Estate Tax Value and Basis



The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, signed by the President of the United States on July 31, 2015, increases the compliance burden on some estates.

 Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of a federal estate tax return.

 For estates required to file a federal estate tax return (those with gross assets and prior taxable gifts exceeding $5,430,000.00 for 2015), the estate beneficiaries must treat their tax basis in property received from an estate consistently with the estate tax return value.

 For example, Mom’s house was worth one million dollars (stepped-up basis to beneficiaries) on the date of death. On the federal estate tax return, Son claims that the house was only worth $800,000.00 to save on the estate tax he must pay. Son then lists the property for sale for $1.1 Million. Son cannot claim that his basis was One Million Dollars when he then sells the house. He must list his basis as $800,000.00 for purposes of capital gains tax.

 If a beneficiary does not comply with the new law, there is a potential 20% accuracy-related penalty on the understated tax due to the inconsistent basis treatment.