For 2010 decedents, there is no estate tax and no estate tax return filing requirement.  However, an informational return is required to be filed by April 15, 2011 for property acquired from a decedent in 2010.   Generally, a modified carryover rule is allowed for the property transferred to beneficiaries whereby the basis of property is increased by up to $1.3 million.  Depreciated assets at the date of death would be transferred at the lower market value vs. the adjusted basis.  A form is being drafted currently by the IRS for the allocation of the $1.3 million step-up.

The informational return requires the following:

1. Name and TIN of the recipient of the property
2. Accurate description of the property
3. Adjusted basis of the property in the hands of the decedent and its fair market value at the time of death
4. Decedent’s holding period in the property
5. Information to determine whether any gain on the sale of the property would be treated as ordinary income
6. The amount of basis increase allocated to the property (up to $1.3 million or $3 million for surviving spouse)

While it is still possible that Congress will retroactively reinstate the estate tax, it appears unlikely at this point. 

If you have any questions regarding the information in this article, or have any other issues you would like to discuss, please feel free to contact the DZH Phillips tax department at 415.781.2500 or email cpas@dzhphillips.com.