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Estates of Decedents Passing in 2010 - Extension of Election to Opt Out of Estate Tax and Allocation of Basis to Assets

Legal Services
04.05.11

The April 18, 2011 deadline for filing Form 8939 – Allocation of Increase in Basis for Property Acquired From a Decedent – has been extended indefinitely by the Internal Revenue Service. Form 8939 is an informational return used to document the basis, for income tax purposes, of property acquired from the estate of a decedent who died in 2010 and for which the executor has elected out of the application of the federal estate tax. Originally, the IRS stated that Form 8939 was to be filed along with the decedent's final Form 1040 no later than April 18, 2011. The filing extension is likely due to the fact that, as of the time of the March 31st announcement, the IRS had not yet finalized and published Form 8939.

In addition, the recent IRS announcement also states that the forthcoming guidance on filing Form 8939 will provide information on the manner in which an executor of an estate of a decedent dying in 2010 may elect to have the estate tax not apply. The IRS stated that it will announce the new deadline for filing Form 8939 at some point in the future and that the revised deadline will provide for a reasonable period of time for the preparation and filing of Form 8939.

Prior to the enactment on December 6, 2010 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act), the estate tax was repealed for decedents dying in 2010. While the Act reinstates the estate tax for 2010 decedents and provides for an estate tax exemption amount of $5,000,000, it also permits executors of the estates of 2010 decedents to elect out of the reinstatement of the federal estate tax. However, rather than taking a basis in an asset acquired from a 2010 decedent equal to the asset's current fair market value, as is the rule in cases of estate which are subject to the federal estate tax, beneficiaries acquiring assets from the estate of a decedent that has elected out of the application of the federal estate tax will take a modified carryover basis in such assets, which is to be determined by filing Form 8939. As result, provided a proper election is made, the estate of a decedent dying in 2010 will not be subject to the federal estate tax, but the executors of such electing estates are required to file Form 8939.

For more information on Form 8939, please contact Leigh Griffith, Richard Johnson, or Mike Yopp or any member of the Waller Lansden Tax Practice at 800-487-6380.

WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT THE FOREGOING DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, NOR RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW. THE ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THE DISCUSSION. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

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