The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “2010 Tax Act”) that was signed into law on December 17, 2010 includes provisions that significantly affect the administration of estates of decedents who died in 2010.
Prior to the passage of the 2010 Tax Act, it was expected that all estates of decedents who died in 2010 with more than $1.3 million of non-cash assets were going to be required to file an IRS Form 8939 “Allocation of Increase in Basis for Property Received from a Decedent” in order to allocate basis to assets inherited from a 2010 decedent. This requirement was a result of the temporary repeal of the estate tax that also repealed the automatic step up in basis upon death rules. However, the 2010 Tax Act changed the rules for 2010 estates. As a result, it may no longer be necessary for as many 2010 estates to file a Form 8939. It has been estimated that there could be as few as 3000 estates that file a Form 8939, due to the new options presented by the 2010 Tax Act.
The estate of a decedent who died in 2010 now has 2 general options. The estate can choose to either “Opt-In” or “Opt-Out” of estate tax.
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