you must
complete and attach Schedule G"..................................................................................................................................................................
13a Were there in existence at the time of the decedent’s death any trusts created by the decedent during his or her lifetime? .......................
b Were there in existence at the time of the decedent’s death any trusts not created by the decedent under which the decedent
possessed any power, beneficial interest, or trusteeship? ............................................................................................................................
c Was the decedent receiving income from a trust created after October 22, 1986 by a parent or grandparent? ...........................................
If “Yes,” was there a GST taxable termination (under section 2612) on the death of the decedent? ............................................................
d If there was a GST taxable termination (under section 2612), attach a statement to explain. Provide a copy of the trust or will
creating the trust, and give the name, address, and phone number of the current trustee(s).
e Did decedent at any time during his or her lifetime transfer or sell an interest in a partnership, limited liability company, or closely
held corporation to a trust described in question 13a or 13b? ......................................................................................................................
If “Yes,” provide the EIN number for this transferred/sold item.
14 Did the decedent ever possess, exercise, or release any general power of appointment? If “Yes,” you must complete and attach Schedule H ........................
15 Did the decedent have an interest in or a signature or other authority over a financial account in a foreign country, such as a
bank account, securities account, or other financial account? .....................................................................................................................
16 Was the decedent, immediately before death, receiving an annuity described in the “General” paragraph of the instructions for
Schedule I or a private annuity? If “Yes,” you must complete and attach Schedule I ...................................................................................
17 Was the decedent ever the beneficiary of a trust for which a deduction was claimed by the estate of a pre-deceased spouse
under section 2056(b)(7) and which is not reported on this return? If “Yes,” attach an explanation .............................................................
Part 5 - Recapitulation
Item no.
1
2
3
4
5
6
7
8
9
10
11
12
13
Item no.
14
15
16
17
18
19
20
21
22
23
24
Schedule A
Schedule B
Schedule C
Schedule D
Schedule E
Schedule F
Schedule G
Schedule H
Schedule I
Gross estate
— Real Estate..............................................................................................
— Stocks and Bonds ...................................................................................
— Mortgages, Notes, and Cash ..................................................................
— Insurance on the Decedent’s Life (attach Form(s) 712) ..........................
— Jointly Owned Property (attach Form(s) 712 for life insurance) ..............
— Other Miscellaneous Property (attach Form(s) 712 for life insurance) ..................
— Transfers During Decedent’s Life (attach Form(s) 712 for life insurance) .............
— Powers of Appointment ...........................................................................
— Annuities .................................................................................................
Alternate value
Value at date of death
800,000.00
11,954,200.00
650,000.00
250,000.00
0.00
13,230.00
10,000,000.00
0.00
0.00
1
2
3
4
5
6
7
8
9
10
Total gross estate (add items 1 through 10) .................................................................... 11
Schedule U — Qualified Conservation Easement Exclusion .......................................... 12
Total gross estate less exclusion (subtract item 12 from item 11). Enter here
and on line 1 of Part 2 - Tax Computation ...................................................................... 13
Deductions
Schedule J — Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims ...............
Schedule K — Debts of the Decedent .....................................................................................................................
Schedule K — Mortgages and Liens .......................................................................................................................
Total of items 14 through 16 .....................................................................................................................................
Allowable amount of deductions from item 17 (see the instructions for item 18 of the Recapitulation) ....................
Schedule L — Net Losses During Administration ...................................................................................................
Schedule L — Expenses Incurred in Administering Property Not Subject to Claims ..............................................
Schedule M — Bequests, etc., to Surviving Spouse ................................................................................................
Schedule O — Charitable, Public, and Similar Gifts and Bequests .........................................................................
Estimated value of assets subject to the special rule of Reg. section 20.2010-2T(a)(7)(ii) ......................................
Tentative total allowable deductions (add items 18 through 23). Enter here and on line 2 of the Tax Computation
Copyright 2015 form software only The Lackner Group, Inc.
23,667,430.00
23,667,430.00
Amount
14
15
16
17
18
19
20
21
22
23
24
0.00
100,000.00
100,000.00
100,000.00
0.00
0.00
0.00
0.00
100,000.00
Page 3
4
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 01/01/2016
Part 6—Portability of Deceased Spousal Unused Exclusion (DSUE)
Portability Election
A decedent with a surviving spouse elects portability of the deceased spousal unused exclusion (DSUE) amount, if any, by completing and timely-filing
this return. No further action is required to elect portability of the DSUE amount to allow the surviving spouse to use the decedent's DSUE amount.
Section A. Opting Out of Portability
The estate of a decedent with a surviving spouse may opt out of electing portability of the DSUE amount. Check here and do not complete Sections B
and C of Part 6 only if the estate opts NOT to elect portability of the DSUE amount.
Section B. QDOT
Yes No
Are any assets of the estate being transferred to a qualified domestic trust (QDOT)?
If “Yes,” the DSUE amount portable to a surviving spouse (calculated in Section C, below) is preliminary and shall be redetermined at the time of the
final distribution or other taxable event imposing estate tax under section 2056A. See instructions for more details.
Section C. DSUE Amount Portable TO the Surviving Spouse (To be completed by the estate of a decedent making a portability
election.)
Complete the following calculation to determine the DSUE amount that can be transferred to the surviving spouse.
1
2
3
4
5
6
7
8
9
10
Enter the amount from line 9c, Part 2 - Tax Computation...................................................................................
Reserved.............................................................................................................................................................
Enter the value of the cumulative lifetime gifts on which tax was paid or payable (see instructions)..................
Add lines 1 and 3.................................................................................................................................................
Enter amount from line 10, Part 2 - Tax Computation.........................................................................................
Divide amount on line 5 by 40% (0.40) (do not enter less than zero)..................................................................
Subtract line 6 from line 4....................................................................................................................................
Enter amount from line 5, Part 2 - Tax Computation...........................................................................................
Subtract line 8 from line 7 (do not enter less than zero)......................................................................................
DSUE amount portable to the surviving spouse (Enter the lesser of line 9 or line 9a, Part 2-Tax Computation)
1
2
3
4
5
6
7
8
9
10
Section D. DSUE Amount Received FROM Predeceased Spouse(s) (To be completed by the estate of a deceased surviving
spouse with DSUE amount from predeceased spouse(s))
Provide the following information to determine the DSUE amount received from deceased spouses.
A
Name of Deceased Spouse
(dates of death after
December 31, 2010, only)
B
Date of Death
(enter as mm/dd/yy)
C
D
Portability
Election
Made?
Yes
If “Yes,” DSUE
Amount Received
from Spouse
E
F
DSUE Amount
Applied by
Decedent to
Lifetime Gifts
G
Remaining DSUE
Amount, if any
(subtract col. E
from col. D)
No
Part 1 — DSUE RECEIVED FROM LAST DECEASED SPOUSE
Part 2 — DSUE RECEIVED FROM OTHER PREDECEASED SPOUSE(S) AND USED BY DECEDENT
Total (for all DSUE amounts from predeceased spouse(s) applied).....................................
Add the amount from Part 1, column D and the total from Part 2, column E. Enter the result on line 9b, Part 2 - Tax
Computation................................................................................................................................................................................
Page 4
Copyright 2015 form software only The Lackner Group, Inc.
5
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE A - Real Estate
•
•
•
•
•
For jointly owned property that must be disclosed on Schedule E, see instructions.
Real estate that is part of a sole proprietorship should be shown on Schedule F.
Real estate that is included in the gross estate under section 2035, 2036, 2037, or 2038 should be shown on Schedule G.
Real estate that is included in the gross estate under section 2041 should be shown on Schedule H.
If you elect section 2032A valuation, you must complete Schedule A and Schedule A-1.
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
Item
Number
Description
Alternate
valuation date
Alternate Value
Value at date of death
1
House #1 - Owned outright (See appraisal attached)
300,000.00
2
House #2 - Recourse debt (deducted on Schedule K-2)
300,000.00
3
House #3 - Non-recourse debt:
Gross
$300,000
Debt
$100,000
-------------Taxable
$200,000
200,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 1.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
800,000.00
Schedule A - Page 5
6
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE B - Stocks and Bonds
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last four
columns.
Item
Number
Description including face amount of bonds or number of shares and par
value for identification. Give CUSIP number. If trust, partnership, or
closely held entity, give EIN
Unit Value
Alternate
valuation date
Alternate Value
Value at date of death
CUSIP # or EIN,
where applicable
1
2,500 shares of Aardvark - Name
changed to Zebra on 4/1/2016
100
250,000.00
2
1,000 shares of Apple
800
800,000.00
Accrued dividend on Item 2
through date of death
4,200.00
3
Charles Schwab - See EVP report
attached
600,000.00
4
500 shares of IBM
5
Morgan Stanley Account #12345 See EVP report attached
400,000.00
6
TD Ameritrade - See EVP report
attached
800,000.00
7
ABC Business
5,000,000.00
8
XYZ Business
4,000,000.00
200
100,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 2.) ...................................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
11,954,200.00
Schedule B - Page 10
Form 706 Schedule B (Rev. 8-2013)
7
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE C - Mortgages, Notes, and Cash
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
Item
Number
Description
1
Note Receivable
2
Cash
Alternate
valuation date
Alternate Value
Value at date of death
600,000.00
50,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 3.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
650,000.00
Schedule C - Page 11
8
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE D - Insurance on the Decedent's Life
You must list all policies on the life of the decedent and attach a Form 712 for each policy.
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
Item
Number
1
Description
Alternate
valuation date
Life Insurance
Alternate Value
Value at date of death
250,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 4.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
250,000.00
Schedule D - Page 12
9
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE F - Other Miscellaneous Property Not Reportable Under Any Other Schedule
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
(If you elect section 2032A valuation, you must complete Schedule F and Schedule A-1.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
1
Did the decedent own any works of art, items, or any collections whose artistic or collectible value at date of death
exceeded $3,000?.................................................................................................................................................................................
If "Yes," submit full details on this schedule and attach appraisals.
2
Has the decedent's estate, spouse, or any other person, received (or will receive) any bonus or award as a result
of the decedent's employment or death?...............................................................................................................................................
If "Yes," submit full details on this schedule.
3
Did the decedent at the time of death have, or have access to, a safe deposit box?............................................................................
If "Yes," state location, and if held in joint names of decedent and another, state name and relationship of joint depositor.
Yes No
If any of the contents of the safe deposit box are omitted from the schedules in this return, explain fully why omitted.
Item
Number
Description. For securities, give CUSIP number. If trust, partnership, or closely held entity,
give EIN
Alternate
valuation date
Alternate Value
Value at date of death
CUSIP # or EIN,
where applicable
1
Art Work
2
Diamond Ring
3
Tangible: Chair
80.00
4
Tangible: Desk
150.00
3,000.00
10,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 6.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
13,230.00
Schedule F - Page 14
Form 706 Schedule F (Rev. 8-2013)
10
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE G - Transfers During Decedent's Life
(If you elect section 2032A valuation, you must complete Schedule G and Schedule A-1.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
Item
Number
Description. For securities, give CUSIP number. If trust,
partnership, or closely held entity, give EIN
A.
Gift tax paid by the decedent or the estate for all gifts made by
the decedent or his or her spouse within 3 years before the
decedent's death (section 2035(b)) .....................................................................
B.
Transfers includible under section 2035(a), 2036, 2037, or 2038:
Alternate
valuation date
Alternate Value
Value at date of death
XXXXXXX
See continuation schedule(s) attached
Total from continuation schedules (or additional sheets) attached to this schedule.........................
10,000,000.00
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 7.)....................................................
10,000,000.00
SCHEDULE H - Powers of Appointment
(Include "5 and 5 lapsing" powers (section 2041(b)(2)) held by the decedent.)
(If you elect section 2032A valuation, you must complete Schedule H and Schedule A-1.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
Item
Number
Description
Alternate
valuation date
Alternate Value
Value at date of death
None
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 8).....................................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Schedules G and H - Page 15
Copyright 2015 form software only The Lackner Group, Inc.
11
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE G - Transfers During Decedent's Life
(continued)
Item
Number
1
Description
For securities, give CUSIP number.
Unit Value
Alternate
valuation date
Trust
Total ........................................................................................................................................
Alternate Value
Value at date of death
10,000,000.00
10,000,000.00
Page 1 of Schedule G - Continued
12
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE K - Debts of the Decedent, and Mortgages and Liens
Use Schedule PC to make a protective claim for refund due to an expense not currently deductible.
For such a claim, report the expense on Schedule K but without a value in the last column.
Yes
No
Are you aware of any actual or potential reimbursement to the estate for any debt of the decedent, mortgage, or lien
claimed as a deduction on this schedule?.......................................................................................................................................................
If “Yes,” attach a statement describing the items subject to potential reimbursement. (see instructions)
Are any of the items on this schedule deductible under Reg. section 20.2053-4(b) and Reg. section 20.2053-4(c)?....................................
If “Yes,” attach a statement indicating the applicable provision and documenting the value of the claim.
Item
Number
Debts of the Decedent - Creditor and nature of claim, and
allowable death taxes
Amount
None
Total from continuation schedules (or additional sheets) attached to this schedule.....................................................................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 15)...............................................................................................
Item
Number
Amount
Mortgages and Liens - Description
See continuation schedule(s) attached
Total from continuation schedules (or additional sheets) attached to this schedule.....................................................................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 16)...............................................................................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
100,000.00
Schedule K - Page 18
Copyright 2015 form software only The Lackner Group, Inc.
13
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 01/01/2016
SCHEDULE K2 - Mortgages and Liens
(continued)
Item
Number
1
Mortgages and liens - Description
Amount
House #2 - Recourse debt
100,000.00
Total ........................................................................................................................................
100,000.00
Page 1 of Schedule K2 - Continued
14
Estate of:
8971
1. Variance: 706 - 8971
23,667,430.00
706 Item
Sched Num
A
A
A
1
2
3
Name
House #1
House #2
House #3
Lot #
#
Benys Cash
IRD Exclude Resid Changed
1
1
1
A
B
B
B
B
B
B
B
B
B
1
2
2a
3
4
5
6
7
8
Aardvark
Apple
Apple
Charles Schwab
IBM
Morgan Stanley
TD Ameritrade
ABC Business
XYZ Business
1
2
2
1
1
5
2
B
C
C
1
2
Note Receivable
Cash
1
C
D
1
Life Insurance
D
F
F
F
F
1
2
3
4
Art Work
Diamond Ring
Tangible: Chair
Tangible: Desk
F
G
1
Trust
2
G
22,490,000.00
1,177,430.00
Form 706
Form 8971
Variance
300,000.00
300,000.00
200,000.00
300,000.00
300,000.00
200,000.00
0.00
0.00
0.00
800,000.00
800,000.00
0.00
250,000.00
800,000.00
4,200.00
600,000.00
100,000.00
400,000.00
800,000.00
5,000,000.00
4,000,000.00
250,000.00
800,000.00
5,000,000.00
4,000,000.00
0.00
0.00
4,200.00
0.00
60,000.00
0.00
800,000.00
0.00
0.00
11,954,200.00
11,090,000.00
864,200.00
600,000.00
50,000.00
600,000.00
0.00
50,000.00
650,000.00
600,000.00
50,000.00
600,000.00
40,000.00
400,000.00
250,000.00
250,000.00
250,000.00
250,000.00
3,000.00
10,000.00
80.00
150.00
3,000.00
10,000.00
80.00
150.00
13,230.00
13,230.00
10,000,000.00
10,000,000.00
0.00
10,000,000.00
10,000,000.00
0.00
23,667,430.00
22,490,000.00
1,177,430.00
-1-
15
Estate of:
8971
2. Variance: 706 - 8971 (with sales history)
13,290,000.00
706 Item
Sched Num
A
1
Name
Lot #
House #1
Description
# Units
Form 706
Form 8971
300,000.00
300,000.00
300,000.00
300,000.00
300,000.00
300,000.00
House #2
300,000.00
300,000.00
Non-recourse debt:
200,000.00
200,000.00
House #3
200,000.00
200,000.00
A
800,000.00
800,000.00
2,500.00
250,000.00
250,000.00
2,500.00
250,000.00
250,000.00
1,000.00
800,000.00
800,000.00
1,000.00
800,000.00
800,000.00
600,000.00
600,000.00
600,000.00
600,000.00
500.00
-300.00
100,000.00
-60,000.00
40,000.00
200.00
40,000.00
40,000.00
400,000.00
400,000.00
400,000.00
400,000.00
Owned outright
House #1
A
A
B
2
3
1
House #2
Recourse debt
House #3
Aardvark
Name changed to
Aardvark
B
2
Inventoried
Apple
Apple
B
3
Charles Schwab
See EVP report
Charles Schwab
B
4
4
IBM
IBM
Inventoried
Sold
IBM
B
5
Morgan Stanley
See EVP report
Morgan Stanley Account #12345
B
6
TD Ameritrade
7
ABC Business
C
G
8
1
0a
XYZ Business
Note Receivable
800,000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
800,000.00
5,000,000.00
5,000,000.00
5,000,000.00
5,000,000.00
4,000,000.00
4,000,000.00
XYZ Business
4,000,000.00
4,000,000.00
B
11,890,000.00
11,090,000.00
600,000.00
600,000.00
Note Receivable
600,000.00
600,000.00
C
600,000.00
600,000.00
Inventoried
ABC Business
B
Variance
800,000.00
See EVP report
TD Ameritrade
B
22,490,000.00
Inventoried
Inventoried
0.00
0.00
0.00
0.00
Basis adjustment
-1-
16
Estate of:
8971
2. Variance: 706 - 8971 (with sales history)
706 Item
Sched Num
Name
Lot #
Description
# Units
13,290,000.00
22,490,000.00
Form 706
Form 8971
Variance
0.00
0.00
Basis adjustment separately shown
G
1
10,000,000.00
Trust
Trust
10,000,000.00
G
10,000,000.00
Total
13,290,000.00
-10,000,000.00
22,490,000.00
-2-
17
Form 8971
SCHEDULE A
8971
Grand total
Sched
Item # Description
Y/N
Beneficiary
Valuation
Date
28,240,000
Value
Percent
A
300,000
706 Amount
1
House #1 - Owned outright
Y
Beny 1
01/01/2016
100.0000%
300,000
100.0000%
300,000
300,000
706 Amount
2
House #2 - Recourse debt (deducted on
Y
Beny 1
01/01/2016
100.0000%
300,000
100.0000%
300,000
200,000
706 Amount
3
House #3 - Non-recourse debt:
Y
Beny 1
01/01/2016
100.0000%
300,000
100.0000%
300,000
900,000
B
250,000
706 Amount
1
Y
2,500 shares of Aardvark - Name changed Beny 1
01/01/2016
100.0000%
250,000
100.0000%
250,000
800,000
706 Amount
2
500 shares of Apple
500 shares of Apple
Y
Y
Beny 1
Beny 2
01/01/2016
01/01/2016
50.0000%
50.0000%
400,000
400,000
100.0000%
800,000
600,000
706 Amount
3
Y
Y
Charles Schwab - See EVP report attached Beny 3
Charles Schwab - See EVP report attached Beny 4
01/01/2016
01/01/2016
50.0000%
50.0000%
300,000
300,000
100.0000%
600,000
100,000
706 Amount
4
200 shares of IBM
Y
Beny 1
01/01/2016
40.0000%
40,000
40.0000%
40,000
400,000
706 Amount
5
Y
Morgan Stanley Account #12345 - See EVP Beny 1
-1-
01/01/2016
100.0000%
400,000
5/30/2016
18
8:41:43
Form 8971
SCHEDULE A
8971
Grand total
Sched
Item # Description
Y/N
Beneficiary
Valuation
Date
28,240,000
Value
Percent
100.0000%
400,000
250,000
706 Amount
7
TD Ameritrade - Stock #1
Y
Beny 3
01/01/2016
100.0000%
250,000
100.0000%
250,000
550,000
706 Amount
8
TD Ameritrade - Stock #2
Y
Beny 4
01/01/2016
100.0000%
550,000
100.0000%
550,000
706 Amount
7
ABC Business
ABC Business
ABC Business
ABC Business
ABC Business
Y
Y
Y
Y
N
Beny 1
Beny 2
Beny 3
Beny 4
Spouse
01/01/2016
01/01/2016
01/01/2016
01/01/2016
01/01/2016
20.0000%
20.0000%
20.0000%
20.0000%
20.0000%
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
100.0000%
5,000,000
706 Amount
8
XYZ Business
XYZ Business
Y
Y
Beny 1
Beny 2
01/01/2016
01/01/2016
5,000,000
4,000,000
100.0000%
100.0000%
4,000,000
4,000,000
200.0000%
8,000,000
15,890,000
G
706 Amount
Basis adjustment separately shown per
100.0000%
Marital Trust
100.0000%
706 Amount
1
Trust
Trust
Credit Shelter Trust
Marital Trust
Y
N
01/01/2016
01/01/2016
10,000,000
54.5000%
45.5000%
5,450,000
6,000,000
100.0000%
11,450,000
11,450,000
Grand total
-2-
28,240,000
5/30/2016
19
8:41:43
8971
Form
(January 2016)
Information Regarding Beneficiaries
Acquiring Property From a Decedent
Department of the Treasury
Internal Revenue Service
OMB No. 1545-2264
Information about Form 8971 and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part I
Decedent and Executor Information
1 Decedent’s name
2 Decedent's date of death
8971
3 Decedent’s SSN
01-01-2016
4 Executor's Name (see instructions)
5 Executor's phone no.
6 Executor's TIN
7 Executor's address (number and street including apartment or suite no.; city, town, or post office; state or province; country; and
ZIP or foreign postal code)
8 If there are multiple executors, check here
TINs of the additional executors.
and attach a statement showing the names, addresses, telephone numbers, and
9 If the estate elected alternate valuation, indicate the alternate valuation date:
Part II
Beneficiary Information
How many beneficiaries received (or are expected to receive) property from the estate?
