Instructions for Form 8939

Transcription

1 2010 Instructions for Form 8939 Allocation of Increase in Basis for Property Acquired From a Decedent Section references are to the Internal Revenue Code unless otherwise noted. Department of the Treasury Internal Revenue Service If there is an executor appointed, acquired from the decedent (other than qualified, and acting within the United cash) that is one of the following. States, the IRS generally will accept Form 1. Tangible property situated in the 8939 only if filed by that executor. For United States. General Instructions detailed information on multiple and 2. Other property acquired from the More information. For more information conflicting filings by executors who are decedent by a United States person. A about the latest developments on Form not appointed, qualified, and acting, see United States person is any of the 8939 and its instructions, go to Notice , section I.A. following. gov/form8939. Effect of Election a. A citizen or resident of the United States. If the executor makes the Section 1022 Purpose of Form b. A domestic partnership. Election, special rules apply. These rules Form 8939 is an information return used c. A domestic corporation. include the following. by the executor (defined below) of a d. Any estate other than a foreign There is no estate tax. decedent who died in 2010: estate. A foreign estate is an estate the The basis of property acquired from a income of which, from sources outside 1. To make the Section 1022 Election decedent generally is determined under the United States that is not effectively (see Section 1022 Election, later); the modified carryover basis rules of connected with the conduct of a trade or 2. To report information about section 1022 and not under section business within the United States, is not property acquired from a decedent; and Generally, the recipient s basis is the includible in gross income. 3. To allocate Basis Increase (see lesser of the decedent s adjusted basis or e. Any trust if a court within the United Basis Increase, later) to certain property the fair market value (FMV) at the date of States is able to exercise primary acquired from a decedent. the decedent s death. supervision over the administration of the For detailed information about the If the executor makes the Section trust and one or more United States Section 1022 Election, see Notice 1022 Election and follows the provisions persons have the authority to control all , I.R.B. 184, available at of section 4 of Revenue Procedure substantial decisions of the trust. and , and takes no return position Notice , I.R.B 479, contrary to any provisions of section 4, Executor. The executor is the executor, available at the IRS will not challenge the taxpayer s personal representative, or administrator irb11-40.pdf. For optional safe harbor ability to rely on the provisions of section of the decedent, or, if there is no executor guidance under section 1022, see 4 on either Form 8939 or any other return or administrator appointed, qualified, and Revenue Procedure , of tax. acting within the United States, then any person in actual or constructive I.R.B. 188, available at Section 1022 Election irs-irbs/irb11-35.pdf. possession of any property of the Irrevocable decedent. For detailed information on multiple or conflicting filings by executors Section 1022 Election A Section 1022 Election can not who are not appointed, qualified, and! The executor of an estate of a decedent be revoked after the due date. acting, see Notice , sections I.A. who died in 2010 can elect to apply CAUTION See When to File, later. and I.B. modified carryover basis treatment to property acquired from the decedent under section 301(c) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA). If the election is made, the estate will not be subject to federal estate tax and does not need to file a Form 706 even if the value of the estate is $5,000,000 or more. As a result, section 1014 generally does not apply to determine the recipient s basis in property acquired from the decedent. Instead, section 1022 applies to determine the recipient s basis in most (but not all) property acquired from the decedent. This election is referred to as the Section 1022 Election. Generally, once the executor has Note. For the definition of property made the Section 1022 Election, the acquired from a decedent, see Property election is irrevocable. However, the Acquired from a Decedent, later. executor can revoke a prior Section 1022 Election on a subsequent Form 8939 filed The executor s disclosure on Form before the due date. See When to File,! 8939 of property acquired from the later. To revoke the Section 1022 CAUTION decedent does not satisfy the Election, the executor must check the box requirements, if applicable, to disclose at the top of Form 8939 designated for foreign financial assets on Form 8938, revocation. See Checkbox for Revoking Statement of Specified Foreign Financial Section 1022 Election, later. For more Assets, or to disclose a financial interest information, see Notice in or signature authority over a foreign Required Disclosure financial account by filing Form TD F , Report of Foreign Bank and Financial Accounts. Returns by Executors Generally, if the executor (defined later) Returns by Trustees and makes the Section 1022 Election, the Beneficiaries How to Make the Section 1022 executor must report all the information If the executor is unable to make a Election required by Form 8939 and its complete return as to any property The Section 1022 Election is made by instructions about all property acquired acquired from the decedent, the executor filing a timely Form Prior filings from the decedent (other than cash). must include a description of such purporting to make the Section 1022 However, for the executor of a decedent property and the name of every person Election must be replaced with a timely who is a nonresident not a citizen of the holding a legal or beneficial interest in the filed For information on when United States, the executor must report property. Upon notice from the IRS, such to file Form 8939, see When to File, later. certain information about the property person must file Form 8939 as to such Oct 05, 2011 Cat. No M

