Basis of Property Acquired from a Decedent

November 11, 2015

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 was signed into law in 2015 and added subsection (f) to IRC Section 1014 and added IRC Section 6035. The purpose of these laws is to provide consistency in basis reporting between an estate and anyone acquiring property from the estate. The law provides new reporting requirements, which are effective as of July 31, 2015.

IRC Section 1014 deals with the basis of property acquired from a decedent. Section 1014(f) requires that the basis of property in the hands of the heir be consistent with the value of the property reported on the estate tax return (Form 706) of the decedent. The reason for this rule and the required reporting under IRC Section 6035 is to prevent taxpayers from overstating basis of inherited property. Effective with this change in the law is that overstating basis may be subject to accuracy-related penalties under IRC Section 6662.

The executor of any estate required to file a return (Form 706) shall furnish to the IRS and to each 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 the estate tax return. This requirement allows the IRS to match the basis of inherited assets to the value reported on Form 706 (the estate tax return).