For each beneficiary, provide
7
the information requested below. If more space is needed, attach a statement showing the requested information for the additional
beneficiaries.
A
B
C
D
Name of Beneficiary
TIN
Address, City, State, ZIP
Date Provided
1
Beny 1
123-45-6789
PA
06/01/2016
2
Beny 2
234-56-7891
PA
06/01/2016
3
Beny 3
345-67-8912
PA
06/01/2016
4
Beny 4
456-78-9123
PA
06/01/2016
5
Credit Shelter Trust
25-1234567
PA
06/01/2016
See continuation schedule attached
Notice To Executors:
Submit Form 8971 with a copy of each completed Schedule A to the IRS. To protect privacy, Form 8971 should not be provided to any
beneficiary. Only Schedule A of Form 8971 should be provided to the beneficiary. Retain copies of all forms for the estate's records.
Sign
Here
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, all information reported herein is true, correct, and complete.
Signature of executor
Date
May the IRS discuss this return with the preparer shown below? See instructions..............................................................................
Print/Type preparer's name
Preparer's signature
Date
Paid
Preparer
Use Only
Check
if
self-employed
Firm's name
Firm's address
For Paperwork Reduction Act Notice, see the separate instructions.
RGA
Copyright 2016 form software only The Lackner Group, Inc.
Yes
X
No
PTIN
Firm's EIN
Phone no.
Form
8971 (1-2016)
20
Beneficiary Information
(Part II, continued))
Decedent's Name:
8971
A
B
C
D
Name of Beneficiary
TIN
Address, City, State, ZIP
Date Provided
6
Marital Trust
25-9876543
PA
06/01/2016
7
Spouse
567-89-1234
PA
06/01/2016
21
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Beny 1
4 Beneficiary's TIN
123-45-6789
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
A
, Item
D
E
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
Y
01/01/2016
300,000
Y
01/01/2016
300,000
3
Y
01/01/2016
300,000
1
Y
01/01/2016
250,000
Y
01/01/2016
400,000
1
Estate Tax
Value
(in U.S.
dollars)
House #1 - Owned outright
[note: 706 language "See appraisal attached" removed for Form 8971/Schedule
A purposes]
Form 706, Schedule
2
A
, Item
B
, Item
2,500 shares of Aardvark - Name changed to Zebra on 4/1/2016
Form 706, Schedule
5
2
House #3 - Non-recourse debt:
Gross
$300,000
Debt
$100,000
-------------Taxable
$200,000
Form 706, Schedule
4
, Item
House #2 - Recourse debt (deducted on Schedule K-2)
Form 706, Schedule
3
A
B
, Item
2
500 shares of Apple
Beneficiary Interest: 50%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
22
Page
Form 8971 (1-2016)
2 of
2
SCHEDULE A—Continuation Sheet
Use only if you need additional space to report property acquired (or expected to be acquired) by the beneficiary.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Beny 1
4 Beneficiary's TIN
123-45-6789
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
Form 706, Schedule
6
, Item
4
Y
01/01/2016
40,000
B
, Item
5
Y
01/01/2016
400,000
B
, Item
7
Y
01/01/2016
1,000,000
, Item
8
Y
01/01/2016
4,000,000
ABC Business
Beneficiary Interest: 20%
Form 706, Schedule
9
E
Estate Tax
Value
(in U.S.
dollars)
Morgan Stanley Account #12345 - See EVP report attached
Form 706, Schedule
8
D
Valuation
Date
200 shares of IBM
Beneficiary Interest: 40%
Form 706, Schedule
7
B
C
Did this
asset
increase
estate tax
liability?
(Y/N)
B
XYZ Business
Beneficiary Interest: 100%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-2
23
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Beny 2
4 Beneficiary's TIN
234-56-7891
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
Valuation
Date
E
Estate Tax
Value
(in U.S.
dollars)
, Item
2
Y
01/01/2016
400,000
B
, Item
7
Y
01/01/2016
1,000,000
, Item
8
Y
01/01/2016
4,000,000
ABC Business
Beneficiary Interest: 20%
Form 706, Schedule
3
B
D
Did this
asset
increase
estate tax
liability?
(Y/N)
500 shares of Apple
Beneficiary Interest: 50%
Form 706, Schedule
2
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
B
XYZ Business
Beneficiary Interest: 100%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
24
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Beny 3
4 Beneficiary's TIN
345-67-8912
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
, Item
3
E
Valuation
Date
Y
01/01/2016
300,000
Estate Tax
Value
(in U.S.
dollars)
B
, Item
6
Y
01/01/2016
250,000
B
, Item
7
Y
01/01/2016
1,000,000
TD Ameritrade - Stock #1
Form 706, Schedule
3
B
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Charles Schwab - See EVP report attached
Beneficiary Interest: 50%
Form 706, Schedule
2
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
ABC Business
Beneficiary Interest: 20%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
25
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Beny 4
4 Beneficiary's TIN
456-78-9123
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
, Item
3
E
Valuation
Date
Y
01/01/2016
300,000
Estate Tax
Value
(in U.S.
dollars)
B
, Item
6
Y
01/01/2016
550,000
B
, Item
7
Y
01/01/2016
1,000,000
TD Ameritrade - Stock #2
Form 706, Schedule
3
B
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Charles Schwab - See EVP report attached
Beneficiary Interest: 50%
Form 706, Schedule
2
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
ABC Business
Beneficiary Interest: 20%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
26
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Credit Shelter Trust
4 Beneficiary's TIN
25-1234567
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
G
, Item
1
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
Y
01/01/2016
E
Estate Tax
Value
(in U.S.
dollars)
5,450,000
Trust
Beneficiary Interest: 54.5%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
27
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Marital Trust
4 Beneficiary's TIN
25-9876543
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
Form 706, Schedule
G
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
N
01/01/2016
E
Estate Tax
Value
(in U.S.
dollars)
, Item
Basis adjustment separately shown per Reg. 1.1014-4(a)(3). QTIP Marital Trust
U/A Jane Q. Public
Form 706, Schedule
1
G
, Item
1
6,000,000
Trust
Beneficiary Interest: 45.5%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
28
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971
2 Decedent's SSN
3 Beneficiary's name
Spouse
4 Beneficiary's TIN
567-89-1234
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
B
, Item
7
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
N
01/01/2016
E
Estate Tax
Value
(in U.S.
dollars)
1,000,000
ABC Business
Beneficiary Interest: 20%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
29
8971
(All Cash)
30
706
Form
(Rev. August 2013)
United States Estate (and Generation-Skipping
Transfer) Tax Return
OMB No. 1545-0015
Estate of a citizen or resident of the United States (see instructions).
To be filed for decedents dying after December 31, 2012.
1a Decedent’s first name and middle initial (and maiden name, if any)
1b Decedent’s last name
Department of the Treasury
Internal Revenue Service
Part 1. – Decedent and Executor
3a
City, town, or post office; county; state or province; country; and ZIP or
foreign postal code.
Decedent’s Social Security No.
3b Year domicile established
4 Date of birth
5 Date of death
01-01-2015
, PA
6a
Name of executor (see instructions)
6c
Executor’s social security number (see instructions)
6b
Executor’s address (number and street including apartment or suite no.; city, town,
or post office; state or province; country; and ZIP or foreign postal code) and phone no.
Phone no.
6d If there are multiple executors, check here
7a Name and location of court where will was probated or estate administered
8
1
2
3a
b
c
4
5
6
7
8
9a
9b
7b Case number
X and attach a certified copy of the will. 9
If decedent died testate, check here
11
10
Part 2. — Tax Computation
2
8971 Cash Only
Total gross estate less exclusion (from Part 5, Recapitulation, item 13).................................................................
Total allowable deductions (from Part 5, Recapitulation, item 24))..........................................................................
Tentative taxable estate (subtract line 2 from line 1)...............................................................................................
Deduction for state death taxes...............................................................................................................................
Taxable estate (subtract line 3b from line 3a)..........................................................................................................
Adjusted taxable gifts (see instructions)...................................................................................................................
Add lines 3c and 4....................................................................................................................................................
Tentative tax on the amount on line 5 from Table A in the instructions...................................................................
Total gift tax paid or payable (see instructions)........................................................................................................
Gross estate tax (subtract line 7 from line 6)...........................................................................................................
Basic exclusion amount...................................................................................
9a
5,430,000.00
Deceased spousal unused exclusion (DSUE) amount from predeceased spouse(s), if
any (from Section D, Part 6 - Portability of Deceased Spousal Unused Exclusion) ..........
9c Applicable exclusion amount (add lines 9a and 9b).........................................
9d Applicable credit amount (tentative tax on the amount in 9c from Table A
in the instructions)............................................................................................
10 Adjustment to applicable credit amount (May not exceed $6,000. See
instructions.).....................................................................................................
10,000,000.00
0.00
10,000,000.00
1
2
3a
b
c
4
5
6
7
10,000,000.00
10,000,000.00
3,945,800.00
8
3,945,800.00
9b
9c
5,430,000.00
9d
2,117,800.00
10
11
12
Allowable unified credit (applicable credit amount) (subtract line 10 from line 9d)..................................................
Subtract line 11 from line 8 (but do not enter less than zero)..................................................................................
11
12
2,117,800.00
1,828,000.00
13
14
15
16
17
18
19
20
0.00
Credit for foreign death taxes (from Schedule(s) P). (Attach Form(s) 706-CE.) 13
0.00
14
Credit for tax on prior transfers (from Schedule Q)..........................................
Total credits (add lines 13 and 14)...........................................................................................................................
Net estate tax (subtract line 15 from line 12)...........................................................................................................
Generation-skipping transfer (GST) taxes (from Schedule R, Part 2, line 10) .....................................................
Total transfer taxes (add lines 16 and 17)................................................................................................................
Prior payments. Explain in an attached statement...................................................................................................
Balance due (or overpayment) (subtract line 19 from line 18).................................................................................
15
16
17
18
19
20
0.00
1,828,000.00
0.00
1,828,000.00
1,828,000.00
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, it is true, correct, and complete. Declaration of preparer other than the executor is based on all information of which preparer has any knowledge.
Sign
Here
Signature of executor
Date
Signature of executor
Print/Type preparer's name
Paid
Preparer
Use Only
Firm's name
Firm's address
For Privacy Act and Paperwork Reduction Act Notice, see instructions.
Copyright 2015 form software only The Lackner Group, Inc.
RGA
Date
Preparer's signature
Date
Check
if
self-employed
PTIN
Firm's EIN
Phone no.
Form
706
(Rev. 8-2013)
31
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 Cash Only 01/01/2015
Part 3 -- Elections by the Executor
Note. For information on electing portability of the decedent's DSUE amount, including how to opt out of the election, see Section A of
Part 6-Portability of Deceased Spousal Unused Exclusion.
Note. Some of these elections may require the posting of bonds or liens.
Yes No
Please check the “Yes” or “No” box for each question (see instructions).
1 Do you elect alternate valuation? .............................................................................................................................................................. 1
2 Do you elect special-use valuation? If “Yes,” you must complete and attach Schedule A-1 .................................................................... 2
3 Do you elect to pay the taxes in installments as described in section 6166?.............................................................................................
If “Yes,” you must attach the additional information described in the instructions.
Note. By electing section 6166, you may be required to provide security for estate tax deferred under section 6166
and interest in the form of a surety bond or a section 6324A lien.
3
4 Do you elect to postpone the part of the taxes attributable to a reversionary or remainder interest as described in section 6163?......... 4
Part 4 -- General Information
(Note. Please attach the necessary supplemental documents. You must attach the death certificate.)
(see instructions).
Authorization to receive confidential tax information under Regs. sec. 601.504(b)(2)(i); to act as the estate’s representative before the IRS; and to make written or
oral presentations on behalf of the estate:
Name of representative (print or type)
State
Address (number, street, and room or suite no., city, state, and ZIP code)
I declare that I am the
attorney/
certified public accountant/
enrolled agent (check the applicable box) for the executor. I am not under suspension or
disbarment from practice before the Internal Revenue Service and am qualified to
in the state shown above.
Signature
CAF number
Date
Telephone number
1 Death certificate number and issuing authority (attach a copy of the death certificate to this return).
2 Decedent’s business or occupation. If retired, check here
3a Marital status of the decedent at time of death:
Widow/widower
Married
and state decedent’s former business or occupation.
Single
Legally separated
Divorced
3b For all prior marriages, list the name and SSN of the former spouse, the date the marriage ended, and whether the marriage ended by
annulment, divorce, or death. Attach additional statements of the same size if necessary.
4a Surviving spouse’s name
4b Social security number
4c Amount received (see instructions)
None
5 Individuals (other than the surviving spouse), trusts, or other estates who receive benefits from the estate (do not include charitable beneficiaries
shown in Schedule O) (see instructions).
Name of individual, trust, or estate receiving $5,000 or more
Identifying number
Relationship to decedent
Amount (see instructions)
All unascertainable beneficiaries and those who receive less than $5,000......................................................................
Total..........................................................................................................................................................................................
If you answer “Yes” to any of the following questions, you must attach additional information as described.
6 Is the estate filing a protective claim for refund? ............................................................................................................................................
If “Yes,” complete and attach two copies of Schedule PC for each claim.
7 Does the gross estate contain any section 2044 property (qualified terminable interest property (QTIP) from a prior gift or estate)
(see instructions)? .........................................................................................................................................................................................
8 a Have federal gift tax returns ever been filed? ................................................................................................................................................
If “Yes,” attach copies of the returns, if available, and furnish the following information:
b Period(s) covered
c Internal Revenue office(s) where filed
Yes No
9 a Was there any insurance on the decedent’s life that is not included on the return as part of the gross estate? ...........................................
b Did the decedent own any insurance on the life of another that is not included in the gross estate? ............................................................
(continued on next page)
Copyright 2015 form software only The Lackner Group, Inc.
32
Page 2
Form 706
(Rev. 8-2013)
Estate of:
8971 Cash Only 01/01/2015
Decedent's Social Security Number
Part 4 - General Information (continued)
If you answer “Yes” to any of the following questions, you must attach additional information as described in the instructions.
10 Did the decedent at the time of death own any property as a joint tenant with right of survivorship in which (a) one or more of
the other joint tenants was someone other than the decedent’s spouse, and (b) less than the full value of the property is included
on the return as part of the gross estate? If “Yes,” you must complete and attach Schedule E ...................................................................
Yes No
11a Did the decedent, at the time of death, own any interest in a partnership (for example, a family limited partnership), an
unincorporated business, or a limited liability company; or own any stock in an inactive or closely held corporation?.................................
b If “Yes,” was the value of any interest owned (from above) discounted on this estate tax return? If “Yes,” see the instructions on
reporting the total accumulated or effective discounts taken on Schedule F or G ........................................................................................
12 Did the decedent make any transfer described in section 2035, 2036, 2037, or 2038 (see the instructions)? If "Yes," you must
complete and attach Schedule G"..................................................................................................................................................................
13a Were there in existence at the time of the decedent’s death any trusts created by the decedent during his or her lifetime? .......................
b Were there in existence at the time of the decedent’s death any trusts not created by the decedent under which the decedent
possessed any power, beneficial interest, or trusteeship? ............................................................................................................................
c Was the decedent receiving income from a trust created after October 22, 1986 by a parent or grandparent? ...........................................
If “Yes,” was there a GST taxable termination (under section 2612) on the death of the decedent? ............................................................
d If there was a GST taxable termination (under section 2612), attach a statement to explain. Provide a copy of the trust or will
creating the trust, and give the name, address, and phone number of the current trustee(s).
e Did decedent at any time during his or her lifetime transfer or sell an interest in a partnership, limited liability company, or closely
held corporation to a trust described in question 13a or 13b? ......................................................................................................................
If “Yes,” provide the EIN number for this transferred/sold item.
14 Did the decedent ever possess, exercise, or release any general power of appointment? If “Yes,” you must complete and attach Schedule H ........................
15 Did the decedent have an interest in or a signature or other authority over a financial account in a foreign country, such as a
bank account, securities account, or other financial account? .....................................................................................................................
16 Was the decedent, immediately before death, receiving an annuity described in the “General” paragraph of the instructions for
Schedule I or a private annuity? If “Yes,” you must complete and attach Schedule I ...................................................................................
17 Was the decedent ever the beneficiary of a trust for which a deduction was claimed by the estate of a pre-deceased spouse
under section 2056(b)(7) and which is not reported on this return? If “Yes,” attach an explanation .............................................................
Part 5 - Recapitulation
Item no.
1
2
3
4
5
6
7
8
9
10
11
12
13
Item no.
14
15
16
17
18
19
20
21
22
23
24
Schedule A
Schedule B
Schedule C
Schedule D
Schedule E
Schedule F
Schedule G
Schedule H
Schedule I
Gross estate
— Real Estate..............................................................................................
— Stocks and Bonds ...................................................................................
— Mortgages, Notes, and Cash ..................................................................
— Insurance on the Decedent’s Life (attach Form(s) 712) ..........................
— Jointly Owned Property (attach Form(s) 712 for life insurance) ..............
— Other Miscellaneous Property (attach Form(s) 712 for life insurance) ..................
— Transfers During Decedent’s Life (attach Form(s) 712 for life insurance) .............
— Powers of Appointment ...........................................................................
— Annuities .................................................................................................
Alternate value
Value at date of death
0.00
0.00
10,000,000.00
0.00
0.00
0.00
0.00
0.00
0.00
1
2
3
4
5
6
7
8
9
10
Total gross estate (add items 1 through 10) .................................................................... 11
Schedule U — Qualified Conservation Easement Exclusion .......................................... 12
Total gross estate less exclusion (subtract item 12 from item 11). Enter here
and on line 1 of Part 2 - Tax Computation ...................................................................... 13
Deductions
Schedule J — Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims ...............
Schedule K — Debts of the Decedent .....................................................................................................................
