Understand the new estate value consistency rules

Do you value consistency? The IRS does too, and recent regulations require it when executors report estate asset values to the IRS and to beneficiaries. These new "consistency" rules took effect under a law passed last summer. They apply to estates that must file returns after July 31, 2015. Here's what you need to know.

• How to report estate asset values. There's a new form to go with the new reporting requirements — Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent. If you're the executor of an estate and you're required to file an estate tax return, you'll use Form 8971 to report the value of estate property distributed or to be distributed.
  
  Form 8971 is filed separately from the estate tax return and includes a schedule that you provide to each beneficiary of the estate. The form is due within 30 days after the estate return is filed or 30 days after the due date of the estate return, whichever is earlier.

Three items to note:

• The new requirements have no effect on the general rule that property in an estate typically passes to beneficiaries at the fair market value on the date of death. That continues to be the case.

• If the estate is not required to file an estate tax return because the value of estate assets is less than the estate exclusion ($5,430,000 for 2015, and $5,450,000 for 2016), you don't have to file Form 8971. That's true even if you file a return for other purposes, such as making a portability election.

• Each beneficiary receives only a copy of the schedule listing the assets for that beneficiary. In general, a beneficiary cannot use a value higher than the value reported by the estate as the initial basis in the property.

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The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
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145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

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