IRS Revises Due Date for Form 8971 For All Estates Filed After July, 2015 to June 30, 2016.

On February 15, 2016 we posted IRS issues Final Form 8971 & Instructions on How To Report the Final Estate Tax Value of a Property Transfered to Beneficiaries , where we discussed that for many years the IRS has had a problem verifying the basis of assets received by an heir from an estate. Within the last three or four years, the IRS has required brokerage houses and banks to supply it with the cost basis so that it could determine that the capital gain or loss on securities was correctly calculated. 

 

The IRS has created a form 8971 along with the schedule A which requires anyone who must file a form 706 or form 706NA to compel the executor/personal representative/administrator to file this form 8971+ schedule A with the Internal Revenue Service. Each heir/beneficiary is to be supplied with a copy of schedule A to inform him of his basis in the assets inherited from the estate. This filing requirement is limited to estates which must file a 706 or 706NA. The upshot of this is that estate tax returns filed merely to achieve portability are exempt from this filing requirement. Such filing had to be made within 30 days of the filing of the estate tax return or, in the case of estate tax returns filed subsequent to July, 2015, by March 30, 2016. 

 

Now, however, the IRS is basically admitting that the form that it released is extremely flawed. The form is now being redrafted/clarified so that estate tax preparers will now have a reasonable idea of what needs to be done to prepare an accurate 8971.

In order to do this and realizing that the filing date was already past, the IRS extended the filing dates for forms 8971 on all estate tax returns filed after July, 2015, to June 30, 2016. Hopefully this will give the IRS the opportunity to draft a form that is comprehensible, free of errors, and relatively easy to file. It is not often that IRS admits that it's products are flawed; this change of date and redrafting of instructions is a tacit admission that the IRS tried to push this form onto the tax preparation world before the form was ready.

Once we see the new manifestation of the form plus instructions which should be out at some point in June, we will have a better idea the IRS accomplished its task.

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Robert S. Blumenfeld  - 

 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.