The Internal Revenue Service has issued guidance to help taxpayers cope with the carryover basis rules for the estates of people who died last year, when the estate tax was not in effect.

The guidance is intended to help executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply. 

Form 8939, the basis allocation form required to be filed by executors opting out of the estate tax, is due Nov. 15, 2011, the IRS noted. 

Under the guidance issued Friday, an executor must file Form 8939, “Allocation of Increase in Basis for Property Acquired from a Decedent,” in order to opt out of the estate tax and have the new carryover basis rules apply. The IRS expects to issue Form 8939 and the related instructions early this fall.

The estate tax expired for persons who died in 2010, under the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001. However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. The law, which passed last December and largely extended the Bush era tax rates for another two years, allows executors of the estates of decedents who died in 2010 to opt out of the estate tax, and instead elect to be governed by the repealed carry-over basis provisions of the 2001 Act. The choice is to be made by filing Form 8939.

Notice 2011-66, which the IRS published Friday, provides guidance for executors of estates of decedents who died in 2010 regarding the time and manner of choosing to opt out of the estate tax have the carryover basis rules apply.

The IRS also issued Revenue Procedure 2011-41, providing safe harbor guidance regarding property acquired from estates of decedents who died in 2010.

 

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