2 property. For details, see section An executor is not permitted to file Form 8939 to allocate Spousal Property 6018(b)(4).! both an estate tax return (Form Basis Increase, below. For information on CAUTION 706 or Form 706-NA) and a other limited circumstances, see Notice Statement to Recipients conditional Form 8939 that would take , section I.D.2. To amend or The executor filing Form 8939 must effect only if an estate tax audit results in supplement a previously filed Form 8939, furnish to each person whose name is an increase in the gross estate above the file an amended Form 8939 and check required to be set forth in such return applicable exclusion amount in section the box at the top of page 1 designated (other than the executor filing the return) 2010(c). for amended returns. Attach a statement a written statement showing the For individuals serving in the Armed that identifies the schedule, line number, information required by section 6018(e) Forces of the United States or serving in and item number of each amended item, with respect to property acquired from the support of the Armed Forces, the the corrected or amended amount or decedent to the person required to deadline for filing Form 8939 can be treatment of the item, and an explanation receive the statement. The executor must extended under section An of the reasons for the change. If the furnish this statement not later than 30 executor filing Form 8939 after the due executor files an amended or days after the date Form 8939 is filed. date under section 7508 should write supplemental Form 8939, the executor Filed Pursuant to Section 7508 at the must provide updated statements to The statement must include top of the first page of the form. For affected recipients. See Updated! information about all property details, see section 7508 and Extension statements, earlier. CAUTION acquired from the decedent by the of Deadlines in Publication 3, Armed recipient of the statement, whether or not Amended Form 8939 to allocate Forces Tax Guide. the executor allocates any Basis Increase Spousal Property Basis Increase. The to that property. For individuals living in a Presidentially executor can file an amended Form 8939 declared disaster area or affected by after the due date for the sole purpose of Use Schedule A to provide this terroristic or military action, the deadline allocating Spousal Property Basis statement to each recipient of property to file Form 8939 can be postponed under Increase to property eligible to receive an acquired from the decedent, including the section 7508A. An executor filing Form allocation of that basis, provided that following persons after the due date under section each of the two following requirements is The decedent s surviving spouse. 7508A should write Filed Pursuant to satisfied. The trustee of a qualified terminable Section 7508A at the top of the first page Form 8939 must have been timely filed interest property (QTIP) trust. of the form. A Presidentially declared and must have been complete when filed Any charitable remainder trust the sole disaster is a disaster that occurred in an except for the allocation of the full amount non-charitable beneficiary of which is the area declared by the President to be of the Spousal Property Basis Increase to decedent s surviving spouse. eligible for federal assistance under the the eligible property reported on that Any other person (other than the Disaster Relief and Emergency Form executor filing the return) who acquires Assistance Act. Each amended Form 8939 must be property from the decedent. filed no more than 90 days after the date A list of the areas eligible for Updated statements. The executor of the distribution of the qualified spousal TIP assistance under the Disaster must furnish an updated statement in the property to which Spousal Property Basis Relief and Emergency Assistance following circumstances. Increase is allocated on that amended Act is available at the Federal Emergency The executor files an amended or Form Management Agency (FEMA) website at supplemental Form For details, see and at IRS.gov. See Spousal Property Basis Increase, Amended and supplemental returns, and Private delivery services. You can use later. Notice , section I.D.2. certain private delivery services The IRS makes an adjustment to any designated by the IRS to meet the timely Who Must Sign tax return that affects the amounts mailing as timely filing rule for tax The executor who files the return must, in properly reportable on Form returns. These private delivery services every case, sign the declaration on page The executor must furnish updated include only the following: 1 of Form 8939 under penalties of perjury. statements to each affected recipient of DHL Express (DHL): DHL Same Day property no later than 30 days after the Service. Where to File executor s filing of the amended or Federal Express (FedEx): FedEx Send this return to: supplemental Form 8939 or receiving Priority Overnight, FedEx Standard notice of the adjustment from the IRS, Overnight, FedEx 2Day, FedEx Internal Revenue Service whichever is applicable. If the property is International Priority, FedEx International Estate & Gift Stop 824G subject to multiple interests (life estate First. 