Schedule K — Mortgages and Liens .......................................................................................................................
Total of items 14 through 16 .....................................................................................................................................
Allowable amount of deductions from item 17 (see the instructions for item 18 of the Recapitulation) ....................
Schedule L — Net Losses During Administration ...................................................................................................
Schedule L — Expenses Incurred in Administering Property Not Subject to Claims ..............................................
Schedule M — Bequests, etc., to Surviving Spouse ................................................................................................
Schedule O — Charitable, Public, and Similar Gifts and Bequests .........................................................................
Estimated value of assets subject to the special rule of Reg. section 20.2010-2T(a)(7)(ii) ......................................
Tentative total allowable deductions (add items 18 through 23). Enter here and on line 2 of the Tax Computation
10,000,000.00
10,000,000.00
Amount
14
15
16
17
18
19
20
21
22
23
24
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Page 3
Copyright 2015 form software only The Lackner Group, Inc.
33
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 Cash Only 01/01/2015
Part 6—Portability of Deceased Spousal Unused Exclusion (DSUE)
Portability Election
A decedent with a surviving spouse elects portability of the deceased spousal unused exclusion (DSUE) amount, if any, by completing and timely-filing
this return. No further action is required to elect portability of the DSUE amount to allow the surviving spouse to use the decedent's DSUE amount.
Section A. Opting Out of Portability
The estate of a decedent with a surviving spouse may opt out of electing portability of the DSUE amount. Check here and do not complete Sections B
and C of Part 6 only if the estate opts NOT to elect portability of the DSUE amount.
Section B. QDOT
Yes No
Are any assets of the estate being transferred to a qualified domestic trust (QDOT)?
If “Yes,” the DSUE amount portable to a surviving spouse (calculated in Section C, below) is preliminary and shall be redetermined at the time of the
final distribution or other taxable event imposing estate tax under section 2056A. See instructions for more details.
Section C. DSUE Amount Portable TO the Surviving Spouse (To be completed by the estate of a decedent making a portability
election.)
Complete the following calculation to determine the DSUE amount that can be transferred to the surviving spouse.
1
2
3
4
5
6
7
8
9
10
Enter the amount from line 9c, Part 2 - Tax Computation...................................................................................
Reserved.............................................................................................................................................................
Enter the value of the cumulative lifetime gifts on which tax was paid or payable (see instructions)..................
Add lines 1 and 3.................................................................................................................................................
Enter amount from line 10, Part 2 - Tax Computation.........................................................................................
Divide amount on line 5 by 40% (0.40) (do not enter less than zero)..................................................................
Subtract line 6 from line 4....................................................................................................................................
Enter amount from line 5, Part 2 - Tax Computation...........................................................................................
Subtract line 8 from line 7 (do not enter less than zero)......................................................................................
DSUE amount portable to the surviving spouse (Enter the lesser of line 9 or line 9a, Part 2-Tax Computation)
1
2
3
4
5
6
7
8
9
10
Section D. DSUE Amount Received FROM Predeceased Spouse(s) (To be completed by the estate of a deceased surviving
spouse with DSUE amount from predeceased spouse(s))
Provide the following information to determine the DSUE amount received from deceased spouses.
A
Name of Deceased Spouse
(dates of death after
December 31, 2010, only)
B
Date of Death
(enter as mm/dd/yy)
C
D
Portability
Election
Made?
Yes
If “Yes,” DSUE
Amount Received
from Spouse
E
F
DSUE Amount
Applied by
Decedent to
Lifetime Gifts
G
Remaining DSUE
Amount, if any
(subtract col. E
from col. D)
No
Part 1 — DSUE RECEIVED FROM LAST DECEASED SPOUSE
Part 2 — DSUE RECEIVED FROM OTHER PREDECEASED SPOUSE(S) AND USED BY DECEDENT
Total (for all DSUE amounts from predeceased spouse(s) applied).....................................
Add the amount from Part 1, column D and the total from Part 2, column E. Enter the result on line 9b, Part 2 - Tax
Computation................................................................................................................................................................................
Page 4
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34
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 Cash Only 01/01/2015
SCHEDULE C - Mortgages, Notes, and Cash
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
Item
Number
1
Description
Alternate
valuation date
Cash
Alternate Value
Value at date of death
10,000,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 3.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
10,000,000.00
Schedule C - Page 11
35
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 Cash Only 01/01/2015
SCHEDULE F - Other Miscellaneous Property Not Reportable Under Any Other Schedule
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
(If you elect section 2032A valuation, you must complete Schedule F and Schedule A-1.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
1
Did the decedent own any works of art, items, or any collections whose artistic or collectible value at date of death
exceeded $3,000?.................................................................................................................................................................................
If "Yes," submit full details on this schedule and attach appraisals.
2
Has the decedent's estate, spouse, or any other person, received (or will receive) any bonus or award as a result
of the decedent's employment or death?...............................................................................................................................................
Yes No
If "Yes," submit full details on this schedule.
Did the decedent at the time of death have, or have access to, a safe deposit box?............................................................................
If "Yes," state location, and if held jointly by decedent and another, state name and relationship of joint depositor.
3
If any of the contents of the safe deposit box are omitted from the schedules in this return, explain fully why omitted.
Item
Number
Description. For securities, give CUSIP number. If trust, partnership, or
closely held entity, give EIN
Alternate
valuation date
Alternate Value
Value at date of death
None
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 6.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Schedule F - Page 14
Copyright 2015 form software only The Lackner Group, Inc.
36
Estate of:
8971 Cash Only
1. Variance: 706 - 8971
10,000,000.00
706 Item
Sched Num
C
1
Name
Lot #
#
Benys Cash
IRD Exclude Resid Changed
Cash
C
Form 706
10,000,000.00
Form 8971
Variance
10,000,000.00
10,000,000.00
10,000,000.00
10,000,000.00
10,000,000.00
10,000,000.00
-1-
37
8971
Form
(January 2016)
Information Regarding Beneficiaries
Acquiring Property From a Decedent
Department of the Treasury
Internal Revenue Service
OMB No. 1545-2264
Information about Form 8971 and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part I
Decedent and Executor Information
1 Decedent’s name
2 Decedent's date of death
8971 Cash Only
3 Decedent’s SSN
01-01-2015
4 Executor's Name (see instructions)
5 Executor's phone no.
6 Executor's TIN
7 Executor's address (number and street including apartment or suite no.; city, town, or post office; state or province; country; and
ZIP or foreign postal code)
8 If there are multiple executors, check here
TINs of the additional executors.
and attach a statement showing the names, addresses, telephone numbers, and
9 If the estate elected alternate valuation, indicate the alternate valuation date:
Part II
Beneficiary Information
How many beneficiaries received (or are expected to receive) property from the estate?
For each beneficiary, provide
the information requested below. If more space is needed, attach a statement showing the requested information for the additional
beneficiaries.
A
B
C
D
Name of Beneficiary
TIN
Address, City, State, ZIP
Date Provided
Notice To Executors:
Submit Form 8971 with a copy of each completed Schedule A to the IRS. To protect privacy, Form 8971 should not be provided to any
beneficiary. Only Schedule A of Form 8971 should be provided to the beneficiary. Retain copies of all forms for the estate's records.
Sign
Here
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, all information reported herein is true, correct, and complete.
Signature of executor
Date
May the IRS discuss this return with the preparer shown below? See instructions..............................................................................
Print/Type preparer's name
Preparer's signature
Date
Paid
Preparer
Use Only
Check
if
self-employed
Firm's name
Firm's address
For Paperwork Reduction Act Notice, see the separate instructions.
RGA
Copyright 2016 form software only The Lackner Group, Inc.
Yes
X
No
PTIN
Firm's EIN
Phone no.
Form
8971 (1-2016)
38
8971
(Alternate Value)
39
706
Form
(Rev. August 2013)
United States Estate (and Generation-Skipping
Transfer) Tax Return
OMB No. 1545-0015
Estate of a citizen or resident of the United States (see instructions).
To be filed for decedents dying after December 31, 2012.
1a Decedent’s first name and middle initial (and maiden name, if any)
1b Decedent’s last name
Department of the Treasury
Internal Revenue Service
Part 1. – Decedent and Executor
3a
City, town, or post office; county; state or province; country; and ZIP or
foreign postal code.
Decedent’s Social Security No.
3b Year domicile established
4 Date of birth
5 Date of death
01-01-2015
, PA
6a
Name of executor (see instructions)
6c
Executor’s social security number (see instructions)
6b
Executor’s address (number and street including apartment or suite no.; city, town,
or post office; state or province; country; and ZIP or foreign postal code) and phone no.
Phone no.
6d If there are multiple executors, check here
7a Name and location of court where will was probated or estate administered
8
1
2
3a
b
c
4
5
6
7
8
9a
9b
7b Case number
X and attach a certified copy of the will. 9
If decedent died testate, check here
11
10
Part 2. — Tax Computation
2
8971 Alt Val
Total gross estate less exclusion (from Part 5, Recapitulation, item 13).................................................................
Total allowable deductions (from Part 5, Recapitulation, item 24))..........................................................................
Tentative taxable estate (subtract line 2 from line 1)...............................................................................................
Deduction for state death taxes...............................................................................................................................
Taxable estate (subtract line 3b from line 3a)..........................................................................................................
Adjusted taxable gifts (see instructions)...................................................................................................................
Add lines 3c and 4....................................................................................................................................................
Tentative tax on the amount on line 5 from Table A in the instructions...................................................................
Total gift tax paid or payable (see instructions)........................................................................................................
Gross estate tax (subtract line 7 from line 6)...........................................................................................................
Basic exclusion amount...................................................................................
9a
5,430,000.00
Deceased spousal unused exclusion (DSUE) amount from predeceased spouse(s), if
any (from Section D, Part 6 - Portability of Deceased Spousal Unused Exclusion) ..........
9c Applicable exclusion amount (add lines 9a and 9b).........................................
9d Applicable credit amount (tentative tax on the amount in 9c from Table A
in the instructions)............................................................................................
10 Adjustment to applicable credit amount (May not exceed $6,000. See
instructions.).....................................................................................................
11,100,000.00
0.00
11,100,000.00
1
2
3a
b
c
4
5
6
7
11,100,000.00
11,100,000.00
4,385,800.00
8
4,385,800.00
9b
9c
5,430,000.00
9d
2,117,800.00
10
11
12
Allowable unified credit (applicable credit amount) (subtract line 10 from line 9d)..................................................
Subtract line 11 from line 8 (but do not enter less than zero)..................................................................................
11
12
2,117,800.00
2,268,000.00
13
14
15
16
17
18
19
20
0.00
Credit for foreign death taxes (from Schedule(s) P). (Attach Form(s) 706-CE.) 13
0.00
14
Credit for tax on prior transfers (from Schedule Q)..........................................
Total credits (add lines 13 and 14)...........................................................................................................................
Net estate tax (subtract line 15 from line 12)...........................................................................................................
Generation-skipping transfer (GST) taxes (from Schedule R, Part 2, line 10) .....................................................
Total transfer taxes (add lines 16 and 17)................................................................................................................
Prior payments. Explain in an attached statement...................................................................................................
Balance due (or overpayment) (subtract line 19 from line 18).................................................................................
15
16
17
18
19
20
0.00
2,268,000.00
0.00
2,268,000.00
2,268,000.00
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, it is true, correct, and complete. Declaration of preparer other than the executor is based on all information of which preparer has any knowledge.
Sign
Here
Signature of executor
Date
Signature of executor
Print/Type preparer's name
Paid
Preparer
Use Only
Firm's name
Firm's address
For Privacy Act and Paperwork Reduction Act Notice, see instructions.
Copyright 2015 form software only The Lackner Group, Inc.
RGA
Date
Preparer's signature
Date
Check
if
self-employed
PTIN
Firm's EIN
Phone no.
Form
706
(Rev. 8-2013)
40
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 Alt Val 01/01/2015
Part 3 -- Elections by the Executor
Note. For information on electing portability of the decedent's DSUE amount, including how to opt out of the election, see Section A of
Part 6-Portability of Deceased Spousal Unused Exclusion.
Note. Some of these elections may require the posting of bonds or liens.
Yes No
Please check the “Yes” or “No” box for each question (see instructions).
1 Do you elect alternate valuation? .............................................................................................................................................................. 1
2 Do you elect special-use valuation? If “Yes,” you must complete and attach Schedule A-1 .................................................................... 2
3 Do you elect to pay the taxes in installments as described in section 6166?.............................................................................................
If “Yes,” you must attach the additional information described in the instructions.
Note. By electing section 6166, you may be required to provide security for estate tax deferred under section 6166
and interest in the form of a surety bond or a section 6324A lien.
X
3
4 Do you elect to postpone the part of the taxes attributable to a reversionary or remainder interest as described in section 6163?......... 4
Part 4 -- General Information
(Note. Please attach the necessary supplemental documents. You must attach the death certificate.)
(see instructions).
Authorization to receive confidential tax information under Regs. sec. 601.504(b)(2)(i); to act as the estate’s representative before the IRS; and to make written or
oral presentations on behalf of the estate:
Name of representative (print or type)
State
Address (number, street, and room or suite no., city, state, and ZIP code)
I declare that I am the
attorney/
certified public accountant/
enrolled agent (check the applicable box) for the executor. I am not under suspension or
disbarment from practice before the Internal Revenue Service and am qualified to
in the state shown above.
Signature
CAF number
Date
Telephone number
1 Death certificate number and issuing authority (attach a copy of the death certificate to this return).
2 Decedent’s business or occupation. If retired, check here
3a Marital status of the decedent at time of death:
Widow/widower
Married
and state decedent’s former business or occupation.
Single
Legally separated
Divorced
3b For all prior marriages, list the name and SSN of the former spouse, the date the marriage ended, and whether the marriage ended by
annulment, divorce, or death. Attach additional statements of the same size if necessary.
4a Surviving spouse’s name
4b Social security number
4c Amount received (see instructions)
None
5 Individuals (other than the surviving spouse), trusts, or other estates who receive benefits from the estate (do not include charitable beneficiaries
shown in Schedule O) (see instructions).
Name of individual, trust, or estate receiving $5,000 or more
Identifying number
Relationship to decedent
Amount (see instructions)
1 Beny 1
111-22-3333
4,894,200.00
2 Beny 2
222-33-4444
3,262,800.00
All unascertainable beneficiaries and those who receive less than $5,000......................................................................
Total..........................................................................................................................................................................................
8,157,000.00
If you answer “Yes” to any of the following questions, you must attach additional information as described.
6 Is the estate filing a protective claim for refund? ............................................................................................................................................
If “Yes,” complete and attach two copies of Schedule PC for each claim.
7 Does the gross estate contain any section 2044 property (qualified terminable interest property (QTIP) from a prior gift or estate)
(see instructions)? .........................................................................................................................................................................................
8 a Have federal gift tax returns ever been filed? ................................................................................................................................................
If “Yes,” attach copies of the returns, if available, and furnish the following information:
b Period(s) covered
c Internal Revenue office(s) where filed
Yes No
9 a Was there any insurance on the decedent’s life that is not included on the return as part of the gross estate? ...........................................
b Did the decedent own any insurance on the life of another that is not included in the gross estate? ............................................................
(continued on next page)
Copyright 2015 form software only The Lackner Group, Inc.
41
Page 2
Form 706
(Rev. 8-2013)
Estate of:
8971 Alt Val 01/01/2015
Decedent's Social Security Number
Part 4 - General Information (continued)
If you answer “Yes” to any of the following questions, you must attach additional information as described in the instructions.
10 Did the decedent at the time of death own any property as a joint tenant with right of survivorship in which (a) one or more of
the other joint tenants was someone other than the decedent’s spouse, and (b) less than the full value of the property is included
on the return as part of the gross estate? If “Yes,” you must complete and attach Schedule E ...................................................................
Yes No
11a Did the decedent, at the time of death, own any interest in a partnership (for example, a family limited partnership), an
unincorporated business, or a limited liability company; or own any stock in an inactive or closely held corporation?.................................
b If “Yes,” was the value of any interest owned (from above) discounted on this estate tax return? If “Yes,” see the instructions on
reporting the total accumulated or effective discounts taken on Schedule F or G ........................................................................................
12 Did the decedent make any transfer described in section 2035, 2036, 2037, or 2038 (see the instructions)? If "Yes," you must
complete and attach Schedule G"..................................................................................................................................................................
13a Were there in existence at the time of the decedent’s death any trusts created by the decedent during his or her lifetime? .......................
b Were there in existence at the time of the decedent’s death any trusts not created by the decedent under which the decedent
possessed any power, beneficial interest, or trusteeship? ............................................................................................................................
c Was the decedent receiving income from a trust created after October 22, 1986 by a parent or grandparent? ...........................................
If “Yes,” was there a GST taxable termination (under section 2612) on the death of the decedent? ............................................................
d If there was a GST taxable termination (under section 2612), attach a statement to explain. Provide a copy of the trust or will
creating the trust, and give the name, address, and phone number of the current trustee(s).
e Did decedent at any time during his or her lifetime transfer or sell an interest in a partnership, limited liability company, or closely
held corporation to a trust described in question 13a or 13b? ......................................................................................................................
If “Yes,” provide the EIN number for this transferred/sold item.
14 Did the decedent ever possess, exercise, or release any general power of appointment? If “Yes,” you must complete and attach Schedule H ........................
15 Did the decedent have an interest in or a signature or other authority over a financial account in a foreign country, such as a
bank account, securities account, or other financial account? .....................................................................................................................
16 Was the decedent, immediately before death, receiving an annuity described in the “General” paragraph of the instructions for
Schedule I or a private annuity? If “Yes,” you must complete and attach Schedule I ...................................................................................
17 Was the decedent ever the beneficiary of a trust for which a deduction was claimed by the estate of a pre-deceased spouse
under section 2056(b)(7) and which is not reported on this return? If “Yes,” attach an explanation .............................................................
Part 5 - Recapitulation
Item no.
1
2
3
4
5
6
7
8
9
10
11
12
13
Item no.
14
15
16
17
18
19
20
21
22
23
24
Schedule A
Schedule B
Schedule C
Schedule D
Schedule E
Schedule F
Schedule G
Schedule H
Schedule I
Gross estate
— Real Estate..............................................................................................
— Stocks and Bonds ...................................................................................
— Mortgages, Notes, and Cash ..................................................................
— Insurance on the Decedent’s Life (attach Form(s) 712) ..........................
— Jointly Owned Property (attach Form(s) 712 for life insurance) ..............
— Other Miscellaneous Property (attach Form(s) 712 for life insurance) ..................
— Transfers During Decedent’s Life (attach Form(s) 712 for life insurance) .............
— Powers of Appointment ...........................................................................
— Annuities .................................................................................................
1
2
3
4
5
6
7
8
9
10
Total gross estate (add items 1 through 10) .................................................................... 11
Schedule U — Qualified Conservation Easement Exclusion .......................................... 12
Total gross estate less exclusion (subtract item 12 from item 11). Enter here
and on line 1 of Part 2 - Tax Computation ...................................................................... 13
Alternate value
Value at date of death
0.00
11,100,000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
15,000,000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
11,100,000.00
0.00
15,000,000.00
11,100,000.00
15,000,000.00
Deductions
Schedule J — Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims ...............
Schedule K — Debts of the Decedent .....................................................................................................................
Schedule K — Mortgages and Liens .......................................................................................................................
Total of items 14 through 16 .....................................................................................................................................
Allowable amount of deductions from item 17 (see the instructions for item 18 of the Recapitulation) ....................
Schedule L — Net Losses During Administration ...................................................................................................
Schedule L — Expenses Incurred in Administering Property Not Subject to Claims ..............................................
Schedule M — Bequests, etc., to Surviving Spouse ................................................................................................
Schedule O — Charitable, Public, and Similar Gifts and Bequests .........................................................................
Estimated value of assets subject to the special rule of Reg. section 20.2010-2T(a)(7)(ii) ......................................
