AICPA Calls for More Guidance from IRS and Treasury on Estate Basis Reporting

February 25, 2016

  • Provide penalty relief if the executor acts in good faith and to provide reasonable cause penalty relief;
  • Clarify the time period (if any) that the executor has continuing responsibilities after providing the original statement;
  • Treat trusts as the beneficiary;
  • Provide a de minimis exemption to the information reporting rules for assets or groups of assets that are not publicly-traded and are of de minimis value, such as $3,000; and
  • Provide guidance and clarifications on other issues.

Draft Form 8971

In a separate, but related January 29 letter, the AICPA has submitted comments to the IRS and Treasury about IRS draft Form 8971), Information Regarding Beneficiaries Acquiring Property from a Decedent, and draft instructions (now officially posted on the IRS website as final.)

In its letter, the AICPA suggested eight recommendations for consideration by the IRS.  Among them are:

  • IRS should clarify that if IRS Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return, is filed solely for electing portability, the Form 8971 is not required;
  • IRS should allow processing of the form if “unknown” is an appropriate answer, so long as the form is accompanied by an explanation, so that the form is not considered incomplete, which could subject the estate to penalties for failure to file a correct Form 8971 by its due date;
  • IRS should ask if the estate tax value is used for income tax purposes;
  • The form should include the date of the previous supplemental filing; and
  • The instructions should include guidance on post Form 706 filing information needed by beneficiaries for determining basis.