Source Publication Abbreviation
Lexis Fed. Tax J. Q., Sept. 2016 at ch. 1.
The first consistent basis returns became due June 30, 2016,2 almost one year after enactment of the filing requirement by Congress. The basis consistency rules only apply to persons filing and property reported on estate tax returns filed after July 31, 2015.3 As of the initial due date for filing Form 8971, its accompanying instructions conflicted with recently proposed regulations, leaving executors and their advisors to grapple with the ambiguities and differences.4 Comments on the proposed regulations generally call for revisions to make compliance less costly and, more importantly, reflective of the purpose underlying enactment of the basis consistency rule which requires the same value to be used by a recipient of decedent’s property in determining basis as was reported by the executor for estate tax purposes.5
The consistent basis reporting requirement provides the mechanism for notifying the Internal Revenue Service and those beneficiaries subject to the basis consistency rule of the maximum basis that may be claimed by the beneficiaries for income tax purposes.6 The proposed reporting regulations, however, extend the duty to report beyond that contemplated by the enacting legislation. Although, the statutory language triggering application of the basis consistency requirement itself differs from that prompting application of the reporting rule, a fair reading of both statutes limits application to beneficiaries of those decedent’s estates required to file an estate tax return and, further, does not suggest that it applies to any assets not reported on a return and for which a final value has not been determined. Despite the limiting provisions of the statutory language, the proposed regulations stretch the reporting requirement to apply in some cases to donees of a beneficiary,7 and, in draconian style, impose a zero basis on the beneficiary if the executor fails to discover and report an asset on the estate tax return.8 After discussing the purposes that underlie enactment of the basis consistency rules and reporting requirement as acknowledged by the Internal Revenue Service, this article sets forth the details of the proposed regulatory scheme. It analyzes the proposed regulations both from the point of view of whether there might exist a more time and cost efficient method of protecting the interests of the Internal Revenue Service, and whether the regulatory requirements fall within the authority granted by Congress to issue regulations. Specifically, following this initial section introducing the article, Section 2 discusses the purpose of the basis consistency requirement; Section 3 sets forth and evaluates the basis consistency rules as interpreted by the proposed regulations, including the controversial zero basis rule; Section 4 sets forth the parameters for application of the rule; and section 5 sets forth and evaluates the efficacy of the consistent basis reporting requirements.
Gagliardi, Elaine H., "Elaine Gagliardi on Consistent Basis Reporting: Are Proposed Regulations Consistent with Congress’s Basis for Enactment?" (2016). Faculty Journal Articles & Other Writings. 143.