Tentative total allowable deductions (add items 18 through 23). Enter here and on line 2 of the Tax Computation
Amount
14
15
16
17
18
19
20
21
22
23
24
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Page 3
Copyright 2015 form software only The Lackner Group, Inc.
42
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 Alt Val 01/01/2015
Part 6—Portability of Deceased Spousal Unused Exclusion (DSUE)
Portability Election
A decedent with a surviving spouse elects portability of the deceased spousal unused exclusion (DSUE) amount, if any, by completing and timely-filing
this return. No further action is required to elect portability of the DSUE amount to allow the surviving spouse to use the decedent's DSUE amount.
Section A. Opting Out of Portability
The estate of a decedent with a surviving spouse may opt out of electing portability of the DSUE amount. Check here and do not complete Sections B
and C of Part 6 only if the estate opts NOT to elect portability of the DSUE amount.
Section B. QDOT
Yes No
Are any assets of the estate being transferred to a qualified domestic trust (QDOT)?
If “Yes,” the DSUE amount portable to a surviving spouse (calculated in Section C, below) is preliminary and shall be redetermined at the time of the
final distribution or other taxable event imposing estate tax under section 2056A. See instructions for more details.
Section C. DSUE Amount Portable TO the Surviving Spouse (To be completed by the estate of a decedent making a portability
election.)
Complete the following calculation to determine the DSUE amount that can be transferred to the surviving spouse.
1
2
3
4
5
6
7
8
9
10
Enter the amount from line 9c, Part 2 - Tax Computation...................................................................................
Reserved.............................................................................................................................................................
Enter the value of the cumulative lifetime gifts on which tax was paid or payable (see instructions)..................
Add lines 1 and 3.................................................................................................................................................
Enter amount from line 10, Part 2 - Tax Computation.........................................................................................
Divide amount on line 5 by 40% (0.40) (do not enter less than zero)..................................................................
Subtract line 6 from line 4....................................................................................................................................
Enter amount from line 5, Part 2 - Tax Computation...........................................................................................
Subtract line 8 from line 7 (do not enter less than zero)......................................................................................
DSUE amount portable to the surviving spouse (Enter the lesser of line 9 or line 9a, Part 2-Tax Computation)
1
2
3
4
5
6
7
8
9
10
Section D. DSUE Amount Received FROM Predeceased Spouse(s) (To be completed by the estate of a deceased surviving
spouse with DSUE amount from predeceased spouse(s))
Provide the following information to determine the DSUE amount received from deceased spouses.
A
Name of Deceased Spouse
(dates of death after
December 31, 2010, only)
B
Date of Death
(enter as mm/dd/yy)
C
D
Portability
Election
Made?
Yes
If “Yes,” DSUE
Amount Received
from Spouse
E
F
DSUE Amount
Applied by
Decedent to
Lifetime Gifts
G
Remaining DSUE
Amount, if any
(subtract col. E
from col. D)
No
Part 1 — DSUE RECEIVED FROM LAST DECEASED SPOUSE
Part 2 — DSUE RECEIVED FROM OTHER PREDECEASED SPOUSE(S) AND USED BY DECEDENT
Total (for all DSUE amounts from predeceased spouse(s) applied).....................................
Add the amount from Part 1, column D and the total from Part 2, column E. Enter the result on line 9b, Part 2 - Tax
Computation................................................................................................................................................................................
Page 4
Copyright 2015 form software only The Lackner Group, Inc.
43
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 Alt Val 01/01/2015
SCHEDULE B - Stocks and Bonds
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last four
columns.
Item
Number
Description including face amount of bonds or number of shares and par
value for identification. Give CUSIP number. If trust, partnership, or
closely held entity, give EIN
Unit Value
Alternate
valuation date
Alternate Value
Value at date of death
CUSIP # or EIN,
where applicable
1
2
10,000 shares of Apple
1000
3,000 shares sold on Jan. 2, 2015
800
01/02/2015
2,400,000.00
1,000 shares distributed to
legatees on Jan. 2, 2015
700
07/01/2015
700,000.00
6,000 shares not disposed of
within 6 months following death
500
07/01/2015
3,000,000.00
2,000 shares of IBM
Not disposed of within 6 months
following death
2500
07/01/2015
5,000,000.00
5,000,000.00
11,100,000.00
15,000,000.00
10,000,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 2.) ...................................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
Schedule B - Page 10
Form 706 Schedule B (Rev. 8-2013)
44
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 Alt Val 01/01/2015
SCHEDULE F - Other Miscellaneous Property Not Reportable Under Any Other Schedule
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
(If you elect section 2032A valuation, you must complete Schedule F and Schedule A-1.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
1
Did the decedent own any works of art, items, or any collections whose artistic or collectible value at date of death
exceeded $3,000?.................................................................................................................................................................................
If "Yes," submit full details on this schedule and attach appraisals.
2
Has the decedent's estate, spouse, or any other person, received (or will receive) any bonus or award as a result
of the decedent's employment or death?...............................................................................................................................................
Yes No
If "Yes," submit full details on this schedule.
Did the decedent at the time of death have, or have access to, a safe deposit box?............................................................................
If "Yes," state location, and if held jointly by decedent and another, state name and relationship of joint depositor.
3
If any of the contents of the safe deposit box are omitted from the schedules in this return, explain fully why omitted.
Item
Number
Description. For securities, give CUSIP number. If trust, partnership, or
closely held entity, give EIN
Alternate
valuation date
Alternate Value
Value at date of death
None
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 6.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Schedule F - Page 14
Copyright 2015 form software only The Lackner Group, Inc.
45
Estate of:
8971 Alt Val
1. Variance: 706 - 8971
6,100,000.00
706 Item
Sched Num
B
B
1
2
Name
Apple
IBM
Lot #
#
Benys Cash
IRD Exclude Resid Changed
2
1
B
3,100,000.00
3,000,000.00
Form 706
Form 8971
Variance
6,100,000.00
3,100,000.00
0.00
3,000,000.00
0.00
6,100,000.00
3,100,000.00
3,000,000.00
6,100,000.00
3,100,000.00
3,000,000.00
-1-
46
Estate of:
8971 Alt Val
2. Variance: 706 - 8971 (with sales history)
12,000,000.00
706 Item
Sched Num
B
B
1
1
Name
Apple
Apple
Lot #
Description
# Units
Inventoried
Sold
Apple
B
2
IBM
Inventoried
IBM
3,100,000.00
Form 706
Form 8971
10,000.00
-3,000.00
6,100,000.00
-2,400,000.00
3,100,000.00
7,000.00
3,700,000.00
3,100,000.00
2,000.00
5,000,000.00
0.00
2,000.00
5,000,000.00
0.00
8,700,000.00
3,100,000.00
8,700,000.00
3,100,000.00
B
Total
Variance
600,000.00
5,000,000.00
-1-
47
Form 8971
SCHEDULE A
8971 Alt Val
Grand total
Sched
Item # Description
Y/N
Beneficiary
Valuation
Date
8,100,000
Value
Percent
B
706 Amount
1
10,000 shares of Apple
10,000 shares of Apple
10,000 shares of Apple
Y
Y
Y
Beny 1
Beny 2
Beny 3
07/01/2015
07/01/2015
07/01/2015
16.9399%
16.9399%
16.9399%
1,033,333
1,033,333
1,033,333
50.8197%
3,100,000
706 Amount
2
2,000 shares of IBM
Y
Beny 1
07/01/2015
6,100,000
5,000,000
100.0000%
5,000,000
100.0000%
5,000,000
8,100,000
Grand total
-1-
8,100,000
5/30/2016
48
8:45:56
8971
Form
(January 2016)
Information Regarding Beneficiaries
Acquiring Property From a Decedent
Department of the Treasury
Internal Revenue Service
OMB No. 1545-2264
Information about Form 8971 and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part I
Decedent and Executor Information
1 Decedent’s name
2 Decedent's date of death
8971 Alt Val
3 Decedent’s SSN
01-01-2015
4 Executor's Name (see instructions)
5 Executor's phone no.
6 Executor's TIN
7 Executor's address (number and street including apartment or suite no.; city, town, or post office; state or province; country; and
ZIP or foreign postal code)
8 If there are multiple executors, check here
TINs of the additional executors.
and attach a statement showing the names, addresses, telephone numbers, and
9 If the estate elected alternate valuation, indicate the alternate valuation date:
Part II
07-01-2015
Beneficiary Information
How many beneficiaries received (or are expected to receive) property from the estate?
For each beneficiary, provide
3
the information requested below. If more space is needed, attach a statement showing the requested information for the additional
beneficiaries.
A
B
C
D
Name of Beneficiary
TIN
Address, City, State, ZIP
Date Provided
1
Beny 1
111-22-3333
PA
06/01/2016
2
Beny 2
222-33-4444
PA
06/01/2016
3
Beny 3
333-44-5555
PA
06/01/2016
Notice To Executors:
Submit Form 8971 with a copy of each completed Schedule A to the IRS. To protect privacy, Form 8971 should not be provided to any
beneficiary. Only Schedule A of Form 8971 should be provided to the beneficiary. Retain copies of all forms for the estate's records.
Sign
Here
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, all information reported herein is true, correct, and complete.
Signature of executor
Date
May the IRS discuss this return with the preparer shown below? See instructions..............................................................................
Print/Type preparer's name
Preparer's signature
Date
Paid
Preparer
Use Only
Check
if
self-employed
Firm's name
Firm's address
For Paperwork Reduction Act Notice, see the separate instructions.
RGA
Copyright 2016 form software only The Lackner Group, Inc.
Yes
X
No
PTIN
Firm's EIN
Phone no.
Form
8971 (1-2016)
49
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971 Alt Val
2 Decedent's SSN
3 Beneficiary's name
Beny 1
4 Beneficiary's TIN
111-22-3333
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
B
, Item
D
E
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
1
Y
07/01/2015
1,033,333
2
Y
07/01/2015
5,000,000
Estate Tax
Value
(in U.S.
dollars)
10,000 shares of Apple
Beneficiary Interest: 16.9399%
Form 706, Schedule
2
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
B
, Item
2,000 shares of IBM
Not disposed of within 6 months following death
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
50
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971 Alt Val
2 Decedent's SSN
3 Beneficiary's name
Beny 2
4 Beneficiary's TIN
222-33-4444
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
B
, Item
1
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
Y
07/01/2015
E
Estate Tax
Value
(in U.S.
dollars)
1,033,333
10,000 shares of Apple
Beneficiary Interest: 16.9399%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
51
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part 1. General Information
1 Decedent's name
8971 Alt Val
2 Decedent's SSN
3 Beneficiary's name
Beny 3
4 Beneficiary's TIN
333-44-5555
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
B
, Item
1
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
Y
07/01/2015
E
Estate Tax
Value
(in U.S.
dollars)
1,033,333
10,000 shares of Apple
Beneficiary Interest: 16.9399%
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
52
8971
(Supplemental)
53
706
Form
(Rev. August 2013)
United States Estate (and Generation-Skipping
Transfer) Tax Return
OMB No. 1545-0015
Estate of a citizen or resident of the United States (see instructions).
To be filed for decedents dying after December 31, 2012.
1a Decedent’s first name and middle initial (and maiden name, if any)
1b Decedent’s last name
Department of the Treasury
Internal Revenue Service
Part 1. – Decedent and Executor
3a
City, town, or post office; county; state or province; country; and ZIP or
foreign postal code.
Decedent’s Social Security No.
3b Year domicile established
4 Date of birth
5 Date of death
01-01-2016
, PA
6a
Name of executor (see instructions)
6c
Executor’s social security number (see instructions)
6b
Executor’s address (number and street including apartment or suite no.; city, town,
or post office; state or province; country; and ZIP or foreign postal code) and phone no.
Phone no.
6d If there are multiple executors, check here
7a Name and location of court where will was probated or estate administered
8
1
2
3a
b
c
4
5
6
7
8
9a
9b
7b Case number
X and attach a certified copy of the will. 9
If decedent died testate, check here
11
10
Part 2. — Tax Computation
2
8971 Supplemental
Total gross estate less exclusion (from Part 5, Recapitulation, item 13).................................................................
Total allowable deductions (from Part 5, Recapitulation, item 24))..........................................................................
Tentative taxable estate (subtract line 2 from line 1)...............................................................................................
Deduction for state death taxes...............................................................................................................................
Taxable estate (subtract line 3b from line 3a)..........................................................................................................
Adjusted taxable gifts (see instructions)...................................................................................................................
Add lines 3c and 4....................................................................................................................................................
Tentative tax on the amount on line 5 from Table A in the instructions...................................................................
Total gift tax paid or payable (see instructions)........................................................................................................
Gross estate tax (subtract line 7 from line 6)...........................................................................................................
Basic exclusion amount...................................................................................
9a
5,450,000.00
Deceased spousal unused exclusion (DSUE) amount from predeceased spouse(s), if
any (from Section D, Part 6 - Portability of Deceased Spousal Unused Exclusion) ..........
9c Applicable exclusion amount (add lines 9a and 9b).........................................
9d Applicable credit amount (tentative tax on the amount in 9c from Table A
in the instructions)............................................................................................
10 Adjustment to applicable credit amount (May not exceed $6,000. See
instructions.).....................................................................................................
200,000.00
0.00
200,000.00
1
2
3a
b
c
4
5
6
7
200,000.00
200,000.00
54,800.00
8
54,800.00
9b
9c
5,450,000.00
9d
2,125,800.00
10
11
12
Allowable unified credit (applicable credit amount) (subtract line 10 from line 9d)..................................................
Subtract line 11 from line 8 (but do not enter less than zero)..................................................................................
11
12
2,125,800.00
0.00
13
14
15
16
17
18
19
20
0.00
Credit for foreign death taxes (from Schedule(s) P). (Attach Form(s) 706-CE.) 13
0.00
14
Credit for tax on prior transfers (from Schedule Q)..........................................
Total credits (add lines 13 and 14)...........................................................................................................................
Net estate tax (subtract line 15 from line 12)...........................................................................................................
Generation-skipping transfer (GST) taxes (from Schedule R, Part 2, line 10) .....................................................
Total transfer taxes (add lines 16 and 17)................................................................................................................
Prior payments. Explain in an attached statement...................................................................................................
Balance due (or overpayment) (subtract line 19 from line 18).................................................................................
15
16
17
18
19
20
0.00
0.00
0.00
0.00
0.00
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, it is true, correct, and complete. Declaration of preparer other than the executor is based on all information of which preparer has any knowledge.
Sign
Here
Signature of executor
Date
Signature of executor
Print/Type preparer's name
Paid
Preparer
Use Only
Firm's name
Firm's address
For Privacy Act and Paperwork Reduction Act Notice, see instructions.
Copyright 2015 form software only The Lackner Group, Inc.
RGA
Date
Preparer's signature
Date
Check
if
self-employed
PTIN
Firm's EIN
Phone no.
Form
706
(Rev. 8-2013)
54
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 Supplemental 01/01/2016
Part 3 -- Elections by the Executor
Note. For information on electing portability of the decedent's DSUE amount, including how to opt out of the election, see Section A of
Part 6-Portability of Deceased Spousal Unused Exclusion.
Note. Some of these elections may require the posting of bonds or liens.
Yes No
Please check the “Yes” or “No” box for each question (see instructions).
1 Do you elect alternate valuation? .............................................................................................................................................................. 1
2 Do you elect special-use valuation? If “Yes,” you must complete and attach Schedule A-1 .................................................................... 2
3 Do you elect to pay the taxes in installments as described in section 6166?.............................................................................................
If “Yes,” you must attach the additional information described in the instructions.
Note. By electing section 6166, you may be required to provide security for estate tax deferred under section 6166
and interest in the form of a surety bond or a section 6324A lien.
3
4 Do you elect to postpone the part of the taxes attributable to a reversionary or remainder interest as described in section 6163?......... 4
Part 4 -- General Information
(Note. Please attach the necessary supplemental documents. You must attach the death certificate.)
(see instructions).
Authorization to receive confidential tax information under Regs. sec. 601.504(b)(2)(i); to act as the estate’s representative before the IRS; and to make written or
oral presentations on behalf of the estate:
Name of representative (print or type)
State
Address (number, street, and room or suite no., city, state, and ZIP code)
I declare that I am the
attorney/
certified public accountant/
enrolled agent (check the applicable box) for the executor. I am not under suspension or
disbarment from practice before the Internal Revenue Service and am qualified to
in the state shown above.
Signature
CAF number
Date
Telephone number
1 Death certificate number and issuing authority (attach a copy of the death certificate to this return).
2 Decedent’s business or occupation. If retired, check here
3a Marital status of the decedent at time of death:
Widow/widower
Married
and state decedent’s former business or occupation.
Single
Legally separated
Divorced
3b For all prior marriages, list the name and SSN of the former spouse, the date the marriage ended, and whether the marriage ended by
annulment, divorce, or death. Attach additional statements of the same size if necessary.
4a Surviving spouse’s name
4b Social security number
4c Amount received (see instructions)
None
5 Individuals (other than the surviving spouse), trusts, or other estates who receive benefits from the estate (do not include charitable beneficiaries
shown in Schedule O) (see instructions).
Name of individual, trust, or estate receiving $5,000 or more
Identifying number
Relationship to decedent
Amount (see instructions)
All unascertainable beneficiaries and those who receive less than $5,000......................................................................
Total..........................................................................................................................................................................................
If you answer “Yes” to any of the following questions, you must attach additional information as described.
6 Is the estate filing a protective claim for refund? ............................................................................................................................................
If “Yes,” complete and attach two copies of Schedule PC for each claim.
7 Does the gross estate contain any section 2044 property (qualified terminable interest property (QTIP) from a prior gift or estate)
(see instructions)? .........................................................................................................................................................................................
8 a Have federal gift tax returns ever been filed? ................................................................................................................................................
If “Yes,” attach copies of the returns, if available, and furnish the following information:
b Period(s) covered
c Internal Revenue office(s) where filed
Yes No
9 a Was there any insurance on the decedent’s life that is not included on the return as part of the gross estate? ...........................................
b Did the decedent own any insurance on the life of another that is not included in the gross estate? ............................................................
(continued on next page)
Copyright 2015 form software only The Lackner Group, Inc.
55
Page 2
Form 706
(Rev. 8-2013)
Estate of:
8971 Supplemental 01/01/2016
Decedent's Social Security Number
Part 4 - General Information (continued)
If you answer “Yes” to any of the following questions, you must attach additional information as described in the instructions.
10 Did the decedent at the time of death own any property as a joint tenant with right of survivorship in which (a) one or more of
the other joint tenants was someone other than the decedent’s spouse, and (b) less than the full value of the property is included
on the return as part of the gross estate? If “Yes,” you must complete and attach Schedule E ...................................................................
Yes No
11a Did the decedent, at the time of death, own any interest in a partnership (for example, a family limited partnership), an
unincorporated business, or a limited liability company; or own any stock in an inactive or closely held corporation?.................................
b If “Yes,” was the value of any interest owned (from above) discounted on this estate tax return? If “Yes,” see the instructions on
reporting the total accumulated or effective discounts taken on Schedule F or G ........................................................................................
12 Did the decedent make any transfer described in section 2035, 2036, 2037, or 2038 (see the instructions)? If "Yes," you must
complete and attach Schedule G"..................................................................................................................................................................
13a Were there in existence at the time of the decedent’s death any trusts created by the decedent during his or her lifetime? .......................
b Were there in existence at the time of the decedent’s death any trusts not created by the decedent under which the decedent
possessed any power, beneficial interest, or trusteeship? ............................................................................................................................
c Was the decedent receiving income from a trust created after October 22, 1986 by a parent or grandparent? ...........................................
