Tax Law Update: Internal Revenue Service extends filing and payment deadlines for estates of decedents dying in 2010

Tax Law Update

Trusts and Estates Magazine’s David Handler offers a summary of significant IRS updates on a handful of important laws:

Internal Revenue Service extends filing and payment deadlines for estates of decedents dying in 2010 — In Notice 2011-76 (Notice), the IRS provided relief for the estates of decedents dying in 2010 (2010 estates). The filing deadline for the Form 706, federal estate and generation-skipping transfer (GST) tax return for 2010 estates was originally Sept. 19. With the new deadline fast approaching, the IRS published this Notice on Sept. 13, providing relief for estates in several respects, including an automatic extension of time to file the estate tax return and to pay the estate tax.

First, executors of 2010 estates opting out of paying the estate tax and instead, electing the carryover basis must file Form 8939 by Jan. 17, 2012. Previously, this form was due on Nov. 15, 2011. If the executor allocates the decedent’s GST tax exemption on a Schedule R or R-1 attached to Form 8939, the IRS will consider the allocation timely and effective as of the decedent’s date of death.

Second, executors of 2010 estates that aren’t electing out of the estate tax may file a Form 4768 by the due date of the estate tax return to receive an automatic six month extension both to file the return and to pay the estate tax. For decedents who died before Dec. 17, 2010, Form 4768 was due by Sept. 19, giving the executors until March 19, 2012 to file the estate tax return and pay the estate tax. For estates of decedents who died between Dec. 16 and Dec. 31, 2010, the Form 4768 is due nine months after the date of death, and the executors will have until 15 months after the date of death to file the return and pay the estate tax.

The Notice doesn’t extend any deadlines for income tax returns or gift tax returns. However, it does provide relief to those taxpayers who received property from a 2010 estate and then disposed of it. These taxpayers may have to file their income tax return before the estate from which they received property is required to make its election under Internal Revenue Code Section 1022 regarding carryover basis. The Notice directs these taxpayers to write “IRS Notice 2011-76” on their income tax return and make a good faith estimate of their income tax liability. The IRS will presume reasonable cause and good faith and won’t impose penalties under IRC Section 6651(a)(2) or IRC Section 6662(a) if the taxpayer’s income tax liability is later increased.

For more information on the Notice, see “IRS Provides Relief to Executors of 2010 Estates” by Michael J. Jones, on the Trusts & Estates website, www.trustsandestates.com.

He also lists and explains updates on:

• New proposed regulations under IRC Section 67
• Treasury publishes 2011-2012 priority guidance list
• IRS releases Form 8939 and instructions

Read the full article.