Enrolled Agent Program Can Finally Address 2010 Estate Tax, Sort of
Enrolled agents are aware from their EA continuing education that 2010 was a special year for estate taxes. The estate tax was repealed for persons who died in 2010. That action was anticipated as a consequence of the Economic Growth and Tax Relief Reconciliation Act of 2001. In contrast, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010.
The conflict of the two acts gives estate executors a choice regarding decedents who died in 2010. Advice these people need creates more enrolled agent work. But an EA must have current knowledge of estate tax matters. The recent legislation allows estates to opt out of the estate tax and elect treatment under the 2001 Act.
Recent IRS guidance reported that Form 8939 is used by estate executors to make the opt out election. However, Form 8939 is not yet available. The IRS expects to issue the form this fall. Enrolled agents should not wait for their first look at the form when completing their EA CPE requirements at year-end. Filing of Form 8939 must occur by November 15, 2011.
This alters the traditional approach enrolled agents have toward November, which is normally a slow tax period when online continuing education courses are leisurely completed. Although the general purpose of year-end CPE is obtaining updates about new tax law, this year renders an update to an old law. The IRS has just been a little slow in clarifying estate treatment for people who died in 2010.
The formal name of Form 8939 is Allocation of Increase in Basis for Property Acquired from a Decedent. As this appellation implies, the big consequence of filing the form is that opting out of estate tax incurs the imposition of basis carryover rules. That overrides the general rule learned from an enrolled agent program about property basis increasing to the fair market value upon the date of death – or a slightly alternative date after death if the estate executor chooses.
Tax practitioners with enrolled agent certification should spread the word now about Form 8939. Estates addressing 2010 decedents need to act soon if they want to avoid estate tax. Only the positive action of filing Form 8939 permits avoidance of estate tax. Failure to file the form causes repeal of the carryover provisions of the 2001 Act along with imposition of the new 2010 estate tax rules.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.…