If “Yes,” was there a GST taxable termination (under section 2612) on the death of the decedent? ............................................................
d If there was a GST taxable termination (under section 2612), attach a statement to explain. Provide a copy of the trust or will
creating the trust, and give the name, address, and phone number of the current trustee(s).
e Did decedent at any time during his or her lifetime transfer or sell an interest in a partnership, limited liability company, or closely
held corporation to a trust described in question 13a or 13b? ......................................................................................................................
If “Yes,” provide the EIN number for this transferred/sold item.
14 Did the decedent ever possess, exercise, or release any general power of appointment? If “Yes,” you must complete and attach Schedule H ........................
15 Did the decedent have an interest in or a signature or other authority over a financial account in a foreign country, such as a
bank account, securities account, or other financial account? .....................................................................................................................
16 Was the decedent, immediately before death, receiving an annuity described in the “General” paragraph of the instructions for
Schedule I or a private annuity? If “Yes,” you must complete and attach Schedule I ...................................................................................
17 Was the decedent ever the beneficiary of a trust for which a deduction was claimed by the estate of a pre-deceased spouse
under section 2056(b)(7) and which is not reported on this return? If “Yes,” attach an explanation .............................................................
Part 5 - Recapitulation
Item no.
1
2
3
4
5
6
7
8
9
10
11
12
13
Item no.
14
15
16
17
18
19
20
21
22
23
24
Schedule A
Schedule B
Schedule C
Schedule D
Schedule E
Schedule F
Schedule G
Schedule H
Schedule I
Gross estate
— Real Estate..............................................................................................
— Stocks and Bonds ...................................................................................
— Mortgages, Notes, and Cash ..................................................................
— Insurance on the Decedent’s Life (attach Form(s) 712) ..........................
— Jointly Owned Property (attach Form(s) 712 for life insurance) ..............
— Other Miscellaneous Property (attach Form(s) 712 for life insurance) ..................
— Transfers During Decedent’s Life (attach Form(s) 712 for life insurance) .............
— Powers of Appointment ...........................................................................
— Annuities .................................................................................................
Alternate value
Value at date of death
0.00
200,000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1
2
3
4
5
6
7
8
9
10
Total gross estate (add items 1 through 10) .................................................................... 11
Schedule U — Qualified Conservation Easement Exclusion .......................................... 12
Total gross estate less exclusion (subtract item 12 from item 11). Enter here
and on line 1 of Part 2 - Tax Computation ...................................................................... 13
Deductions
Schedule J — Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims ...............
Schedule K — Debts of the Decedent .....................................................................................................................
Schedule K — Mortgages and Liens .......................................................................................................................
Total of items 14 through 16 .....................................................................................................................................
Allowable amount of deductions from item 17 (see the instructions for item 18 of the Recapitulation) ....................
Schedule L — Net Losses During Administration ...................................................................................................
Schedule L — Expenses Incurred in Administering Property Not Subject to Claims ..............................................
Schedule M — Bequests, etc., to Surviving Spouse ................................................................................................
Schedule O — Charitable, Public, and Similar Gifts and Bequests .........................................................................
Estimated value of assets subject to the special rule of Reg. section 20.2010-2T(a)(7)(ii) ......................................
Tentative total allowable deductions (add items 18 through 23). Enter here and on line 2 of the Tax Computation
200,000.00
200,000.00
Amount
14
15
16
17
18
19
20
21
22
23
24
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Page 3
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56
Form 706
(Rev. 8-2013)
Estate of:
Decedent's Social Security Number
8971 Supplemental 01/01/2016
Part 6—Portability of Deceased Spousal Unused Exclusion (DSUE)
Portability Election
A decedent with a surviving spouse elects portability of the deceased spousal unused exclusion (DSUE) amount, if any, by completing and timely-filing
this return. No further action is required to elect portability of the DSUE amount to allow the surviving spouse to use the decedent's DSUE amount.
Section A. Opting Out of Portability
The estate of a decedent with a surviving spouse may opt out of electing portability of the DSUE amount. Check here and do not complete Sections B
and C of Part 6 only if the estate opts NOT to elect portability of the DSUE amount.
Section B. QDOT
Yes No
Are any assets of the estate being transferred to a qualified domestic trust (QDOT)?
If “Yes,” the DSUE amount portable to a surviving spouse (calculated in Section C, below) is preliminary and shall be redetermined at the time of the
final distribution or other taxable event imposing estate tax under section 2056A. See instructions for more details.
Section C. DSUE Amount Portable TO the Surviving Spouse (To be completed by the estate of a decedent making a portability
election.)
Complete the following calculation to determine the DSUE amount that can be transferred to the surviving spouse.
1
2
3
4
5
6
7
8
9
10
Enter the amount from line 9c, Part 2 - Tax Computation...................................................................................
Reserved.............................................................................................................................................................
Enter the value of the cumulative lifetime gifts on which tax was paid or payable (see instructions)..................
Add lines 1 and 3.................................................................................................................................................
Enter amount from line 10, Part 2 - Tax Computation.........................................................................................
Divide amount on line 5 by 40% (0.40) (do not enter less than zero)..................................................................
Subtract line 6 from line 4....................................................................................................................................
Enter amount from line 5, Part 2 - Tax Computation...........................................................................................
Subtract line 8 from line 7 (do not enter less than zero)......................................................................................
DSUE amount portable to the surviving spouse (Enter the lesser of line 9 or line 9a, Part 2-Tax Computation)
1
2
3
4
5
6
7
8
9
10
Section D. DSUE Amount Received FROM Predeceased Spouse(s) (To be completed by the estate of a deceased surviving
spouse with DSUE amount from predeceased spouse(s))
Provide the following information to determine the DSUE amount received from deceased spouses.
A
Name of Deceased Spouse
(dates of death after
December 31, 2010, only)
B
Date of Death
(enter as mm/dd/yy)
C
D
Portability
Election
Made?
Yes
If “Yes,” DSUE
Amount Received
from Spouse
E
F
DSUE Amount
Applied by
Decedent to
Lifetime Gifts
G
Remaining DSUE
Amount, if any
(subtract col. E
from col. D)
No
Part 1 — DSUE RECEIVED FROM LAST DECEASED SPOUSE
Part 2 — DSUE RECEIVED FROM OTHER PREDECEASED SPOUSE(S) AND USED BY DECEDENT
Total (for all DSUE amounts from predeceased spouse(s) applied).....................................
Add the amount from Part 1, column D and the total from Part 2, column E. Enter the result on line 9b, Part 2 - Tax
Computation................................................................................................................................................................................
Page 4
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57
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 Supplemental 01/01/2016
SCHEDULE B - Stocks and Bonds
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last four
columns.
Item
Number
Description including face amount of bonds or number of shares and par
value for identification. Give CUSIP number. If trust, partnership, or
closely held entity, give EIN
Unit Value
Alternate
valuation date
Alternate Value
Value at date of death
CUSIP # or EIN,
where applicable
1
500 shares of Google
400
200,000.00
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 2.) ...................................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Copyright 2015 form software only The Lackner Group, Inc.
200,000.00
Schedule B - Page 10
Form 706 Schedule B (Rev. 8-2013)
58
Form 706
(Rev. 8-2013)
Decedent's Social Security Number
Estate of:
8971 Supplemental 01/01/2016
SCHEDULE F - Other Miscellaneous Property Not Reportable Under Any Other Schedule
(For jointly owned property that must be disclosed on Schedule E, see instructions.)
(If you elect section 2032A valuation, you must complete Schedule F and Schedule A-1.)
Note. If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and the
Form 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to
report the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions and Reg. section 20.2010-2T
(a)(7)(ii) for more information. If you are not required to report the value of an asset, identify the property but make no entries in the last three
columns.
1
Did the decedent own any works of art, items, or any collections whose artistic or collectible value at date of death
exceeded $3,000?.................................................................................................................................................................................
If "Yes," submit full details on this schedule and attach appraisals.
2
Has the decedent's estate, spouse, or any other person, received (or will receive) any bonus or award as a result
of the decedent's employment or death?...............................................................................................................................................
Yes No
If "Yes," submit full details on this schedule.
Did the decedent at the time of death have, or have access to, a safe deposit box?............................................................................
If "Yes," state location, and if held jointly by decedent and another, state name and relationship of joint depositor.
3
If any of the contents of the safe deposit box are omitted from the schedules in this return, explain fully why omitted.
Item
Number
Description. For securities, give CUSIP number. If trust, partnership, or
closely held entity, give EIN
Alternate
valuation date
Alternate Value
Value at date of death
None
Total from continuation schedules (or additional sheets) attached to this schedule.........................
TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 6.) ..................................
(If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size)
Schedule F - Page 14
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59
Estate of:
8971 Supplemental
1. Variance: 706 - 8971
200,000.00
706 Item
Sched Num
B
1
Name
Google
Lot #
#
Benys Cash
IRD Exclude Resid Changed
1
B
200,000.00
0.00
Form 706
Form 8971
Variance
200,000.00
200,000.00
0.00
200,000.00
200,000.00
0.00
200,000.00
200,000.00
0.00
-1-
60
Estate of:
8971 Supplemental
2. Variance: 706 - 8971 (with sales history)
200,000.00
706 Item
Sched Num
B
1
Name
Google
Lot #
Description
# Units
Inventoried
Google
200,000.00
Form 706
Form 8971
500.00
200,000.00
200,000.00
500.00
200,000.00
200,000.00
200,000.00
200,000.00
200,000.00
200,000.00
B
Total
Variance
0.00
-1-
61
Form 8971
SCHEDULE A
8971 Supplemental
200,000
Grand total
Sched
Item # Description
Y/N
Beneficiary
Valuation
Date
Value
Percent
B
200,000
706 Amount
1
N
Description for supplemental filing, showing Beny 1
01/01/2016
100.0000%
200,000
100.0000%
200,000
200,000
200,000
Grand total
-1-
5/30/2016
62
8:50:41
8971
Form
(January 2016)
Information Regarding Beneficiaries
Acquiring Property From a Decedent
Department of the Treasury
Internal Revenue Service
Information about Form 8971 and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
Part I
OMB No. 1545-2264
X
Decedent and Executor Information
1 Decedent’s name
2 Decedent's date of death
8971 Supplemental
3 Decedent’s SSN
01-01-2016
4 Executor's Name (see instructions)
5 Executor's phone no.
6 Executor's TIN
7 Executor's address (number and street including apartment or suite no.; city, town, or post office; state or province; country; and
ZIP or foreign postal code)
8 If there are multiple executors, check here
TINs of the additional executors.
and attach a statement showing the names, addresses, telephone numbers, and
9 If the estate elected alternate valuation, indicate the alternate valuation date:
Part II
Beneficiary Information
How many beneficiaries received (or are expected to receive) property from the estate?
For each beneficiary, provide
1
the information requested below. If more space is needed, attach a statement showing the requested information for the additional
beneficiaries.
1
A
B
C
D
Name of Beneficiary
TIN
Address, City, State, ZIP
Date Provided
Beny 1
123-45-6789
PA
06/01/2016
Notice To Executors:
Submit Form 8971 with a copy of each completed Schedule A to the IRS. To protect privacy, Form 8971 should not be provided to any
beneficiary. Only Schedule A of Form 8971 should be provided to the beneficiary. Retain copies of all forms for the estate's records.
Sign
Here
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and
belief, all information reported herein is true, correct, and complete.
Signature of executor
Date
May the IRS discuss this return with the preparer shown below? See instructions..............................................................................
Print/Type preparer's name
Preparer's signature
Date
Paid
Preparer
Use Only
Check
if
self-employed
Firm's name
Firm's address
For Paperwork Reduction Act Notice, see the separate instructions.
RGA
Copyright 2016 form software only The Lackner Group, Inc.
Yes
X
No
PTIN
Firm's EIN
Phone no.
Form
8971 (1-2016)
63
Form 8971 (1-2016)
SCHEDULE A—Information Regarding Beneficiaries Acquiring Property from a Decedent
Information about Form 8971 (including Schedule A) and its separate instructions is at www.irs.gov/form8971.
Check box if this is a supplemental filing
X
Part 1. General Information
1 Decedent's name
8971 Supplemental
2 Decedent's SSN
3 Beneficiary's name
Beny 1
4 Beneficiary's TIN
123-45-6789
5 Executor's name
6 Executor's phone no.
7 Executor's address
Part 2. Information on Property Acquired
A
Item
No.
B
Form 706, Schedule
1
C
Description of property acquired from the decedent and the Schedule and item
number where reported on the decedent's Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return. If the beneficiary acquired a partial
interest in the property, indicate the percentage acquired here.
B
, Item
1
D
Did this
asset
increase
estate tax
liability?
(Y/N)
Valuation
Date
N
01/01/2016
E
Estate Tax
Value
(in U.S.
dollars)
200,000
Description for supplemental filing, showing only items that have changed.
Notice To Beneficiaries:
You have received this schedule to inform you of the value of property you received from the estate of the decedent named above.
Retain this schedule for tax reporting purposes. If the property increased the estate tax liability, Internal Revenue Code section
1014(f) applies, requiring the consistent reporting of basis information. For more information on determining basis, see IRC section
1014 and/or consult a tax professional.
Page A-1
64
8971 Proposed Regulations
March 4, 2016
Background
1.
Overview ................................................................................................................. 5
2.
Summary of new statutory framework ....................................................................... 5
A.
Section 1014(f) ............................................................................................ 5
B.
Section 6035 ................................................................................................ 6
C.
Penalties under sections 6662, 6721, and 6722 .............................................. 7
3.
Notice 2015-57 ......................................................................................................... 8
4.
Notice 2016-19 ......................................................................................................... 8
Summary of Comments on Notice 2015-57 and Explanation of Provisions
1.
Section 1014(f)(1) - Consistency of basis with estate tax return ................................... 8
2.
Effect of other provisions of the Code that govern basis .............................................. 9
3.
Section 1014(f)(2) - Property that increases estate tax liability ..................................... 11
4.
Section 1014(f)(3) - Final value of property acquired from a decedent .......................... 11
5.
After-discovered or omitted property .......................................................................... 13
6.
Definition of executor for purposes of sections 1014(f) and 6035 ................................. 13
7.
Requirement to provide Information Return and Statement(s) under section 6035 ........ 14
8.
Circumstances under which no Information Return or Statement(s) is required under
section 6035 ............................................................................................................ 14
9.
Property to be reported on an Information Return and Statement(s) ............................ 15
10. Beneficiaries ............................................................................................................. 15
11. Due date for Information Return and Statements ........................................................ 16
12. Supplemental Information Return and Statement(s) .................................................... 17
13. Subsequent transfers ................................................................................................ 18
14. Surviving joint tenants or other recipients under section 6035(b)(2) ............................. 20
15. Removal of regulations under former section 6035 ...................................................... 21
16. Request for new process ........................................................................................... 21
65
8971 Proposed Regulations
March 4, 2016
1.1014-10 Basis of property acquired from a decedent must be consistent with Federal estate tax return
(a) Consistent basis requirement ...................................................................................... 24
(b) Property subject to consistency requirement ................................................................ 25
(c) Final value ................................................................................................................. 27
(d) Executor .................................................................................................................... 29
(e) Examples ................................................................................................................... 29
(f) Effective/applicability date .......................................................................................... 31
1.6035-1 Basis information to persons acquiring property from decedent
(a) Required Information Return and Statement(s) ............................................................ 31
(b) Property for which reporting is required ....................................................................... 33
(c) Beneficiaries .............................................................................................................. 34
(d) Due dates .................................................................................................................. 36
(e) Duty to supplement .................................................................................................... 36
(f) Subsequent transfers ................................................................................................. 40
(g) Definitions ................................................................................................................. 41
(h) Penalties ................................................................................................................... 41
(i) Effective/applicability date .......................................................................................... 42
1.6035-2 Transition relief ................................................................................................ 42
1.6662-8 Inconsistent estate basis reporting .................................................................... 43
66
8971 Proposed Regulations
March 4, 2016
1.1014-10 Basis of property acquired from a decedent must be consistent with Federal estate tax return
(a) Consistent basis requirement
(1) In general ...................................................................................................... 24
(2) Subsequent basis adjustments ........................................................................ 25
(b) Property subject to consistency requirement
(1) In general ...................................................................................................... 26
(2) Exceptions (marital/charitable deduction property; tangible ppty ≤ $3,000) ........ 26
(3) Application ..................................................................................................... 26
(c) Final value
(1) Finality of estate tax value .............................................................................. 27
(2) No finality of estate tax value .......................................................................... 27
(3) After-discovered or omitted property ............................................................... 28
(i) Return under section 6018 filed .................................................................. 28
(A) Reporting prior to expiration of period of limitation on asssessment ....... 28
(B) No reporting prior to expiration of period of limitation on assessment .... 28
(ii) No return under section 2018 filed ............................................................. 29
(d) Executor .................................................................................................................... 29
(e) Examples
Example
Example
Example
Example
Example
Example
Example
1
2(i)
2(ii)
3(i)
3(i)
4(i)
4(ii)
Partnership .....................................................................................
Private residence; valuation changed per agreement .........................
Private residence; capital improvement .............................................
After-discovered asset; return required; final value = 0 .....................
After-discovered asset; no return required; final value upon filing ......
Residence with nonrecourse debt; report gross, not net .....................
Beny sells residence before final value is reduced; inc tax deficiency ...
29
30
30
30
30
30
31
(f) Effective/applicability date .......................................................................................... 31
67
8971 Proposed Regulations
March 4, 2016
1.6035-1 Basis information to persons acquiring property from decedent
(a) Required Information Return and Statement(s)
(1) In general ...................................................................................................... 31
(2) Exception (GST allocation/election, portability election, protective filing) ............ 32
(b) Property for which reporting is required
(1) Property for which reporting is required ........................................................... 33
Exceptions: cash, IRD, tangible personal property ≤ $3,000, sales .................... 33
(2) Examples ....................................................................................................... 33
(i) Example 1. Tangible personal property ($3,000 threshold) ........................... 34
(i) Example 2. Stock with fully taxable exchange .............................................. 34
(c) Beneficiaries
(1) In general ...................................................................................................... 34
(2) Beneficiary not an individual ........................................................................... 35
(3) Beneficiary not determined ............................................................................. 35
(4) Beneficiary not located ................................................................................... 35
(d) Due dates
(1) In general ...................................................................................................... 36
(2) Transition rule................................................................................................ 36
(e) Duty to supplement
(1) In general ...................................................................................................... 36
(2) Adjustments requiring supplement .................................................................. 37
(3) Adjustments not requiring supplement
(i) In general ................................................................................................. 37
68
8971 Proposed Regulations
March 4, 2016
(ii) Examples (uncertain distributions; report all assets to each beny)
(A) Example 1. Stock, personal residence, three paintings ......................... 38
(A) Example 2. Household effects (report only those > $3,000) ................. 38
(4) Due date of supplemental reporting
(i) In general ................................................................................................. 38
(ii) Probate property or property from decedent’s revocable trust ...................... 39
(f) Subsequent transfers .................................................................................................. 40
(g) Definitions
(1) Executor ........................................................................................................ 41
(2) Information Return (Form 8971 plus Schedules A) ............................................ 41
(3) Statement (Schedules A) ................................................................................ 41
(h) Penalties
(1) Failure to timely file complete and correct Information Return ........................... 41
(2) Failure to timely furnish correct Statements ..................................................... 42
(i) Effective/applicability date ........................................................................................... 42
1.6035-2 Transition relief .............................................................................................. 42
1.6662-8 Inconsistent estate basis reporting
(a) In general ...................................................................................................... 43
(b) Inconsistent estate basis................................................................................. 43
(c) Applicable property ......................................................................................... 43
(d) Effective/applicability date .............................................................................. 43
69
This document is scheduled to be published in the
Federal Register on 03/04/2016 and available online at
http://federalregister.gov/a/2016-04718, and on FDsys.gov
[4830-01-p]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[REG-127923-15]
RIN 1545-BM97
Consistent Basis Reporting Between Estate and Person Acquiring Property From
Decedent
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking, and notice of proposed rulemaking by crossreference to temporary regulations.