201 W. Rivercenter Blvd. and remainder interest), the life tenant United Parcel Service (UPS): UPS Next Covington, KY and all holders of remainder interests are Day Air, UPS Next Day Air Saver, UPS affected recipients of the property. 2nd Day Air, UPS 2nd Day Air A.M., UPS Do not file Form 8939 with the Worldwide Express Plus, and UPS! decedent s final income tax return. If the executor files an amended Form CAUTION Worldwide Express. Do not send Form 8939 to the 8939 that revokes a Section 1022 same address you use for mailing the Election, the executor should write The private delivery service can tell decedent s final income tax return. Section 1022 Election Revoked at the you how to get written proof of the mailing top of the updated statement and send a date. Penalties copy to each affected recipient. Extension of time to file Section 6716 provides penalties for failing Generally, the IRS will not grant an to file this return on time and for failing to When to File extension of time to file Form provide the information required unless File Form 8939 by January 17, See However, see Notice , section there is reasonable cause for the failure. Notice For more information, I.D.2. for limited relief provisions. Generally, the penalty is $10,000 for each see Generally, the such failure. The penalty for failure to IRS will not grant extensions of time to file Amended and supplemental provide the information required by a Form 8939 and will not accept a Form returns section 6018(b)(2) is $500 for each 8939 or an amended Form 8939 filed There are only a few limited failure. The penalty for failure to provide after the due date. However, see circumstances where the IRS will accept recipients of property acquired from the Amended and supplemental returns and an amended Form One of these decedent the information required by Extension of time to file, later. circumstances is described in Amended section 6018(e) is $50 for each such -2-

3 failure. If any failure is due to intentional of income in respect of a decedent (IRD) more other persons (either as joint disregard of the requirements of section under section 691. The executor is not tenants with right of survivorship or 6018, the penalty is 5% of the FMV (as of required to list property that constitutes a tenants by the entirety), the following the date of death) of the property about right to receive an item of IRD on Form rules apply. which the information is required Generally, IRD is income that the 1. If the only other person with whom decedent would have received had death the decedent owned the property is the Rounding Off to Whole not occurred and that was not properly decedent s surviving spouse, the includible on the decedent s final income Dollars decedent is treated as owning 50% of the tax return. IRD includes the following. property. Show the money items on the return and An installment obligation, reportable by 2. If any other person with whom the accompanying schedules as whole-dollar the decedent on the installment method, decedent owned the property is not the amounts. To do so, drop any amount less that remains uncollected by the decedent. decedent s surviving spouse and if the than 50 cents and increase any amount Accrued but unpaid interest on a note, decedent furnished consideration for the from 50 cents through 99 cents to the certificate of deposit, or other obligation. acquisition of the property, the decedent next higher dollar. Dividends declared on a share of stock is treated as the owner to the extent of before the decedent s death but payable the portion of the property that is Assembling the Return to shareholders of record on a date after proportionate to the consideration the decedent s death. Attach the following to the return. furnished by the decedent. Decedent s death certificate. The right to receive an amount of IRD 3. If any other person with whom the If the decedent died testate, a certified must be treated in the hands of the decedent owned the property is not the copy of the will. If you cannot obtain a estate, or by the person entitled to receive decedent s surviving spouse and if the certified copy, attach a copy of the will that amount by bequest, devise, or property was acquired by gift, bequest, and an explanation of why it is not inheritance from the decedent, or by devise or inheritance by the decedent and certified. reason of the decedent s death, as if it the other person as joint tenants with right Copies of trust instruments for any had been acquired in the same of survivorship and their interests are not trust that is shown on the return as a transaction as the decedent acquired that otherwise specified or fixed by law, the recipient of property acquired from the right, and must be considered as having decedent is treated as owning a fractional decedent. the same character it would have had if part of the property. The fractional part of If the executor is appointed, a certified the decedent had lived and received that the property that the decedent is treated copy of the letters testamentary, letters of amount. For more information, see as owning is determined by dividing the administration, or other similar