Estate Basis Consistency Rules for Fiduciaries: IRS Final Regulations, Reporting Requirements, Distribution Strategies

This CLE/CPE course will provide estate planners and advisers to trusts and estates with a practical guide to estate basis consistency reporting requirements as they impact trustees and fiduciaries. The panel will discuss IRS final regulations and key issues for fiduciaries, explain the IRS pronouncements on coordinating basis reporting with the filing of the estate tax return and valuations reported on Form 8971, and offer strategies to help fiduciaries avoid adverse tax consequences in estate distributions in light of the final regulations.

The basis consistency rules present challenges to tax compliance advisers, fiduciaries, and estate counsel. The rules create filing obligations for executors of taxable estates but also impact distribution decisions and litigation strategies. Estate planners must grasp the wide-ranging impact of the estate basis consistency rules and planning strategies to avoid unnecessary taxes and penalties.

IRC Sections 1014(f) and 6035 set the guidelines for the basis consistency regime. IRC Section 1014(f) mandates that an asset's reported estate tax value and the basis of the asset when acquired by the estate beneficiary must be consistent. IRC 6035 requires estate executors to identify the value of property reported on the estate tax return to both the IRS and the estate beneficiaries.

The requirement to furnish basis information to all beneficiaries creates a substantial burden on fiduciaries. Additionally, the mandate to match basis on assets between Form 706 and the beneficiaries' tax returns complicates determining and making distributions. Executors will have to balance the tax situations of the beneficiaries with the needs of the estate in distributing property.

Recently, the IRS finalized and issued the estate basis consistency rules which provide some relief to estate planners and families handling inheritances relating to reporting to beneficiaries, rules for property transfers, and other key items. However, challenges still remain that must be considered by estate planners.

Listen as our experienced panel provides a comprehensive and practical guide to the estate basis consistency rules as they impact executors and estate planners.