The IRS has issued a new Form 8971 “Information Regarding Beneficiaries Acquiring Property From a Decedent” and instructions. This increases the duties of a personal representative or executor of a decedent’s estate.

Form 8971 is required to be filed if an estate has to file an estate tax return under Form 706 after July 31, 2015. Form 8971 should be filed separately from the 706 and not attached to the Form 706.
Code Sec. 6035(a)(1) provides that the executor of any estate required to file an estate tax return under Code Sec. 6018(a) must furnish, both to IRS and the person acquiring any interest in property included in the decedent’s gross estate for federal estate tax purposes, a statement identifying the value of each interest in such property as reported on such return and such other information with respect to that interest as IRS may prescribe.

Form 8971 and only Schedule A [of Form 8971 to a beneficiary must be filed no later than 30 days after the date on which Form 706 is required to be filed with the IRS or the date that is 30 days after the date the Form 706 is actually filed with the IRS. A beneficiary can be served Schedule A by email. The executor of the estate must certify on Form 8971 the date Schedule A was provided to each beneficiary and should keep the proof of delivery for his or her records.

The filing requirement for Form 8971 does not apply to an executor of an estate that is not required to file an estate tax return because the gross estate plus adjusted taxable gifts is less than the basic exclusion amount, but who does file a Form 706 for the sole purpose of making an allocation or election respecting the generation-skipping transfer tax.

Notice 2016-19, 2016-9 IRB provides that the IRS has delayed the due date to March 31, 2016 for statements required under Code Sec. 6035(a)(1) and Code Sec. 6035(a)(2) that an executor must provide to the IRS and to beneficiaries. Those failing to follow the new Code Sec. 6035 information reporting requirements are subject to the failure-to-file penalty rules of Code Sec. 6724. (Code Sec. 6721(a); Code Sec. 6724(d)(1)(D) ; Code Sec. 6724(d)(2)(II)).

A separate Schedule A must be prepared for each beneficiary. Schedule A lists each item of property that a given beneficiary receives from the estate, its estate tax value, and other information about that item of property.

The Form 8971 instructions do not give notice as to whether Form 8971 must be filed for estates that file Form 706 solely to make the Code Sec. 2010(c)(5) portability election. Code Sec. 6035 only applies to persons required by Code Sec. 6018(a) or Code Sec. 6018(b) to file returns. Reg. § 20.2010-2(a)(1), which was circulated before the Act, provides that, “An estate that elects portability will be considered, for purposes of subtitle B and subtitle F of the Internal Revenue Code (Code), to be required to file a return under Code Sec. 6018(a).” Code Sec. 1014(f)(2) provides that the basis consistency rule only applies to a property whose inclusion in the decedent’s estate increases the estate’s federal estate tax liability (reduced by credits allowable against such tax).

The IRS has indicated that filers of a Form 706 for portability only will not be required to file Form 8971. The IRS has also stated that the proposed regulations on Code Sec. 6035 will be released soon and that executors should wait for the regulations before they prepare the required statements. Stay tuned!