evidence Regulations section 1.691(a)-3. value of the property by the number of of the executor s authority to act. Example: Installment Obligation. joint tenants with right of survivorship. Appraisals used to value certain Decedent Tammy died in 2010 and her property as required under section 2031 Revocable trusts. The decedent is executor, Vince, timely makes the Section and Rev. Proc , section 4.04(1). treated as the owner of any property that 1022 Election. Whitney, an heir of the decedent transferred to a qualified Tammy s estate, is entitled to collect an revocable trust (QRT) during his or her Property Acquired from installment obligation, reported by Tammy lifetime. on the installment method, that has a face the Decedent value of $100, FMV of $80, and a basis in A QRT is any trust (or part of a trust) Generally, section 1022 determines a Tammy s hands on the date of her death that, on the day the decedent died, was recipient s basis in property, but only if the of $60. Section 1022 does not apply to treated as owned by the decedent under property is acquired from the decedent. the installment obligation and does not section 676 by reason of a power to Generally, property acquired from the determine the estate s basis or Whitney s revoke that was exercisable by the decedent includes the following. basis in the installment obligation. decedent (determined without regard to 1. Property acquired by bequest, section 672(e)). For this purpose, a QRT devise, or inheritance, or by the Property Eligible for includes a trust that was treated as decedent s estate from the decedent. owned by the decedent under section Property transferred by the Increase to Basis by reason of a power to revoke that was decedent during the decedent s lifetime Generally, the executor can allocate exercisable by the decedent with the to: additional basis under section 1022 (up to consent or approval of a nonadverse a. A qualified revocable trust (as the FMV of the property) to property party or the decedent s spouse. However, defined in section 645(b)(1)), or acquired from the decedent that was a QRT does not include a trust that was b. Any other trust with respect to owned by the decedent at the time of treated as owned by the decedent under which the decedent reserved the right to death. Property the basis of which can be section 676 by reason of a power to make any change in the enjoyment increased is eligible property. revoke that was exercisable solely by a thereof through the exercise of a power to nonadverse party or the decedent s Not all property acquired from the alter, amend, or terminate the trust. spouse and not by the decedent. For! decedent is considered owned by more information, see sections 645(b) 3. Any other property passing from CAUTION decedent at the time of death. and 676 and the instructions for Form the decedent by reason of death to the 8885, Election To Treat a Qualified extent that such property passed without Property Owned by the Revocable Trust as Part of an Estate. consideration. Decedent at the Time of Death Election not required. No election is Note. Section 1022 does not apply to a decedent s interest in a QTIP trust or similar arrangement funded for the benefit of the decedent by the decedent s predeceased spouse. A recipient s basis in this property will not be determined under section The basis of property acquired from the decedent can be increased by an allocation of Basis Increase (defined in Basis Increase, later) only if and to the extent the property was owned by the decedent at the time of death. Rules relating to ownership. The following rules apply in determining required for a trust to be a QRT. Powers of appointment. The decedent is not treated as the owner of any property by virtue of holding a power of appointment with respect to such property. Community property. Property that represents the decedent s surviving Income in Respect of a whether property was owned by the spouse s one-half share of the community Decedent decedent at the time of death. property held by the decedent and his or Section 1022 does not apply to property Jointly held property. If property her surviving spouse will be treated as that constitutes a right to receive an item was owned by the decedent and one or owned by (and acquired from) the -3-

4 Amount of Increase to General Basis Increase decedent if at least one-half of the whole of the community interest in such property Basis General Basis Increase is the sum of the is treated as owned by (and acquired aggregate basis increase and the from) the decedent under the community The executor can allocate General Basis carryovers/unrealized losses increase. property laws of the state (or possession Increase (defined in General Basis However, for a decedent who was neither of the United States or any foreign Increase, later), and/or Spousal Property a resident nor citizen of the United States, country) that apply to the decedent. Basis Increase (defined in Spousal the General Basis Increase is limited to Property Basis Increase, later) to eligible the Aggregate Basis Increase (limited as property (defined earlier) but not in Property Not Eligible for described below). excess of the amount needed to increase Increase to Basis the decedent s adjusted basis to the Aggregate Basis Increase Only property owned by and acquired property s FMV as of the date of the Aggregate Basis Increase is $1,300,000. from the decedent is eligible for allocation decedent s death. The result is that, for However, for a decedent who was neither of Basis Increase. See