SUMMARY: This document contains proposed regulations that provide guidance
regarding the requirement that a recipient’s basis in certain property acquired from a
decedent be consistent with the value of the property as finally determined for Federal
estate tax purposes. In addition, these proposed regulations provide guidance on the
reporting requirements for executors or other persons required to file Federal estate tax
returns. Temporary regulations in the Rules and Regulations section of this issue of the
Federal Register provide transition relief to executors and other persons required to file
or furnish certain statements. The text of those temporary regulations (TD 9757)
published in the Rules and Regulations section of this issue of the Federal Register
also serves as the text of the proposed regulations regarding the transition relief. These
proposed regulations as well as TD 9757 published elsewhere in the Rules and
Regulations section of this issue of this Federal Register affect executors or other
70
persons who file estate tax returns after July 31, 2015. The proposed regulations also
affect beneficiaries who acquire certain property from these estates, and subsequent
transferees to whom beneficiaries transfer the property in transactions that do not result
in the recognition of gain or loss for Federal income tax purposes.
DATES: Written or electronic comments and requests for a public hearing must be
received by [INSERT DATE 90 DAYS AFTER PUBLICATION IN THE FEDERAL
REGISTER].
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-127923-15), Internal
Revenue Service, Room 5203, PO Box 7604, Ben Franklin Station, Washington, DC
20044. Submissions may be hand delivered Monday through Friday between the hours
of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-127923-15), Courier’s Desk, Internal
Revenue Service, 1111 Constitution Avenue NW, Washington, DC 20224; or sent
electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRSREG-127923-15).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Theresa M. Melchiorre, at (202) 317-6859; concerning submissions of comments or, to
request a hearing, Regina Johnson, at (202) 317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in this notice of proposed rulemaking has
been submitted to the Office of Management and Budget for review in accordance with
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d). Comments on the collection
2
71
of information should be sent to the Office of Management and Budget, Attn: Desk
Officer for the Department of the Treasury, Office of Information and Regulatory Affairs,
Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS
Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments
on the collection of information should be received by [INSERT DATE 60 DAYS AFTER
THE PUBLICATION IN THE FEDERAL REGISTER].
Comments are specifically requested concerning:
Whether the proposed collection of information is necessary for the proper
performance of the functions of the Internal Revenue Service (IRS), including whether
the information will have practical utility;
The accuracy of the estimated burden associated with the proposed collection of
information;
How the quality, utility, and clarity of the information to be collected may be
enhanced;
How the burden of complying with the proposed collection of information may be
minimized, including through the application of automated collection techniques or other
forms of information technology; and
Estimates of capital or start-up costs and costs of operation, maintenance, and
purchase of service to provide information.
The reporting requirements in these proposed regulations are in §1.6035-1(a)
and (d) and require executors and other persons required to file a return under section
6018 to furnish a statement to the IRS and to each beneficiary providing information
3
72
regarding the value of the property the beneficiary acquires from the decedent. The IRS
will use this information to determine whether the beneficiary (or transferee) reports a
basis for that property that is consistent with the value of that property as finally
determined for Federal estate tax purposes when the beneficiary (or transferee)
depreciates the property, or sells, exchanges, or otherwise disposes of some or all of
that property in transactions that result in the recognition of gain or loss for Federal
income tax purposes.
The collection of information may vary depending on the property includible in the
gross estate and the number of beneficiaries receiving the property. The following
estimates are based on the information that is available to the IRS. A respondent may
require more or less time, depending on the circumstances.
Estimated total annual reporting burden. The estimated total annual reporting
burden per respondent is 5.31 hours.
Estimated annual number of respondents. The estimated annual number of
respondents is 10,000.
An agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless it displays a valid control number assigned by the
Office of Management and Budget.
Books or records relating to a collection of information must be retained as long
as their contents may become material in the administration of any internal revenue law.
Generally, tax returns and tax return information are confidential, as required by
26 U.S.C. 6103.
4
73
Background
1. Overview.
On July 31, 2015, the President of the United States signed into law H.R. 3236,
the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015,
Public Law 114-41, 129 Stat. 443 (Act). Section 2004 of the Act enacted sections
1014(f), 6035, 6662(b)(8), 6662(k), 6724(d)(1)(D), and 6724(d)(2)(II) of the Internal
Revenue Code (Code). This document contains proposed regulations that amend 26
CFR parts 1 and 301 under those Code provisions to achieve consistency between a
recipient’s basis in certain property acquired from a decedent and the value of the
property as finally determined for Federal estate tax purposes. This notice of proposed
rulemaking also cross-references to temporary regulations (TD 9757) published in the
Rules and Regulations section of this issue of the Federal Register, which provide
transition relief to certain persons required to file or furnish statements under section
6035. This document also proposes to remove from 26 CFR part 1 regulations under
former section 6035 as a result of the repeal of that Code provision in 2004.
2. Summary of new statutory framework.
A. Section 1014(f).
Section 1014(f) imposes an obligation of consistency between the basis of
certain inherited property and the value of that property for Federal estate tax purposes.
Section 1014(f)(1) provides that the basis of property acquired from a decedent
cannot exceed that property’s final value for purposes of the Federal estate tax imposed
on the estate of the decedent, or, if the final value has not been determined, the value
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reported on a statement required by section 6035(a).
Section 1014(f)(2) provides that section 1014(f)(1) only applies to property the
inclusion of which in the decedent’s gross estate increased the estate’s liability for the
Federal estate tax (reduced by credits allowable against the tax).
Section 1014(f)(3) provides that, for purposes of section 1014(f)(1), the basis of
property has been determined for Federal estate tax purposes if (A) the value of the
property is shown on a return under section 6018 and that value is not contested by the
Secretary before the expiration of the time for assessing the estate tax; (B) in a case not
described in (A), the value is specified by the Secretary and that value is not timely
contested by the executor of the estate; or (C) the value is determined by a court or
pursuant to a settlement agreement with the Secretary.
B. Section 6035.
Section 6035 requires the reporting, both to the IRS and the beneficiary, of the
value of property included on a required Federal estate tax return.
Section 6035(a)(1) provides that the executor of any estate required to file a
return under section 6018(a) must furnish, both to the Secretary and to the person
acquiring any interest in property included in the estate, a statement identifying the
value of each interest in the property as reported on the return and any other
information as the Secretary may prescribe.
Section 6035(a)(2) provides that each person required to file a return under
section 6018(b) must furnish to the Secretary and to each other person who holds a
legal or beneficial interest in the property to which the return relates a statement
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identifying the information described in section 6035(a)(1).
Section 6035(a)(3)(A) provides that this statement is due no later than the earlier
of (i) 30 days after the due date of the return under section 6018 (including extensions,
if any) or (ii) 30 days after the date the return is filed. If there is an adjustment to the
information required to be included on this statement, section 6035(a)(3)(B) requires the
executor (or other person required to file the statement) to provide a supplemental
statement to the Secretary and to each affected beneficiary no later than 30 days after
the adjustment is made.
Section 6035(b) authorizes the Secretary to prescribe regulations to carry out
section 6035, including regulations relating to (1) the application of this section to
property to which no Federal estate tax return is required to be filed, and (2) situations
in which the surviving joint tenant or other recipient may have better information than
the executor regarding the basis or fair market value of the property.
C. Penalties under sections 6662, 6721, and 6722.
Section 2004(c) of the Act added a new accuracy-related penalty for
underpayments attributable to an inconsistent estate basis. See section 6662(b)(8).
Section 6662(k) provides that there is an inconsistent estate basis if the basis of
property claimed on a return exceeds the basis as determined under section 1014(f).
Section 2004(c) of the Act adds statements under section 6035 to the list of
information returns and payee statements subject to the penalties under section 6721
and section 6722, respectively. Specifically, the Act adds new paragraph (D) to section
6724(d)(1) to provide that the term information return means any statement required to
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be filed with the Secretary under section 6035. The Act also adds new paragraph (II) to
section 6724(d)(2) to provide that the term payee statement means any statement
required to be furnished under section 6035 (other than a statement described in
section 6724(d)(1)(D)).
3. Notice 2015-57.
On August 21, 2015, the Treasury Department and the IRS issued Notice 201557, 2015-36 IRB 294. That notice delayed until February 29, 2016, the due date for any
statements required under section 6035(a)(3)(A) to be provided before
February 29, 2016. The notice also stated that the Treasury Department and the IRS
expect to issue additional guidance to assist taxpayers in complying with sections
1014(f) and 6035 and invited comments. The Treasury Department and the IRS
received numerous comments in response to the notice and considered all comments in
the drafting of the proposed regulations. The comments are discussed in more detail in
this preamble.
4. Notice 2016-19.
On February 11, 2016, the Treasury Department and the IRS issued Notice
2016-19, 2016-09 IRB 362. That notice provides that executors or other persons
required to file or furnish a statement under section 6035(a)(1) or (a)(2) before March
31, 2016, need not do so until March 31, 2016.
Summary of Comments on Notice 2015-57 and Explanation of Provisions
1. Section 1014(f)(1) – Consistency of basis with estate tax return.
The general rule of section 1014 is that the basis of property received from a
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decedent (or as a result of a decedent’s death) is that property’s fair market value on
the decedent’s date of death (or the alternate valuation date, if elected). Newly enacted
section 1014(f)(1) provides that the basis of certain property acquired from a decedent
cannot exceed that property’s final value as determined for Federal estate tax purposes.
If no final value has been determined when the taxpayer’s basis in the property
becomes relevant for Federal tax purposes, for example, to calculate depreciation or
amortization, or to calculate gain or loss on the sale, exchange or disposition of the
property, the taxpayer uses the value reported on the statement required by section
6035(a) (the fair market value reported on the Federal estate tax return) to determine
the taxpayer’s basis for Federal tax purposes.
Proposed §1.1014-10(a)(1) provides that a taxpayer’s initial basis in certain
property acquired from a decedent may not exceed the final value of the property as
that term is defined in §1.1014-10(c). This limitation applies to the property whenever
the taxpayer reports to the IRS a taxable event with respect to the property (for
example, depreciation or amortization) and continues to apply until the property is sold,
exchanged, or otherwise disposed of in one or more transactions that result in the
recognition of gain or loss for Federal income tax purposes. The property for this
purpose includes any other property the basis of which is determined in whole or in part
by reference to the basis of the property acquired from the estate or as a result of the
death of the decedent (for example as the result of a like-kind exchange or involuntary
conversion).
2. Effect of other provisions of the Code that govern basis.
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Section 6662(b)(8) imposes an accuracy-related penalty on the portion of any
underpayment of tax required to be shown on a return that is attributable to an
inconsistent estate basis. Under newly enacted section 6662(k), an inconsistent estate
basis arises if the basis of property claimed on a return exceeds its final value as
determined under section 1014(f).
Commenters have expressed concern that section 1014(f) and section 6662(k)
appear to prohibit otherwise permissible adjustments to the basis of property as a result
of post-death events. In response, proposed §§1.1014-10(a)(2) and 1.6662-8(b) clarify
that sections 1014(f) and 6662(k) do not prohibit adjustments to the basis of property as
a result of post-death events that are allowed under other sections of the Code, and
provide that such basis adjustments will not cause a taxpayer to violate the provisions of
section 1014(f) or section 6662(k) on the date of sale, exchange, or disposition. The
proposed regulations interpret sections 1014(f) and 6662(k) to require only that the
beneficiary’s initial basis of the inherited property cannot exceed the final value of the
property for Federal estate tax purposes. Adjustments to the basis of the inherited
property permitted by other sections of the Code as a result of post-death events (for
example, depreciation or amortization, or a sale, exchange, or disposition of the
property) will not cause the taxpayer’s basis in the property on the date of a taxable
event with respect to the property to be treated as exceeding the final value of the
property. As a result, there cannot be an underpayment attributable to an inconsistent
estate basis arising from these basis adjustments, and the accuracy-related penalty
under section 6662(b)(8) cannot apply solely as a result of these basis adjustments.
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3. Section 1014(f)(2) - Property that increases estate tax liability.
The consistent basis requirement of section 1014(f)(1) applies only to property
the inclusion of which in the decedent’s gross estate for Federal estate tax purposes
increases the Federal estate tax liability payable by the decedent’s estate. Proposed
§1.1014-10(b) defines this property as property includible in the gross estate under
section 2031, as well as property subject to tax under section 2106, that generates a
Federal estate tax liability in excess of allowable credits. The proposed regulations
specifically exclude all property reported on a Federal estate tax return required to be
filed by section 6018 if no Federal estate tax is imposed upon the estate due to
allowable credits (other than a credit for a prepayment of that tax). In cases where
Federal estate tax is imposed on the estate, the proposed regulations exclude property
that qualifies for a charitable or marital deduction under section 2055, 2056, or 2056A
because this property does not increase the Federal estate tax liability. In addition, the
proposed regulations exclude any tangible personal property for which an appraisal is
not required under §20.2031-6(b) (relating to the valuation of certain household and
personal effects) because of its value. Thus, if any Federal estate tax liability is
incurred, all of the property in the gross estate (other than that described in the
preceding two sentences) is deemed to increase the Federal estate tax liability and is
subject to the consistency requirement of section 1014(f).
4. Section 1014(f)(3) – Final value of property acquired from a decedent.
Section 1014(f)(3) provides that, for purposes of section 1014(f)(1), the final
value of property has been determined for Federal estate tax purposes if: (A) the value
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is reported on a Federal estate tax return filed with the IRS and is not contested by the
IRS before the period of limitation on assessment expires; (B) the value is specified by
the IRS and is not timely contested by the executor of the estate; or (C) the value is
determined by a court or pursuant to a settlement agreement with the IRS.
Proposed §1.1014-10(c)(1) defines the final value of property that is reported on
a Federal estate tax return filed with the IRS. That value is the value reported on the
Federal estate tax return once the period of limitations on assessment for adjusting or
contesting that value has expired. The IRS may specify a value for the property by
determining a value in the course of carrying out its responsibilities under section
7803(a)(2). If the IRS determines a value different from the value reported, the final
value is the value determined by the IRS once that value can no longer be contested by
the estate. If the value determined or specified by the IRS is timely contested by the
estate, the final value is the value determined in an agreement that is binding on all
parties, or the value determined by a court once the court’s determination is final.
Proposed §1.1014-10(c)(2) provides that the recipient of property to which the
consistency requirement applies may not claim a basis in excess of the value reported
on the statement required to be furnished under section 6035(a) (the value shown on
the Federal estate tax return) if the taxpayer’s basis in the property is relevant for any
purpose under the Internal Revenue Code before the final value of that property has
been determined under proposed §1.1014-10(c)(1). However, under section 1014(f)(1),
basis cannot exceed the property’s final value. Therefore, proposed §1.1014-10(c)(2)
provides that, if the final value is determined before the period of limitation on
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assessment expires for any Federal income tax return of the recipient on which the
taxpayer’s basis is relevant and the final value differs from the initial basis claimed with
respect to that return, a deficiency and an underpayment may result.
5. After-discovered or omitted property.
Commenters requested that the regulations clarify how the consistent basis
requirement applies to property that is discovered after the filing of the Federal estate
tax return or is otherwise omitted from that return. If this property would have generated
a Federal estate tax liability if it had been reported on the Federal estate tax return that
was filed with IRS, proposed §1.1014-10(c)(3)(i) provides two different results based
upon whether the period of limitation on assessment has expired for the Federal estate
tax imposed on the estate. Proposed §1.1014-10(c)(3)(i)(A) provides that, if the
executor reports the after-discovered or omitted property on an estate tax return filed
before the expiration of the period of limitation on assessment of the estate tax, the final
value of the property is determined under proposed §1.1014-10(c)(1) or (2).
Alternatively, proposed §1.1014-10(c)(3)(i)(B) provides that, if the after-discovered or
omitted property is not reported before the period of limitation on assessment expires,
the final value of the after-discovered or omitted property is zero.
Finally, to address situations in which no Federal estate tax return was filed,
proposed §1.1014-10(c)(3)(ii) provides that the final value of all property includible in the
gross estate subject to the consistent basis requirement is zero until the final value is
determined under proposed §1.1014-10(c)(1) or (2).
6. Definition of executor for purposes of sections 1014(f) and 6035.
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The proposed regulations adopt the definition of the term executor found in
section 2203 applicable for Federal estate tax purposes and expand it to include a
person required to file a return under section 6018(b).
7. Requirement to provide Information Return and Statement(s) under section 6035.
The proposed regulations define the term Information Return as the Form 8971,
Information Regarding Beneficiaries Acquiring Property from a Decedent, which
includes a copy of a Schedule A (Statement) for each person who has received or will
receive property from the estate or by reason of the decedent’s death.
Proposed §1.6035-1(a)(1) provides that an executor who is required to file a
Federal estate tax return also is required to file an Information Return with the IRS to
report the final value of certain property, the recipient of that property, and other
information prescribed by the Information Return and the related instructions. The
executor also is required to furnish a Statement to each beneficiary who has acquired
(or will acquire) property from the decedent or by reason of the death of the decedent to
report the property the beneficiary has acquired (or will acquire) and the final value of
that property.
8. Circumstances under which no Information Return or Statement(s) is required under
section 6035.
Commenters expressed concern that the section 6035 filing requirements might
extend to a return filed by an estate solely to make the portability election under section
2010(c)(5), or a generation-skipping transfer tax election or exemption allocation. The
proposed regulations provide that the filing requirements of section 6035 do not apply to
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such returns because these returns are not required by section 6018.
9. Property to be reported on an Information Return and Statement(s).
Commenters requested that the regulations clarify the types of property to be
reported on the Information Return and one or more Statements. In response,
proposed §1.6035-1(b) defines the property to be reported on an Information Return
and Statement(s) as all property included in the gross estate for Federal estate tax
purposes with four exceptions: cash (other than coins or paper bills with numismatic
value); income in respect of a decedent; those items of tangible personal property for
which an appraisal is not required under §20.2031-6(b); and property that is sold or
otherwise disposed of by the estate (and therefore not distributed to a beneficiary) in a
transaction in which capital gain or loss is recognized.
10. Beneficiaries.
Proposed §1.6035-1(c)(1) provides that each beneficiary (including a beneficiary
who is also the executor of the estate) who receives property to be reported on the
estate’s Information Return must receive a copy of the Statement reporting the property
distributable to that beneficiary. Proposed §1.6035-1(c)(2) provides that, if the
beneficiary is a trust, estate, or business entity instead of an individual, the executor is
to furnish the entity’s Statement to the trustee, executor, or to the business entity itself,
and not to the beneficiaries of the trust or estate or to the owners of the business entity.
Commenters requested guidance on how to comply with the section 6035
reporting requirements when the executor cannot determine the exact distribution of the
estate’s property and thus the beneficiary of each property by the due date of the
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Information Return and the related Statements. This situation can arise, for example,
when tangible personal property defined in §20.2031-6 is to be distributed among a
group of beneficiaries as that group determines, the residuary estate is distributable to
multiple beneficiaries, or when multiple residuary trusts are to be funded. In response,
proposed §1.6035-1(c)(3) provides that, if by the due date the executor does not yet
know what property will be used to satisfy the interest of each beneficiary, the executor
is required to report on the Statement for each beneficiary all of the property that could
be used to satisfy that beneficiary’s interest. This results in the duplicate reporting of
those assets on multiple Statements, but each beneficiary will have been advised of the
final value of each property that may be received by that beneficiary and therefore will
be able to comply with the basis consistency requirement, if applicable.
Proposed §1.6035-1(c)(4) provides that, if the executor is unable to locate a
beneficiary by the due date of the Information Return, the executor is required to report
that on that Information Return and explain the efforts taken to locate the beneficiary. If
the executor subsequently locates the beneficiary, the executor is required to furnish the
beneficiary with a Statement and file a supplemental Information Return with the IRS
within 30 days of locating the beneficiary. If the executor is unable to locate a
beneficiary and distributes the property to a different beneficiary who was not identified
in the Information Return as the recipient of that property, the executor is required to file
a supplemental Information Return with the IRS and furnish the successor beneficiary
with a Statement within 30 days after distributing the property.
