IRS finalizes rules on consistent basis reporting for estates

The Internal Revenue Service issued final regulations on consistent basis reporting between an estate and a person acquiring property from a decedent.

The final regulations, released Monday, offer guidance on a statutory 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, the final regulations include guidance on the statutory requirements that executors and other people provide basis information to the IRS and to the recipients of certain properties. The final regulations regarding the statutory consistent basis requirement affect recipients of property acquired from a decedent if the inclusion of the value of the property in the decedent’s gross estate increases the federal estate tax liability.

Samuel Corum/Bloomberg

The final regulations pertaining to the statutory basis reporting requirements affect executors and others required to file an estate tax return based on the value of the decedent’s gross estate and the amount of decedent’s lifetime adjusted taxable gifts, as well as trustees making in-kind distributions of property initially acquired from a decedent that was subject to the statutory basis reporting requirements.

A 2015 law required 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. It was later modified by a technical correction in a 2018 law.

The IRS issued proposed regulations in 2016, and the American Institute of CPAs asked in a comment letter that year for several changes, such as removing a zero-basis rule for unreported property. The IRS said it received a total of 30 written comments and held a public hearing. It made a number of changes in the final regulations that promise to make the rules less burdensome for both taxpayers and the IRS and easier to administer.

The revisions include removing the zero basis rule for unreported property; adopting a suggested interpretation of the term “acquiring” for the purposes of Section 6035(a)(1) and thereby modifying the reporting requirements applicable in the case of property not acquired by a beneficiary before the estate tax return due date; eliminating the subsequent transfer reporting requirement for all beneficiaries other than trustees; and excepting additional types of property interests from the consistent basis requirements and the reporting requirements under Section 6035.