In Notice 2016-19, the IRS has delayed until March 31, 2016, the due date for executors of estates and others required under new Section 6035 to file statements with respect to the value of certain property. Notice 2016-19 is effective February 11, 2016.

Background

On July 31, the President signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41, which contained some provisions affecting trusts and estates, including new Sections 1014(f) and 6035, addressing the consistency of basis reporting. See Tax Alert 2015-1532.

For estate tax returns filed after July 31, 2015, new Section 1014(f) states that the basis of any property acquired from a decedent to which Section 1014(a) applies cannot exceed either: (1) the final value of the property determined for federal estate tax purposes or (2) in the case of any other property for which a statement has been furnished under new Section 6035, the value of the property as listed on that statement.

Under new Section 6035, the executor of an estate that files its estate tax return after July 31, 2015, must provide a statement identifying the value of property accounted for on the return to both the IRS and the beneficiaries acquiring any interest in the property. The law imposes a penalty for not filing the required statement. There is also a penalty for reporting an inconsistent basis.

Notice 2016-19

Notice 2016-19 provides that the due date for statements that are required to be filed under new Section 6035 that would otherwise be due, under Section 6035(a)(3), before March 31, 2016, is delayed to March 31, 2016. The IRS recommends that executors and others required to file statements under Section 6035 should not do so until the IRS has issued the proposed regulations on the Section 6035 requirements. Notice 2016-19 applies to executors and others who are required under Section 6018(a) or (b) to file a return if that return is filed after July 31, 2015.

Implications

For the last several years, the President's budget proposal contained a provision requesting that the basis of property in the hands of a beneficiary have a basis that is consistent with the fair market value of the property reported on the Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.

Although Notice 2016-19 buys taxpayers another month delay in filing, legal and procedural questions remain about what should and should not be included in the filings. It is likely that the forthcoming proposed regulations will provide some answers, but it is highly unlikely that those regulations will be able to address all of the issues that executors will face when filing the Form 8971 for the first time.

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