Consistent Basis Reporting and the IRS

Planning for your future includes ensuring you have a well thought out and tailor made estate plan.  A good estate plan will help you achieve your goals and support your family and loved ones after you pass.  Proper estate planning requires a multitude of considerations, including taxes.  The IRS describes estate taxes as a tax “on your right to transfer property at your death.”  It provides that there will have to be an accounting of all your assets at the time of your death to determine the value of your estate.  For those who pass on in 2019, estate taxes will have to be filed for estates with gross assets and prior taxable gifts exceeding $11,400,000.  A part of the consideration for estate tax reporting is called “Consistent Basis Reporting.”

Consistent Basis Reporting is a rule that was created in 2015 when the Surface Transportation and Veterans Health Care Choice Improvement Act was signed into law.  The law requires consistent basis reporting between the estate of the deceased and the person inheriting property from the deceased.  The law states that the fair market value of property passed to an heir or beneficiary through an estate cannot be challenged by the beneficiary when determining gain or loss on the property during a subsequent sale.  In the past, the beneficiary would have been able to rebut the value of the property listed in the estate by presenting clear and convincing evidence when the heir sold the property later on.

The law also puts requirements on the personal representative. The law states that the personal representative must file a specific estate tax return with the IRS.  This statement will identify the value of each property or interest in the property and also identify each person who will receive an interest in property included in the gross estate value for federal tax purposes.  The personal representative needs to pay attention to timelines, as the statement must be filed on or before 1) the date which is thirty days after the date when the return was required to be filed; or 2) the date which is thirty days after the date the return is actually filed, whichever comes first.

We have extensive experience assisting our clients in understanding the tax implications in their estate plans.  Call us today at 651-413-9568 and let us help you.