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2010 Estate Tax Relief Announced

Long awaited estate tax relief has arrived! Last week the IRS issued new guidance for filing the IRS Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent until January 17, 2012. This new form must be filed by executors electing to use the new carry over provisions of Section 1022 of the tax code. Unfortunately, there are no extensions available after the due date. So, if the executor misses the due date, the executor would need to file IRS Form 706. For executors who decide to use the traditional estate tax regulations by filing IRS Form 706, the IRS has automatically extended the deadline to March 19, 2012 to file and pay the estate tax.

The 2010 Estate Tax

In 2010, the estate tax expired, leading many executors to believe they would not be responsible for paying estate tax. However, the passage of the Tax Relief and Jobs Creation Act of 2010 (the Act) in late December changed the situation. The law retroactively reinstated the estate tax to the beginning of 2010 and caught many taxpayers and estate planners by surprise. Since the law was implemented so late in the year, executors have been given the option to decide which tax forms they should file. They are permitted to choose between the traditional estate tax regulations (Form 706) or the recently enacted carryover basis provisions (Form 8939).

Extended Filing Deadlines

For the estates of individuals who died between January 1, 2010 and December 16, 2010, and have elected to follow the traditional estate tax regulations, they should have filed IRS Form 4768, Application for Extension of Time to File a Return/Pay U.S. Estate Tax prior to September 19, 2011.

For estates of individuals who died after December 16, 2010 and before January 1, 2011, the due date has been extended from 9 months after the date of death to 15 months after the date of death. For example if someone died on December 20, 2010, under the new regulations the executor would have until March 20, 2012 to file Form 706 and pay estate taxes. Again, this is a change to the due date and not an extension, so no additional forms need to be filed with the IRS to qualify for this change.

Contact Us

Understanding the impact these new filing deadlines have on your responsibilities as estate executor is extremely important. If you are unsure how these changes impact your situation, contact one of our estate tax advisors today! For additional information on these or other Estate and Trust issues, contact, Beth Flynn in Salinas at 831-759-6300 or Jim Stiles in Carmel at 831-625-3374, or click here to email them. They can help assess your situation to ensure you are in compliance and assist with these filing requirements