Guide to Electing Out of the 2010 Estate Tax (And Into Modified Carryover Basis)

Supplement No. 1 to the Guide is now available. It’s a free download available at www.thompsonjones.com. It summarizes IRS guidance, and offers a formula method to allocate Basis Increase. This Guide will help attorneys, accountants, executors of estates and trustees understand what rules could apply to 2010 estates, how to apply them, get ahead of critical deadlines, and assess the 2010 decision. The 2010 decision is this: The U.S. Congress made the tax consequences of death in 2010 frighteningly complex by making executors decide which of two options would apply. Either: - The estate tax must be paid and the income tax basis of the estate’s assets will be equal to fair market value as of date of death, or - by election of the executor, the estate tax (and only the estate tax) will be avoided while the income tax basis of each estate asset will be the lesser of the decedent’s cost basis or fair market value as of date of death (a limited amount of basis increase may be had). But which is best? That depends on each situation, so a thorough understanding of each estate’s facts, familiarity with the intricacies of the new rules, and careful analysis are indispensible. Think the decision is simple for estates under $5 million? Not always. And there are other rules that come into play besides modified carryover basis, if the election out of the estate tax is made. The IRS announced it will give a “reasonable amount of time” to file the election, once the forms and guidance are published (neither has been released as of this writing). Some say that amount of time will be a mere 90 days. The IRS hasn’t said whether the time for making the election, once that time is set, may be extended. And in no event can the specially extended date for making “qualified” disclaimers be extended. The time to start analyzing is now. A lot is at stake, and there’s very little time. Praise for GUIDE TO ELECTING OUT OF THE 2010 ESTATE TAX “In Mike’s book, you’ll have all the relevant Code Sections at your fingertips and a superb checklist of key questions – and their answers.” - Stephan R. Leimberg, Esq., CEO of Leimberg and Le Clair, Inc. and publisher of Leimberg Information Services®, Inc. at http://www.leimbergservices.com “The must-read for any practitioner advising clients on whether to elect out of the modified carryover basis. Mike nailed it – he made the amorphous understandable. A great practitioner guide.” - Keith Schiller, Esq., author of Estate Planning At The Movies™ — Art of the Estate Tax Return