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Deadline to Elect Estate Tax Carryover Basis Set for January 2012

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, executors for decedents who passed away in 2010 have the choice of paying the 2010 estate tax or electing to have an estate tax carryover basis in certain property. Under this option, beneficiaries can increase basis in some qualifying property by $1.3 million, or $3 million if the property passes to a spouse.

For some larger estates, the carryover basis will mean less cost than the 2010 estate tax; for the majority, however, the 2010 estate tax will be the obvious choice. For a few estates the decision is not clear.

For those estates still weighing options, early this September the IRS extended the deadline to file Form 8939, the form to elect the Section 1022 carryover basis, until January of 2012. Recently the IRS reiterated that this January will be the deadline, and taxpayers will not have the option to elect a carryover basis past this due date or amend the form, with only limited exceptions.

Previously, the IRS had imposed a November deadline. This had worried many
estate planning advisors that there would not have been enough time to determine if a few estates should take the 2010 estate tax or the carryover basis. A complicating factor is that the IRS has yet to issue a final version of Form 8939 (it is expected to do so this fall).

Moving Forward

At this point, the best option for executors still unclear about which choice is appropriate is to fill out two returns and decide then which is best.

This article is only a brief notice of the extension. An experienced estate planning attorney can advise executors which option is appropriate for any given situation. Consult a local estate planning attorney to discuss this and other issues facing executors of large estates.