Rules relating to each property, the sum of the decedent s a resident nor citizen of the United States, ownership, earlier. adjusted basis in that property and the the Aggregate Basis Increase is $60,000. Basis Increase allocated to that property The executor cannot allocate Basis can not exceed the FMV of that property Carryovers/Unrealized Losses Increase to cash, whether acquired from on the decedent s date of death. Increase the decedent, in exchange for property The executor can allocate Basis Carryovers/Unrealized Losses Increase is acquired from the decedent, or otherwise. Increase (defined in Basis Increase, later) the sum of the following three items. to property owned by and acquired from 1. The amount of any capital loss The executor cannot allocate any the decedent on a property-by-property carryovers under section 1212(b) that Basis Increase to property or proceeds basis. For example, the executor can would (but for the decedent s death) be acquired after the decedent s death in allocate Basis Increase to one or more carried from the decedent s last taxable exchange for property acquired from the shares of stock or to a particular block of year to a later tax year. See decedent. The basis of this property is stock rather than to the decedent s entire Carryforwards, below. determined under other applicable rules holding of that stock. 2. The amount of any net operating for determining basis. Basis Increase may not be allocated loss (NOL) carryovers under section 172 separately to a life estate and remainder that would (but for the decedent s death) Even if property acquired from the interest in the same property. be carried from the decedent s last decedent was owned by the decedent at taxable year to a later tax year. See the time of death, the basis of the types of Decedent s Adjusted Basis Carryforwards, below. property acquired from the decedent Generally, the adjusted basis of the 3. The amount of any losses that discussed below, under Property property in the hands of the decedent as would be allowable under section 165 if Acquired by the Decedent by Gift Within 3 of the date of the decedent s death is the the property acquired from the decedent Years of Death and under Stock or decedent s cost or other basis, adjusted had been sold at FMV immediately before Securities of Certain Entities, generally as required by sections 1016, 1017, and the decedent s death ( unrealized cannot be increased under section or as otherwise specifically provided losses ). See Unrealized Losses, later. This property is ineligible property. for under applicable provisions of Internal Revenue laws. Note. The amount of any losses that Property Acquired by the Property acquired by gift. If the would be allowable under section 165 is Decedent by Gift Within 3 Years decedent acquired property by gift, the determined based on a hypothetical sale of Death decedent s adjusted basis at death is the and does not require an actual sale of Generally, property that the decedent decedent s basis determined under property. acquired by gift or lifetime transfer for less section 1015, adjusted as required by For any decedent who was neither than adequate and full consideration in sections 1016, 1017, and 1018 or as! a citizen nor resident of the United money or money s worth during the otherwise specifically provided for under CAUTION States the amount of the 3-year period ending on the date of the applicable provisions of Internal Revenue Carryovers/Unrealized Losses Increase is decedent s death is not eligible for a basis laws. The decedent s original basis under zero. increase. However, property acquired by section 1015 is the same as it would be in the decedent from the decedent s spouse the hands of the donor or the last Carryforwards during such 3-year period will generally preceding owner by whom it was not The Carryovers/Unrealized Losses be eligible for a basis increase, unless, acquired by gift, except that if such basis Increase includes any capital loss during the 3-year period, the decedent s (adjusted for the period before the date of carryovers under section 1212(b) and the spouse acquired the property in whole or the gift as provided in section 1016) is NOL carryovers under section 172 that in part by gift or lifetime transfer for less greater than the FMV of the property at would (but for the decedent s death) be than adequate and full consideration in the time of the gift, then for the purpose of carried forward to tax years after the money or money s worth. determining loss the basis shall be such decedent s last tax year. FMV. Capital loss. The capital loss Stock or Securities of Certain Fair Market Value (FMV) carryforward included in the Carryovers/ Entities Unrealized Losses Increase is the amount Generally, for purposes of section 1022, The decedent s interest in the following of any capital loss carryforward that would the FMV of property is the price at which types of property is not eligible for an (but for the decedent s death) be carried the property would change hands increase in basis. to a tax year of the decedent after the between a willing buyer and a willing Stock or securities of a foreign personal decedent s last tax year. Generally, you seller, neither being under any holding company. can figure the decedent s capital loss compulsion to buy or sell and both having Stock of a domestic international sales carryforward using the Capital Loss reasonable knowledge of the relevant corporation (DISC) or former DISC. Carryover Worksheet in the Instructions facts. Stock of a foreign investment company. to Schedule D (Form 1040). Stock of a passive foreign investment Basis Increase Existing income tax rules will apply to company unless such company is a Basis Increase is the sum of the General determine the decedent s share of a qualified electing fund (as defined in Basis Increase (defined later) and the capital loss carryforward under section section 1295) with respect to the Spousal Property Basis Increase (defined 1212(b) if the decedent s final Form 1040 decedent. later). is filed jointly with the decedent s -4-

