Form 8971 Filing Unhappiness

By Charles Rubin

For executors of estates who typically fill out Form 706 federal estate tax returns, you have likely faced the headache of the subsequent Form 8971 that is newly required by the IRS. The Form requires listing the assets of a beneficiary and their estate tax value in order to calculate the gain or loss in the sale of an asset. The headache comes with the short amount of time – 30 days – that is allotted for the submission of the form. Unfortunately, estates and related trusts may not have sufficient time to collect and identify all the beneficiaries’ assets.

This article discusses the best way to tackle the Form 8971, and begins as follows:

The IRS has now issued a final Form 8971 and instructions. If you recall, this Form is newly required by executors of estates filing a Form 706 (federal estate tax return). The Form requires a schedule for each beneficiary which lists the assets received by the beneficiary and the estate tax value of those assets. The purpose is to put documentation in the hands of the beneficiary to allow it to calculate basis in the received assets. This will allow the beneficiary to calculate gain or loss on a subsequent sale of the assets received.

The form must be completed within 30 days of the filing of the Form 706. Unfortunately, many estates and related trusts will not have wound down their administration by that point and may not have identified (or be capable of identifying) assets that will be given to each beneficiary. So how should the Form 8971 be filed if the assets going to each beneficiary cannot be identified by the due date?

Read the rest of the article here: Form 8971 Filing Unhappiness – Rubin On Tax