Better Late Than Never: Extension of Time to File Form 8939 for a 2010 Decedent


On April 16, 2012, the IRS issued Private Letter Ruling 201231003 in response to a Personal Representative’s request for an extension of time to file a form 8939 for a 2010 Decedent.  Form 8939, entitled, Allocation of Increase in Basis for Property Acquired From a Decedent, is a form provided by the IRS to give 2010 Decedent’s Estates the option to: 1) elect out of the estate tax (as in 2010 there was no Federal Estate Tax) thus receiving no step-up in basis for Decedent’s assets as of the date of death value, and, 2) elect, under Section 1022 of the IRS Code, to allocate basis increases up to $1,300,000  for assets chosen by the Personal Representative of the Estate.  The goal of this election is to allocate basis increases to the Estate’s most appreciable assets which will result in capital gains savings to the beneficiaries.  In choosing to make this election, the Personal Representative, along with their team of estate planning and financial advisors will calculate the total tax savings and compare the difference of the benefit of saving estate taxes or capital gains taxes.

We recently have assisted clients in completing such elections in order to save the beneficiaries of the Estate from incurring exorbitant capital gains taxes later on upon the sale of their inherited assets.  Pursuant to this latest Letter Ruling, it’s possible that those of you who lost loved ones in 2010 could benefit too.  Private Letter Ruling 201231003 states that in circumstances where a Form 8939 was not filed previously, Personal Representatives are permitted to request an extension of time to file the Form 8939 if the individual:

“(i) Requests relief under this section before the failure to make the regulatory election is discovered by the Internal Revenue Service (IRS);

(ii) Failed to make the election because of intervening events beyond the taxpayer’s control;

(iii) Failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer’s experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election;

(iv) Reasonably relied on the written advice of the Internal Revenue Service (IRS); or

(v) Reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election.”  (Treasury Regulation Sec. 301.9100-3)

The Form 8939 and its various complexities require a more thorough analysis which the space limitation’s of this publication do not allow.  However, the goal of this posting is to raise awareness that many of you who have been affected by the loss of a loved one or friend in 2010 where probably never made aware of this option because many practitioners at that time were also unaware of its existence.  I encourage anyone who may be eligible to consider filing for the extension and taking the necessary steps to file for this election, the tax savings in the future may be well worth it.

–  Gary Altman, Esq. and Adam Abramowitz, Esq.

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