11. Due date for Information Return and Statements.
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Proposed §1.6035-1(d)(1) provides that the executor is required to file the
Information Return with the IRS, and is required to furnish each beneficiary with that
beneficiary’s Statement, on or before the earlier of the date that is 30 days after the due
date of the Federal estate tax return (including extensions actually granted, if any), or
the date that is 30 days after the date on which that return is filed with the IRS. In
response to comments, proposed §1.6035-1(d)(2) provides a transition rule for any
Federal estate tax return that was due on or before July 31, 2015, but that is filed after
July 31, 2015. In this case, the due date of the Information Return and all Statements is
30 days after the date on which the return is filed. Otherwise, as commenters noted,
the due date for the Information Return and Statement(s) may be prior to the effective
date of section 6035.
12. Supplemental Information Return and Statement(s).
Proposed §1.6035-1(e)(1) and (2) generally requires a supplemental Information
Return and corresponding supplemental Statement(s) upon a change to the information
required to be reported on the Information Return or a Statement that causes the
information as reported to be incorrect or incomplete. Such changes include, for
example, the discovery of property that should have been, but was not, reported on the
Federal estate tax return, a change in the value of property pursuant to an examination
or litigation, or (except as provided by proposed §1.6035-1(e)(3)(B)) a change in the
identity of the beneficiary to whom the property is to be distributed (for example,
pursuant to a death, disclaimer, bankruptcy, or otherwise).
Proposed §1.6035-1(e)(3) provides that a supplemental Information Return and
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Statement(s) may be filed, but they are not required, to correct an inconsequential error
or omission within the meaning of §301.6722-1(b) or to specify the actual distribution of
assets previously reported as being available to satisfy the interests of multiple
beneficiaries in the situation described in proposed §1.6035-1(c)(3).
Proposed §1.6035-1(e)(4) provides that the due date for the supplemental
Information Return and each supplemental Statement is 30 days after: (i) the final value
(within the meaning of proposed §1.1014-10(c)(1)) of property is determined; (ii) the
executor discovers that the information reported on the Information Return or Statement
is otherwise incorrect or incomplete; or (iii) a supplemental Federal estate tax return is
filed. However, at the suggestion of a commenter, if these events occur prior to the
distribution to the beneficiary of probate property or of the property of a revocable trust,
a supplemental Information Return or Statement is not due until 30 days after the
property is distributed. This is likely to be approximately the same time when the
executor would provide the beneficiary with information as to changes, if any, to the
basis of the property that have occurred since the decedent’s death and prior to the
distribution. Because that basis adjustment information is not part of what is required to
be reported under section 6035, however, if the executor chooses to provide that basis
adjustment information on the Schedule A provided to the beneficiary, the basis
adjustment information must be shown separately from the final value required to be
reported on the beneficiary’s Statement.
13. Subsequent transfers.
As discussed earlier in this preamble, section 6035(a)(2) imposes a reporting
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requirement on the executor of the decedent’s estate and on any other person required
to file a return under section 6018. The purpose of this reporting is to enable the IRS to
monitor whether the basis claimed by an owner of the property is properly based on the
final value of that property for estate tax purposes. The Treasury Department and the
IRS are concerned, however, that opportunities may exist in some circumstances for the
recipient of such reporting to circumvent the purpose of the statute (for example, by
making a gift of the property to a complex trust for the benefit of the transferor’s family).
Accordingly, pursuant to the regulatory authority granted in section 6035(b)(2),
the proposed regulations require additional information reporting by certain subsequent
transferors in limited circumstances. Specifically, proposed §1.6035-1(f) provides that,
with regard to property that previously was reported or is required to be reported on a
Statement furnished to a recipient, when the recipient distributes or transfers (by gift or
otherwise) all or any portion of that property to a related transferee, whether directly or
indirectly, in a transaction in which the transferee’s basis for Federal income tax
purposes is determined in whole or in part with reference to the transferor’s basis, the
transferor is required to file and furnish with the IRS and the transferee, respectively, a
supplemental Statement documenting the new ownership of this property. This
proposed reporting requirement is imposed on each such recipient of the property. For
purposes of this provision, a related transferee means any member of the transferor’s
family as defined in section 2704(c)(2), any controlled entity (a corporation or any other
entity in which the transferor and members of the transferor’s family, whether directly or
indirectly, have control within the meaning of section 2701(b)(2)(A) or (B)), and any trust
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of which the transferor is a deemed owner for income tax purposes.
In the event such transfer occurs before a final value is determined within the
meaning of proposed §1.1014-10(c), the transferor must provide the executor with a
copy of the supplemental Statement filed with the IRS and furnished to the transferee
reporting the new ownership of the property. When a final value is determined, the
executor will then provide a supplemental Statement to the new transferee instead of to
the transferor. The supplemental Statements are due no later than 30 days after the
transferor distributes or transfers all or a portion of the property to the transferee.
14. Surviving joint tenants or other recipients under section 6035(b)(2).
Section 6035(b)(2) authorizes the IRS to prescribe regulations relating to
situations in which the surviving joint tenant or other recipient may have better
information than the executor regarding the basis or fair market value of the property
received by reason of the decedent’s death. Section 6018(b) addresses these
situations. Section 6018(b) generally requires that, if the executor is unable to make a
complete return as to any part of the gross estate of the decedent, the executor must
include on the return a description of that part of the gross estate and the name of every
person holding a legal or beneficial interest in it. Upon notice from the Secretary, any
such person must in like manner make a return as to this part of the gross estate.
Section 6035(a)(2) and these proposed regulations require a person required to file a
return under section 6018(b) to file an Information Return with the IRS and to furnish the
Statement(s) to each beneficiary of that property. Therefore, the Treasury Department
and the IRS have determined that no additional regulations applicable only to surviving
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joint tenants or other recipients are necessary for this purpose.
15. Removal of regulations under former Section 6035
The American Jobs Creation Act of 2004 (Public Law 108-357, 118 Stat. 1418)
(Jobs Act) repealed former section 6035, effective for taxable years of foreign
corporations beginning after December 31, 2004, and for taxable years of United States
shareholders with or within which the tax years of foreign corporations end. Prior to
repeal, former section 6035 set forth information reporting requirements for certain
United States persons that were officers, directors, or 10-percent shareholders of a
foreign personal holding company. Section 1.6035-1 (TD 8573), §301.6035-1 (TD
6498), §1.6035-2 (TD 8028), and §1.6035-3 (TD 8028) (collectively, the FPHC
regulations) provide guidance on the information reporting required under former
section 6035, as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982 (Public Law 97-248, 96 Stat. 328), and prior to its repeal by
the Jobs Act.
This document proposes to withdraw the FPHC regulations. However, the FPHC
regulations referenced above contained in 26 CFR parts 1 and 301, revised as of
April 1, 2015, continue to apply for taxable years of foreign corporations beginning on or
before December 31, 2004, and for taxable years of United States shareholders in
which former section 6035 applies with or within which the tax years of foreign
corporations end.
16. Request for new process.
One commenter requested the creation of a process to allow an estate
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beneficiary to challenge the value reported by the executor. There is no such process
under the Federal law regarding returns described in section 6018. The beneficiary’s
rights with regard to the estate tax valuation of property are governed by applicable
state law. Accordingly, the proposed regulations do not create a new Federal process
for challenging the value reported by the executor.
Proposed Effective/Applicability Date
Upon the publication of the Treasury Decision adopting these rules as final in the
Federal Register, these proposed regulations will apply to property acquired from a
decedent or by reason of the death of a decedent whose return required by section
6018 is filed after July 31, 2015. Persons may rely upon these rules before the date of
publication of the Treasury Decision adopting these rules as final in the Federal
Register.
Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings notices, notices and other guidance
cited in this preamble are published in the Internal Revenue Bulletin (or Cumulative
Bulletin) and are available from the Superintendent of Documents, U.S. Government
Printing Office, Washington, DC 20402, or by visiting the IRS website at
http://www.irs.gov.
Special Analyses
Certain IRS regulations, including this one, are exempt from the requirements of
Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563.
Therefore, a regulatory impact assessment is not required. It is hereby certified that the
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collection of information in these regulations will not have a significant economic impact
on a substantial number of small entities. This certification is based on the fact that this
rule primarily affects individuals (or their estates) and trusts, which are not small entities
as defined by the Regulatory Flexibility Act (5 U.S.C. 601). Although it is anticipated
that there may be an incremental economic impact on executors that are small entities,
including entities that provide tax and legal services that assist individuals in preparing
tax returns, any impact would not be significant and would not affect a substantial
number of small entities. Therefore, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to
section 7805(f) of the Code, the notice of proposed rulemaking will be submitted to the
Chief Counsel for Advocacy of the Small Business Administration for comment on its
impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight (8) copies) or
electronic comments that are submitted timely to the IRS. Comments are requested on
all aspects of the proposed rules. All comments will be available for public inspection
and copying. A public hearing may be scheduled if requested in writing by any person
that timely submits written comments. If a public hearing is scheduled, notice of the
date, time, and place for the hearing will be published in the Federal Register.
Drafting Information
The principal author of these proposed regulations is Theresa M. Melchiorre,
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Office of Associate Chief Counsel (Passthroughs and Special Industries). Other
personnel from the Treasury Department and the IRS participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties.
Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as follows:
PART 1 – INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding entries in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1014-10 also issued under 26 U.S.C. 1014(f).
Section 1.6035-1 also issued under 26. U.S.C. 6035(a).
Section 1.6035-2 also issued under 26. U.S.C. 6035(a).
Par. 2. Section 1.1014-10 is added to read as follows:
§1.1014–10 Basis of property acquired from a decedent must be consistent with
Federal estate tax return.
(a) Consistent basis requirement--(1) In general. The taxpayer’s initial basis in
property described in paragraph (b) of this section may not exceed the property’s final
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value within the meaning of paragraph (c) of this section. This requirement applies
whenever the taxpayer reports a taxable event with respect to the property to the
Internal Revenue Service (IRS) (for example depreciation or amortization) and
continues to apply until the property is sold, exchanged, or otherwise disposed of in one
or more transactions that result in the recognition of gain or loss for Federal income tax
purposes, regardless of whether the owner on the date of the sale, exchange, or
disposition is the same taxpayer who acquired the property from the decedent or as a
result of the decedent’s death.
(2) Subsequent basis adjustments. The final value within the meaning of
paragraph (c) of this section is the taxpayer’s initial basis in the property. In computing
at any time after the decedent’s date of death the taxpayer’s basis in property acquired
from the decedent or as a result of the decedent’s death, the taxpayer’s initial basis in
that property may be adjusted due to the operation of other provisions of the Internal
Revenue Code (Code) governing basis without violating paragraph (a)(1) of this section.
Such adjustments may include, for example, gain recognized by the decedent’s estate
or trust upon distribution of the property, post-death capital improvements and
depreciation, and post-death adjustments to the basis of an interest in a partnership or
S corporation. The existence of recourse or non-recourse debt secured by property at
the time of the decedent’s death does not affect the property’s basis, whether the gross
value of the property and the outstanding debt are reported separately on the estate tax
return or the net value of the property is reported. Therefore, post-death payments on
such debt do not result in an adjustment to the property’s basis.
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(b) Property subject to consistency requirement--(1) In general. Property subject
to the consistency requirement in paragraph (a)(1) of this section is any property that is
includable in the decedent’s gross estate under section 2031,any property subject to tax
under section 2106, and any other property the basis of which is determined in whole or
in part by reference to the basis of such property (for example as the result of a like-kind
exchange or involuntary conversion) that generates a tax liability under chapter 11 of
subtitle B of the Code (chapter 11) on the decedent’s estate in excess of allowable
credits, except the credit for prepayment of tax under chapter 11.
(2) Exclusions. For purposes of paragraph (b)(1) of this section, property that
qualifies for an estate tax charitable or marital deduction under section 2055, 2056, or
2056A, respectively, does not generate a tax liability under chapter 11 and therefore is
excluded from the property subject to the consistency requirement in paragraph (a)(1) of
this section. For purposes of paragraph (b)(1) of this section, tangible personal property
for which an appraisal is not required under §20.2031-6(b) is deemed not to generate a
tax liability under chapter 11 and therefore also is excluded from the property subject to
the consistency requirement in paragraph (a)(1) of this section.
(3) Application. For purposes of paragraph (b)(1) of this section, if a liability
under chapter 11 is payable after the application of all available credits (other than a
credit for a prepayment of estate tax), the consistency requirement in paragraph (a)(1)
of this section applies to the entire gross estate (other than property excluded under
paragraph (b)(2) of this section) because all such property contributes to the liability
under chapter 11 and therefore is treated as generating a tax liability under chapter 11.
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If, however, after the application of all such available credits, no tax under chapter 11 is
payable, the entire gross estate is excluded from the application of the consistency
requirement.
(c) Final value--(1) Finality of estate tax value. The final value of property
reported on a return filed pursuant to section 6018 is its value as finally determined for
purposes of the tax imposed by chapter 11. That value is --(i) The value reported on a return filed with the Internal Revenue Service (IRS)
pursuant to section 6018 once the period of limitations for assessment of the tax under
chapter 11 has expired without that value having been timely adjusted or contested by
the IRS,
(ii) If paragraph (c)(1)(i) of this section does not apply, the value determined or
specified by the IRS once the periods of limitations for assessment and for claim for
refund or credit of the tax under chapter 11 have expired without that value having been
timely contested;
(iii) If paragraphs (c)(1)(i) and (ii) of this section do not apply, the value
determined in an agreement, once that agreement is final and binding on all parties; or
(iv) If paragraphs (c)(1)(i), (ii), and (iii) of this section do not apply, the value
determined by a court, once the court’s determination is final.
(2) No finality of estate tax value. Prior to the determination, in accordance with
paragraph (c)(1) of this section, of the final value of property described in paragraph (b)
of this section, the recipient of that property may not claim an initial basis in that
property in excess of the value reported on the statement required to be furnished under
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section 6035(a). If the final value of the property subsequently is determined under
paragraph (c)(1) of this section and that value differs from the value reported on the
statement required to be furnished under section 6035(a), then the taxpayer may not
rely on the statement initially furnished under section 6035(a) for the value of the
property and the taxpayer may have a deficiency and underpayment resulting from this
difference.
(3) After-discovered or omitted property--(i) Return under section 6018 filed. In
the event property described in paragraph (b)(1) of this section is discovered after the
estate tax return under section 6018 has been filed or otherwise is omitted from that
return (after-discovered or omitted property), the final value of that property is
determined under section (c)(3)(i)(A) or (B) of this section.
(A) Reporting prior to expiration of period of limitation on assessment. The final
value of the after-discovered or omitted property is determined in accordance with
paragraph (c)(1) or (2) of this section if the executor, prior to the expiration of the period
of limitation on assessment of the tax imposed on the estate by chapter 11, files with the
IRS an initial or supplemental estate tax return under section 6018 reporting the
property.
(B) No reporting prior to expiration of period of limitation on assessment. If the
executor does not report the after-discovered or omitted property on an initial or
supplemental Federal estate tax return filed prior to the expiration of the period of
limitation on assessment of the tax imposed on the estate by chapter 11, the final value
of that unreported property is zero. See Example 3 of paragraph (e) of this section.
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(ii) No return under section 6018 filed. If no return described in section 6018 has
been filed, and if the inclusion in the decedent’s gross estate of the after-discovered or
omitted property would have generated or increased the estate’s tax liability under
chapter 11, the final value, for purposes of section 1014(f), of all property described in
paragraph (b) of this section is zero until the final value is determined under paragraph
(c)(1) or (2) of this section. Specifically, if the executor files a return pursuant to section
6018(a) or (b) that includes this property or the IRS determines a value for the property,
the final value of all property described in paragraph (b) of this section includible in the
gross estate then is determined under paragraph (c)(1) or (2) of this section.
(d) Executor. For purposes of this section, executor has the same meaning as in
section 2203 and includes any other person required under section 6018(b) to file a
return.
(e) Examples. The following examples illustrate the application of this section.
Example 1. (i) At D’s death, D owned 50% of Partnership P, which owned a
rental building with a fair market value of $10 million subject to nonrecourse debt of
$2 million. D’s sole beneficiary is C, D’s child. P is valued at $8 million. D’s interest in
P is reported on the return required by section 6018(a) at $4 million. The IRS accepts
the return as filed and the time for assessing the tax under chapter 11 expires. C sells
the interest for $6 million in cash shortly thereafter.
(ii) Under these facts, the final value of D’s interest is $4 million under paragraph
(c)(1)(i) of this section. Under section 742 and §1.742-1, C’s basis in the interest in P
at the time of its sale is $5 million (the final value of D’s interest ($4 million) plus 50% of
the $2 million nonrecourse debt). Following the sale of the interest, C reports taxable
gain of $1 million. C has complied with the consistency requirement of paragraph
(a)(1) of this section.
(iii) Assume instead that the IRS adjusts the value of the interest in P to $4.5
million, and that value is not contested before the expiration of the time for assessing
the tax under chapter 11. The final value of D’s interest in P is $4.5 million under
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paragraph (c)(1)(ii) of this section. Under section 742 and §1.742-1, C claims a basis of
$5.5 million at the time of sale and reports gain on the sale of $500,000. C has
complied with the consistency requirement of paragraph (a)(1) of this section.
Example 2. (i) At D’s death, D owned (among other assets) a private residence
that was not encumbered. D’s sole beneficiary is C. D’s executor reports the value of
the residence on the return required by section 6018(a) as $600,000 and pays the tax
liability under chapter 11. The IRS timely contests the reported value and determines
that the value of the residence is $725,000. The parties enter into a settlement
agreement that provides that the value of the residence for purposes of the tax imposed
by chapter 11 is $650,000. Pursuant to paragraph (c)(1)(iii) of this section, the final
value of the residence is $650,000.
(ii) Several years later, C adds a master suite to the residence at a cost of
$45,000. Pursuant to section 1016(a), C’s basis in the residence is increased by
$45,000 to $695,000. Subsequently, C sells the residence to an unrelated third party
for $900,000. C claims a basis in the residence of $695,000 and reports a gain of
$205,000 ($900,000 – $695,000). C has complied with the consistency requirement of
paragraph (a)(1) of this section.
Example 3. (i) The facts are the same as in Example 2 but, after the expiration
of the period for assessing the tax imposed by chapter 11, the executor discovers
property that had not been reported on the return required by section 6018(a) but which,
if reported, would have generated additional chapter 11 tax on the entire value of the
newly discovered property. Pursuant to paragraph (c)(3)(i)(B) of this section, C’s basis
in the residence of $695,000 does not change, but the final value of the additional
unreported property is zero.
(ii) Alternatively, assume that no return was required to be filed under section
6018 before discovering the additional property (and none in fact was filed) but, after the
application of the applicable credit amount, D’s taxable estate including the unreported
property would have been $200,000. Pursuant to paragraph (c)(3)(ii) of this section, the
final value of all property included in D’s gross estate that is described in paragraph (b)
of this section is zero until the executor files an estate tax return with the IRS pursuant
to section 6018 or the IRS determines a value for the property. In either of those
events, the final value of property described in paragraph (b) of this section reported on
the return is determined in accordance with paragraph (c)(1) or (c)(2) of this section.
Example 4. (i) At D’s death, D’s gross estate includes a residence valued at
$300,000 encumbered by nonrecourse debt in the amount of $100,000. Title to the
residence is held jointly by D and C (D’s daughter) with rights of survivorship. D
provided all the consideration for the residence and the entire value of the residence
was included in D’s gross estate. The executor reports the value of the residence as
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$200,000 on the return required by section 6018 filed with the IRS for D’s estate and
claims no other deduction for the debt. The statement required by section 6035 reports
the value of the residence as $300,000. C sells the residence before the final value is
determined under paragraph (c)(1) of this section for $375,000 and claims a gain of
$75,000 on C’s Federal income tax return.
