Instructions For Form 8939 - Allocation Of Increase In Basis For Property Acquired From A Decedent - 2010 Page 4

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Income in Respect of a
provide the information required by
whether property was owned by the
section 6018(b)(2) is $500 for each
decedent at the time of death.
Decedent
failure. The penalty for failure to provide
Jointly held property. If property
Section 1022 does not apply to property
recipients of property acquired from the
was owned by the decedent and one or
that constitutes a right to receive an item
decedent the information required by
more other persons (either as joint
of income in respect of a decedent (IRD)
section 6018(e) is $50 for each such
tenants with right of survivorship or
under section 691. The executor is not
failure. If any failure is due to intentional
tenants by the entirety), the following
required to list property that constitutes a
disregard of the requirements of section
rules apply.
right to receive an item of IRD on Form
6018, the penalty is 5% of the FMV (as of
8939. Generally, IRD is income that the
the date of death) of the property about
1. If the only other person with whom
decedent would have received had death
which the information is required.
the decedent owned the property is the
not occurred and that was not properly
decedent’s surviving spouse, the
Rounding Off to Whole
includible on the decedent’s final income
decedent is treated as owning 50% of the
tax return. IRD includes the following.
Dollars
property.
An installment obligation, reportable by
2. If any other person with whom the
the decedent on the installment method,
Show the money items on the return and
decedent owned the property is not the
that remains uncollected by the decedent.
accompanying schedules as whole-dollar
decedent’s surviving spouse and if the
Accrued but unpaid interest on a note,
amounts. To do so, drop any amount less
decedent furnished consideration for the
certificate of deposit, or other obligation.
than 50 cents and increase any amount
acquisition of the property, the decedent
Dividends declared on a share of stock
from 50 cents through 99 cents to the
is treated as the owner to the extent of
before the decedent’s death but payable
next higher dollar.
the portion of the property that is
to shareholders of record on a date after
proportionate to the consideration
Assembling the Return
the decedent’s death.
furnished by the decedent.
The right to receive an amount of IRD
Attach the following to the return.
3. If any other person with whom the
must be treated in the hands of the
Decedent’s death certificate.
decedent owned the property is not the
estate, or by the person entitled to receive
If the decedent died testate, a certified
decedent’s surviving spouse and if the
that amount by bequest, devise, or
copy of the will. If you cannot obtain a
property was acquired by gift, bequest,
inheritance from the decedent, or by
certified copy, attach a copy of the will
devise or inheritance by the decedent and
reason of the decedent’s death, as if it
and an explanation of why it is not
the other person as joint tenants with right
had been acquired in the same
certified.
of survivorship and their interests are not
transaction as the decedent acquired that
Copies of trust instruments for any
otherwise specified or fixed by law, the
right, and must be considered as having
trust that is shown on the return as a
decedent is treated as owning a fractional
the same character it would have had if
recipient of property acquired from the
part of the property. The fractional part of
the decedent had lived and received that
decedent.
the property that the decedent is treated
amount. For more information, see
If the executor is appointed, a certified
as owning is determined by dividing the
Regulations section 1.691(a)-3.
copy of the letters testamentary, letters of
value of the property by the number of
administration, or other similar evidence
Example: Installment Obligation.
joint tenants with right of survivorship.
of the executor’s authority to act.
Decedent Tammy died in 2010 and her
Appraisals used to value certain
executor, Vince, timely makes the Section
Revocable trusts. The decedent is
property as required under section 2031
1022 Election. Whitney, an heir of
treated as the owner of any property that
and Rev. Proc. 2011-41, section 4.04(1).
Tammy’s estate, is entitled to collect an
the decedent transferred to a qualified
installment obligation, reported by Tammy
revocable trust (QRT) during his or her
Property Acquired from
on the installment method, that has a face
lifetime.
value of $100, FMV of $80, and a basis in
the Decedent
A QRT is any trust (or part of a trust)
Tammy’s hands on the date of her death
that, on the day the decedent died, was
Generally, section 1022 determines a
of $60. Section 1022 does not apply to
treated as owned by the decedent under
recipient’s basis in property, but only if the
the installment obligation and does not
section 676 by reason of a power to
property is “acquired from the decedent.”
determine the estate’s basis or Whitney’s
revoke that was exercisable by the
Generally, property acquired from the
basis in the installment obligation.
decedent (determined without regard to
decedent includes the following.
Property Eligible for
section 672(e)). For this purpose, a QRT
1. Property acquired by bequest,
includes a trust that was treated as
devise, or inheritance, or by the
Increase to Basis
owned by the decedent under section 676
decedent’s estate from the decedent.
by reason of a power to revoke that was
Generally, the executor can allocate
2. Property transferred by the
exercisable by the decedent with the
additional basis under section 1022 (up to
decedent during the decedent’s lifetime
consent or approval of a nonadverse
the FMV of the property) to property
to:
party or the decedent’s spouse. However,
acquired from the decedent that was
a. A qualified revocable trust (as
a QRT does not include a trust that was
owned by the decedent at the time of
defined in section 645(b)(1)), or
treated as owned by the decedent under
death. Property the basis of which can be
b. Any other trust with respect to
section 676 by reason of a power to
increased is eligible property.
which the decedent reserved the right to
revoke that was exercisable solely by a
make any change in the enjoyment
Not all property acquired from the
nonadverse party or the decedent’s
thereof through the exercise of a power to
!
decedent is considered owned by
spouse and not by the decedent. For
alter, amend, or terminate the trust.
decedent at the time of death.
more information, see sections 645(b)
CAUTION
3. Any other property passing from
and 676 and the instructions for Form
Property Owned by the
the decedent by reason of death to the
8885, Election To Treat a Qualified
Decedent at the Time of Death
extent that such property passed without
Revocable Trust as Part of an Estate.
consideration.
The basis of property acquired from the
Election not required. No election is
decedent can be increased by an
Note. Section 1022 does not apply to a
required for a trust to be a QRT.
allocation of Basis Increase (defined in
decedent’s interest in a QTIP trust or
Basis Increase, later) only if and to the
similar arrangement funded for the benefit
Powers of appointment. The
extent the property was owned by the
of the decedent by the decedent’s
decedent is not treated as the owner of
decedent at the time of death.
predeceased spouse. A recipient’s basis
any property by virtue of holding a power
in this property will not be determined
Rules relating to ownership. The
of appointment with respect to such
under section 1022.
following rules apply in determining
property.
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