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New Estate Tax Forms a Source of Confusion


On the surface the desire to close an estate tax loophole seems like a good idea and simple enough. The loophole in question was that property could be given one value for estate tax purposes and later a different value for income tax purposes when the heir sold the property. To close this loophole executors now must send an itemized list of estate property valuations to the IRS within 30 days of the date of death.

Heirs and beneficiaries will then be stuck with that value for income tax purposes.

However, Forbes in "Executors, Inheritors, Lawyers Flummoxed By New IRS Forms" reports that the forms are causing some problems.

The biggest issue comes when a bequest has not been specifically funded.

The executor is required to list all of the property that could be used to fund the bequest and its value on a schedule that is sent to the beneficiaries of that bequest. The form itself is not clear and can lead beneficiaries to think they are inheriting all of the listed property when their actual inheritance is quite small.

Another potential source of problems is that beneficiaries have to file another form if they subsequently transfer the property, but nothing informs them of that requirement.

Public comments are still open about the new rules and the forms so there is a possibility that the IRS will listen to concerns about the problems and make changes to make things more clear.

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