(ii) A court subsequently determines that the value of the residence was
$290,000 and the time for contesting this value in any court expires before the
expiration of the period for assessing C’s income tax for the year of C’s sale of the
property. The final value of the residence is $290,000 pursuant to paragraphs (c)(1)(iv)
and (c)(2) of this section. Because C claimed a basis in the residence that exceeds the
final value, C may have a deficiency and underpayment.
(f) Effective/applicability date. Upon the publication of the Treasury Decision
adopting these rules as final in the Federal Register, this section will apply to property
acquired from a decedent or by reason of the death of a decedent whose return
required by section 6018 is filed after July 31, 2015. Persons may rely upon these rules
before the date of publication of the Treasury Decision adopting these rules as final in
the Federal Register.
Par. 3. Section 1.6035-1 is revised to read as follows:
§1.6035-1 Basis information to persons acquiring property from decedent.
(a) Required Information Return and Statement(s)--(1) In general. An executor
(defined in paragraph (g)(1) of this section) required to file a return under section 6018
for an estate must file an Information Return (defined in paragraph (g)(2) of this section)
with the Internal Revenue Service (IRS) to report the value of certain property
(described in paragraph (b)(1) of this section) included in the decedent’s gross estate
for purposes of the tax imposed by chapter 11 of subtitle B of the Internal Revenue
Code (chapter 11) and other information prescribed by the Information Return and the
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instructions thereto. The value to be reported is the final value of the property as
described in §1.1014-10(c). This executor also must furnish a Statement (defined in
paragraph (g)(3) of this section) to each beneficiary who has (or will) acquire, whether
from the decedent or by reason of the death of the decedent, property reported on the
Information Return to identify the property the beneficiary is to receive and to report the
value of that property and other information prescribed by the Statement and
instructions thereto. The Information Return and each Statement are required to be
filed and furnished by the date provided in paragraph (d) of this section. If, after the
Information Return and Statement are filed and furnished, there are certain changes in
the final value and/or the recipient of property as described in paragraph (e) or (f) of this
section, the executor must file a supplemental Information Return with the IRS and
furnish a supplemental Statement to the beneficiary. Subsequent transfers of all or a
portion of property previously reported (or required to be reported) on the Information
Return required by paragraph (a) of this section, in transactions in which the transferee
acquires the property with the transferor’s basis, require additional reporting as
described in paragraph (f) of this section.
(2) Exception. Paragraph (a)(1) of this section applies only to the executor of an
estate required by section 6018 to file an estate tax return. Accordingly,
notwithstanding §20.2010-2(a)(1), the executor does not have to file or furnish the
Information Return or Statement(s) referred to in paragraph (a)(1) of this section if the
executor is not required by section 6018 to file an estate tax return for the estate, even if
the executor does file such a return for other purposes, e.g., to make a generation32
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skipping transfer tax exemption allocation or election, to make the portability election
under section 2010(c)(5), or to make a protective filing to avoid any penalty if an asset
value is later determined to cause a return to be required or otherwise.
(b) Property for which reporting is required--(1) In general. The property to which
the reporting requirement under paragraph (a)(1) of this section applies is all property
reported or required to be reported on a return under section 6018. This includes, for
example, any other property whose basis is determined in whole or in part by reference
to that property (for example as the result of a like-kind exchange or involuntary
conversion). Of the property of a deceased nonresident non-citizen, this includes only
the property that is subject to U.S. estate tax; similarly, this includes only the decedent’s
one-half of community property. Nevertheless, the following property is excepted from
the reporting requirements-(i) Cash (other than a coin collection or other coins or bills with numismatic
value);
(ii) Income in respect of a decedent (as defined in section 691);
(iii) Tangible personal property for which an appraisal is not required under
§20.2031-6(b); and
(iv) Property sold, exchanged, or otherwise disposed of (and therefore not
distributed to a beneficiary) by the estate in a transaction in which capital gain or loss is
recognized.
(2) Examples. The following examples illustrate the provisions of paragraph
(b)(1) of this section.
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Example 1. Included in D’s gross estate are the contents of his residence.
Pursuant to §20.2031-6(a), the executor attaches to the return required by section 6018
filed for D’s estate a room by room itemization of household and personal effects. All
articles are named specifically. In each room a number of articles, none of which has a
value in excess of $100, are grouped. A value is provided for each named article.
Included in the household and personal effects are a painting, a rug, and a clock, each
of which has a value in excess of $3,000. Pursuant to §20.2031-6(b), the executor
obtains an appraisal from a disinterested, competent appraiser(s) of recognized
standing and ability, or a disinterested dealer(s) in the class of personalty involved for
the painting, rug, and clock. The executor attaches these appraisals to the estate tax
return for D’s estate. Pursuant to paragraph (b)(1)(iii) of this section, the reporting
requirements of paragraph (a)(1) of this section apply only to the painting, rug, and
clock.
Example 2. Included in D’s estate are shares in C, a publicly traded company.
Shortly after D’s death but prior to the filing of the estate tax return for D’s estate, C is
acquired by T, also a publicly traded company. For the shares in C includible in D’s
estate, the estate receives new shares in T and cash in a fully taxable transaction.
Pursuant to paragraph (b)(1)(iv) of this section, the reporting requirements of paragraph
(a)(1) of this section do not apply to the new shares in T or the cash.
(c) Beneficiaries--(1) In general. As provided in paragraph (a)(1) of this section,
the executor must furnish to each beneficiary (including a beneficiary who is also an
executor) receiving property that must be reported on the Information Return filed with
the IRS, the Statement containing the required information regarding that beneficiary’s
property. For purposes of this provision, the beneficiary of a life estate is the life tenant,
the beneficiary of a remainder interest is the remainderman(men) identified as if the life
tenant were to die immediately after the decedent, and the beneficiary of a contingent
interest is a beneficiary, unless the contingency has occurred prior to the filing of the
Form 8971. If the contingency subsequently negates the inheritance of the beneficiary,
the executor must do supplemental reporting in accordance with paragraph (e) of this
section to report the change of beneficiary.
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(2) Beneficiary not an individual. If the beneficiary is a trust or another estate, the
executor must furnish the beneficiary’s Statement to the trustee or executor of the trust
or estate, rather than to the beneficiaries of that trust or estate. If the beneficiary is a
business entity, the executor must furnish the Statement to the entity. However, see
paragraph (f) of this section for additional reporting requirements in the event the trust,
estate, or entity transfers all or a portion of the property in a transaction in which the
transferee acquires the basis of the trust, estate, or entity.
(3) Beneficiary not determined. If, by the due date provided in paragraph (d) of
this section, the executor has not determined what property will be used to satisfy the
interest of each beneficiary, the executor must report on the Statement for each such
beneficiary all of the property that the executor could use to satisfy that beneficiary’s
interest. Once the exact distribution has been determined, the executor may, but is not
required to, file and furnish a supplemental Information Return and Statement as
provided in paragraph (e)(3) of this section.
(4) Beneficiary not located. An executor must use reasonable due diligence to
identify and locate all beneficiaries. If the executor is unable to locate a beneficiary by
the due date of the Information Return provided in paragraph (d) of this section, the
executor must so report on that Information Return and explain the efforts the executor
has taken to locate the beneficiary and to satisfy the obligation of reasonable due
diligence. If the executor subsequently locates the beneficiary, the executor must
furnish the beneficiary with that beneficiary’s Statement and file a supplemental
Information Return with the IRS within 30 days of locating the beneficiary. A copy of the
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beneficiary’s Statement must be attached to the supplemental Information Return. If the
executor is unable to locate a beneficiary and distributes the property to a different
beneficiary who was not identified in the Information Return as the recipient of that
property, the executor must file a supplemental Information Return with the IRS and
furnish the substitute beneficiary with that beneficiary’s Statement within 30 days after
the property is distributed. See paragraph (e)(1) of this section. A copy of the
substitute beneficiary’s Statement must be attached to the supplemental Information
Return.
(d) Due dates--(1) In general. Except as provided in §1.6035-2T, the executor
must file the Information Return with the IRS, and must furnish to each beneficiary the
Statement with regard to the property to be received by that beneficiary, on or before
the earlier of-(i) The date that is 30 days after the due date of the estate tax return required by
section 6018 (including extensions, if any), or
(ii) The date that is 30 days after the date on which that return is filed with the
IRS.
(2) Transition rule. If the due date of an estate tax return required to be filed by
section 6018 is on or before July 31, 2015, but the executor does not file the return with
the IRS until after July 31, 2015, then the Information Return and Statement(s) are due
on or before the date that is 30 days after the date on which the estate tax return is filed,
except as provided in §1.6035-2T.
(e) Duty to supplement.--(1) In general. In the event of any adjustment to the
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information required to be reported on the Information Return or any Statement as
described in paragraph (e)(2) of this section, the executor must file a supplemental
Information Return with the IRS including all supplemental Statements and furnish a
corresponding supplemental Statement to each affected beneficiary by the due date
described in paragraph (e)(4) of this section.
(2) Adjustments requiring supplement. Except as provided in paragraph (e)(3) of
this section, an adjustment to which the duty to supplement applies is any change to the
information required to be reported on the Information Return or Statement that causes
the information as reported to be incorrect or incomplete. Such changes include, for
example, the discovery of property that should have been (but was not) reported on an
estate tax return described in section 6018, a change in the value of property pursuant
to an examination or litigation, or a change in the identity of the beneficiary to whom the
property is to be distributed (pursuant to a death, disclaimer, bankruptcy, or otherwise).
Such changes also include the executor’s disposition of property acquired from the
decedent or as a result of the death of the decedent in a transaction in which the basis
of new property received by the estate is determined in whole or in part by reference to
the property acquired from the decedent or as a result of the death of the decedent (for
example as the result of a like-kind exchange or involuntary conversion). Changes
requiring supplement pursuant to this paragraph (e)(2) are not inconsequential errors or
omissions within the meaning of §301.6722-1(b) of this chapter.
(3) Adjustments not requiring supplement--(i) In general. A supplemental
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(A) To correct an inconsequential error or omission within the meaning of
§301.6722-1(b) of this chapter, or
(B) To specify the actual distribution of property previously reported as being
available to satisfy the interests of multiple beneficiaries in the situation described in
paragraph (c)(3) of this section.
(ii) Example. Paragraph (e)(3)(i)(B) of this section is illustrated by the following
example.
Example 1. D’s Will provided for D’s residuary estate to be distributed to D’s
three children (E, F, and G). D’s residuary estate included stock in a publicly traded
company (X), a personal residence, and three paintings. On the due date of the
Information Return and Statement required by paragraph (a)(1) of this section, D’s
executor had not yet determined which property each child would receive from D’s
residuary estate in satisfaction of that child’s bequest. In accordance with paragraph
(c)(3) of this section, D’s executor reported on the Information Return filed with the IRS
and on each child’s own Statement that E, F, and G each might receive an interest in
the stock in X, the personal residence, and the three paintings. Several months later,
the executor determined that E would receive the stock in X, F would receive the
residence, and G would receive the paintings. Paragraph (e)(3)(i)(B) of this section
provides that the executor may but is not required to file a supplemental Information
Return with the IRS and furnish supplemental Statements to E, F, and G to accurately
report which beneficiary received what property.
Example 2. D’s Will provided that D’s jewelry and household effects (personalty)
are to be distributed among D’s three children (E, F, and G) as determined by E, F, and
G. In accordance with paragraph (c)(3) of this section, D’s executor reports on the
Information Return filed with the IRS and on each child’s own Statement each item of
personalty other than items described in paragraph (b)(1)(iii) of this section. Several
months later, E, F, and G determine who is to receive each item of personalty.
Paragraph (e)(3)(i)(B) of this section provides that the executor may but is not required
to file a supplemental Information Return with the IRS and furnish supplemental
Statements to E, F, and G to accurately report which beneficiary received which item(s)
of personalty.
(4) Due date of supplemental reporting--(i) In general. Except as provided in
paragraph (e)(4)(ii) of this section, the supplemental Information Return must be filed
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and each supplemental Statement must be furnished on or before 30 days after-(A) The final value within the meaning of §1.1014-10(c)(1) is determined;
(B) The executor discovers that the information reported on the Information
Return or Statement is otherwise incorrect or incomplete, except to the extent described
in paragraph (e)(3)(i) of this section; or
(C) A supplemental estate tax return under section 6018 is filed reporting
property not reported on a previously filed estate tax return pursuant to §1.101410(c)(3)(i). In this case, a copy of the supplemental Statement provided to each
beneficiary of an interest in this property must be attached to the supplemental
Information Return.
(ii) Probate property or property from decedent’s revocable trust. With respect to
property in the probate estate or held by a revocable trust at the decedent’s death, if an
event described in paragraph (e)(4)(i)(A), (B), or (C) of this section occurs after the
decedent’s date of death but before or on the date the property is distributed to the
beneficiary, the due date for the supplemental Information Return and corresponding
supplemental Statement is the date that is 30 days after the date the property is
distributed to the beneficiary. If the executor chooses to furnish to the beneficiary on
the Statement information regarding any changes to the basis of the reported property
as described in §1.1014-10(a)(2) that occurred after the date of death but before or on
the date of distribution, that basis adjustment information (which is not part of the
requirement under section 6035) must be shown separately from the final value
required to be reported on that Statement.
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(f) Subsequent transfers. If all or any portion of property that previously was
reported or is required to be reported on an Information Return (and thus on the
recipient’s Statement or supplemental Statement) is distributed or transferred (by gift or
otherwise) by the recipient in a transaction in which a related transferee determines its
basis, in whole or in part, by reference to the recipient/transferor’s basis, the
recipient/transferor must, no later than 30 days after the date of the distribution or other
transfer, file with the IRS a supplemental Statement and furnish a copy of the same
supplemental Statement to the transferee. The requirement to file a supplemental
Statement and furnish a copy to the transferee similarly applies to the distribution or
transfer of any other property the basis of which is determined in whole or in part by
reference to that property (for example as the result of a like-kind exchange or
involuntary conversion). In the case of a supplemental Statement filed by the
recipient/transferor before the recipient/transferor’s receipt of the Statement described
in paragraph (a) of this section, the supplemental Statement will report the change in
the ownership of the property and need not provide the value information that would
otherwise be required on the supplemental Statement. In the event the transfer occurs
before the final value is determined within the meaning of proposed §1.1014-10(c), the
transferor must provide the executor with a copy of the supplemental Statement filed
with the IRS and furnished to the transferee in order to notify the executor of the change
in ownership of the property. When the executor subsequently files any Return and
issues any Statement required by paragraphs (a) or (e) of this section, the executor
must provide the Statement (or supplemental Statement) to the new transferee instead
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of to the transferor. For purposes of this provision, a related transferee means any
member of the transferor’s family as defined in section 2704(c)(2), any controlled entity
(a corporation or any other entity in which the transferor and members of the
transferor’s family (as defined in section 2704(c)(2)), whether directly or indirectly, have
control within the meaning of section 2701(b)(2)(A) or (B)), and any trust of which the
transferor is a deemed owner for income tax purposes. If the transferor chooses to
include on the supplemental Statement provided to the transferee information regarding
any changes to the basis of the reported property as described in §1.1014-10(a)(2) that
occurred during the transferor’s ownership of the property, that basis adjustment
information (which is not part of the requirement under section 6035) must be shown
separately from the final value required to be reported on that Statement.
(g) Definitions. For purposes of this section, the following terms are defined as
follows-(1) Executor has the same meaning as in section 2203 and includes any other
person required under section 6018(b) to file a return.
(2) Information Return means the Form 8971, including each beneficiary’s
Statement as defined in paragraph (g)(3) of this section required to be furnished, or any
successor form issued by the IRS for this purpose.
(3) Statement means the payee statement described as Schedule A of the
Information Return furnished to a beneficiary or any successor form or schedule issued
by the IRS for this purpose.
(h) Penalties--(1) Failure to timely file complete and correct Information Return.
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For provisions relating to the penalty provided for failure to file an Information Return
required by section 6035(a)(1) on or before the required filing date, failure to include all
of the required information on an Information Return, or the filing of an Information
Return that includes incorrect information, see section 6721 and the regulations
thereunder. See section 6724 and the regulations thereunder for rules relating to
waivers of penalties for certain failures due to reasonable cause.
(2) Failure to timely furnish correct Statements. For provisions relating to the
penalty provided for failure to furnish a Statement required by section 6035(a)(2) on or
before the prescribed date, failure to include all of the required information on a
Statement, or the filing of a Statement that includes incorrect information, see section
6722 and the regulations thereunder. See section 6724 and the regulations thereunder
for rules relating to waivers of penalties for certain failures due to reasonable cause.
(i) Effective/applicability date. Upon the publication of the Treasury Decision
adopting these rules as final in the Federal Register, this section will apply to property
acquired from a decedent or by reason of the death of a decedent whose return
required by section 6018 is filed after July 31, 2015. Persons may rely upon these rules
before the date of publication of the Treasury Decision adopting these rules as final in
the Federal Register.
Par. 4. Section 1.6035-2 is added to read as follows:
§1.6035-2 Transition relief.
[The text of proposed §1.6035-2 is the same as the text of §1.6035-2T published
elsewhere in this issue of the Federal Register].
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§1.6035-3 [REMOVED]
Par. 5. Section 1.6035-3 is removed.
Par. 6. Section 1.6662-8 is added to read as follows:
§1.6662-8 Inconsistent estate basis reporting.
(a) In general. Section 6662(a) and (b)(8) impose an accuracy-related penalty on
the portion of any underpayment of tax required to be shown on a return that is
attributable to an inconsistent estate basis.
(b) Inconsistent estate basis. In accordance with section 6662(k), there is an
inconsistent estate basis to the extent that a taxpayer claims a basis, without regard to
the adjustments described in §1.1014-10(a)(2), in property described in paragraph (c) of
this section that exceeds that property’s final value as determined under §1.1014-10(c).
(c) Applicable property. The property to which this section applies is property
described in §1.1014-10(b) that is reported or required to be reported on a return
required by section 6018 filed after July 31, 2015.
(d) Effective/applicability date. Upon the publication of the Treasury Decision
adopting these rules as final in the Federal Register, this section will apply to property
described in §1.1014-10(b) acquired from a decedent or by reason of the death of a
decedent whose return required by section 6018 is filed after July 31, 2015. Persons
may rely upon these rules before the date of publication of the Treasury Decision
adopting these rules as final in the Federal Register.
PART 301--PROCEDURE AND ADMINISTRATION
Par. 7. The authority citation for part 301 continues to read in part as follows:
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Authority: 26 U.S.C. 7805 * * *
Par. 8. Section 301.6721-1 is amended by removing the word “or” at the end of
paragraph (g)(2)(x), removing the period and adding “; or” at the end of paragraph
(g)(2)(xi), and adding paragraph (g)(2)(xii).
The addition reads as follows:
§301.6721-1 Failure to file correct information returns.
*****
(g) * * *
(2) * * *
(xii) Section 6035 (relating to basis of property acquired from decedents).
*****
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*****
Par. 9. Section 301.6722-1 is amended by removing the word “or” at the end of
paragraph (d)(2)(xxxiii), removing the period and adding a semi-colon in its place
followed by the word “or” at the end of paragraph (d)(2)(xxxiv), and adding paragraph
(d)(2)(xxxv).
The addition reads as follows:
§301.6722-1 Failure to furnish correct payee statements.
*****
(d) * * *
(2) * * *
(xxxv) Section 6035 (relating to basis of property acquired from decedents).
*****
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-04718 Filed: 3/2/2016 4:15 pm; Publication Date: 3/4/2016]
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