Under the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, signed into law on July 31, 2015, Congress enacted new provisions requiring “basis consistency” between what is reported on a decedent’s federal estate tax return and what the beneficiaries of the estate can use as their cost basis for assets inherited from the decedent. The statute prescribed certain reports to be prepared and filed with the IRS by either the executor or “other persons” who have effectively the same responsibility as an executor. The vague language of the statute indicated that the reports were going to show each asset that a beneficiary would inherit and the value as declared on the federal estate tax return, which would be the income tax basis for that beneficiary in that asset. There were so many questions about the statute that everyone conceded that the IRS would have to issue regulations explaining the statute and what the reports would have to say, and what they would look like.
Unfortunately, the deadline for filing reports was set by the statute at 30 days after the due date of the estate tax return. Because the statute applied to all estate tax returns filed on or after August 1, 2015, the first reports were due as early as August 31, 2015.
The new statute caught everyone flat-footed. No one saw it coming. Treasury and the IRS had not conceived of how a report form would look or what the regulations for reporting might say. For that and other reasons, on August 21, 2015, Treasury and the IRS issued Notice 2015-57 which delayed until February 29, 2016, the due date for the reports required by the new statute to show the income tax basis of those assets. In the meantime, the IRS worked feverishly to come up with a report form and proposed regulations, which were only recently issued.
Earlier today, the IRS issued Notice 2016-19 which extends the deadline again to March 31, 2016. The Notice says that it is being issued “in order to provide executors and such other persons the opportunity to review the proposed regulations to be issued under sections 1014(f) and 6035 before preparing a Form 8971 and any Schedule A.”
The Notice can be found on the IRS website. If you would prefer, email me and I will email the notice back to you.