Beth Kaufman Comments on Estate Carryover Election


Excerpt from BNA, "IRS Official Stresses January Due Date For Estate Carryover Election, Need for Input".

Taxpayers will not be given any extensions to file Form 8939, which is due in January for the estate tax carryover basis election, an Internal Revenue official said Sept. 21.

Taxpayers who want to make the tax code Section 1022 election and not opt for the estate tax for 2010 should fill out Form 8939 in a timely manner before it is due Jan. 17, 2012, said Catherine Hughes, estate and gift tax attorney-adviser with the Treasury Department, at a panel for the D.C. Bar Taxation Section Estate Planning Committee. The Economic Growth and Tax Relief Reconciliation Act of 2001 gave estates of individuals dying in 2010 a choice between paying estate tax on property transferred to a beneficiary or having the modified carryover basis rules apply.

Earlier in September, IRS released guidance announcing the January date for filling out the form to elect into the carryover basis regime (178 DTR G-8, 9/14/11). Taxpayers cannot revoke the form or file for the first time after that date, Hughes said.

Relief Limited After January

Taxpayers who want to change or make an allocation on the form can do so as long as it is done before the due date, Hughes said. After that date, there will be no extensions and relief will be limited, she said.

IRS did set four opportunities for relief, including one that allows taxpayers to update the form with new spousal property distributions if the original form was timely filed and the updated form is filed within 90 days of the distribution to the spouse (166 DTR G-3, 8/26/11). The form can also be amended within six months if it was timely filed, she said.

Few Will Have to Struggle to Decide

Most estates will fall in one of the extremes, either clearly taking the estate tax or the carryover basis election, Beth Kaufman, a partner at Caplin & Drysdale in Washington, D.C., said. The estate tax will cover the majority of estates from 2010 and most people will not have to delve into the election requirements, she said.

For larger estates, the additional basis will likely cost less than the estate tax. In these cases, Kaufman said, taxpayers should take the election.

However, a small group of taxpayers will have a tough decision to make between the two options. Tax advisers should fill out two returns in these cases to determine which one will be the best for specific clients, she said.

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