5 surviving spouse. For rules about a Generally, the executor can allocate 1. The surviving spouse is entitled to capital loss carryforward arising from Spousal Property Basis Increase only to all the income from the property, payable community property, see sections 4.05 qualified spousal property that was both annually or at more frequent intervals, or and 4.06(4) of Rev. Proc acquired from and owned by the has a usufruct interest for life in the Net operating loss (NOL). The NOL decedent. property. carryovers under section 172 included in Qualified spousal property. Qualified 2. No person has a power to appoint Carryovers/Unrealized Losses Increase spousal property means: any part of the property to any person are the losses that would (but for the Outright transfer property; and other than the surviving spouse. decedent s death) carry forward to tax Qualified terminable interest property. Item 2, above, shall not apply to a power years after the decedent s last tax year. Outright transfer property. For exercisable only at or after the death of purposes of the Spousal Property Basis the surviving spouse. To the extent An NOL arising in the decedent s Increase, outright transfer property means provided in regulations, an annuity shall! final tax year must be carried back any interest in property acquired from the be treated in a manner similar to an CAUTION and used in the applicable 2-year, decedent by the decedent s surviving income interest in property (regardless of 3-year, 5-year, or 10-year carryback spouse. Outright transfer property does whether the property from which the period unless the carryback period is not include an interest passing to the annuity is payable can be separately waived on the decedent s final income tax surviving spouse that, on the lapse of identified). return by attaching a statement showing time, on the occurrence of an event or that the carryback period is waived. See Special Rules. For purposes of the contingency, or on the failure of an event Waiving the Carryback Period in Spousal Property Basis Increase, the or contingency to occur, will terminate or Publication 536. following rules apply. fail: The term property includes an interest Existing income tax rules will apply to 1. If both: in property. determine the decedent s share of the a. An interest in such property passes A specific portion of property is treated NOL carryovers under section 172 if the or has passed (for less than adequate as separate property. For this purpose, decedent s final Form 1040 is filed jointly and full consideration in money or specific portion only includes a portion with the decedent s surviving spouse. For money s worth) from the decedent to any determined on a fractional or percentage rules about NOL carryovers arising from person other than such surviving spouse basis. community property, see sections 4.05 (or the estate of such spouse); and and 4.06(4) of Rev. Proc b. By reason of such passing such The executor also can allocate person (or his heirs or assigns) may Spousal Property Basis Increase to the Unrealized Losses possess or enjoy any part of such following. The amount of unrealized losses included property after such termination or failure 1. Property held by a testamentary in the Carryovers/Unrealized Losses of the interest so passing to the surviving charitable remainder trust (CRT) as Increase is the amount that would have spouse; or defined in section 664 (subject to the been allowable as a deduction under 2. If such interest is to be acquired for limitation of section 1022(d)), if the section 165 if the property acquired from the surviving spouse, pursuant to surviving spouse is the sole the decedent had been sold at FMV directions of the decedent, by his non-charitable beneficiary of the CRT and immediately before the death of the executor or by the trustee of a trust. the CRT would have qualified for the decedent. The amount of losses that marital deduction under section would have been allowable as a For purposes of the exception described 2056(b)(8) if the decedent s executor had deduction under section 165 is limited to in the preceding sentence, an interest not made the Section 1022 Election. losses incurred in a trade or business and shall not be considered as an interest 2. Property that is sold before being losses incurred in any transaction entered which will terminate or fail merely distributed. However, this allocation can into for profit, though not connected with a because it is the ownership of a bond, be made only to the extent that the trade or business. note, or similar contractual obligation, the executor: discharge of which would not have the Certain limitations on the allowance of a. Certifies on Form 8939 that the net effect of an annuity for life or for a term. losses may apply. For example, no proceeds from the sale of that property deduction is allowable for a loss For purposes of whether property is will be distributed to or for the benefit of sustained on any registration-required outright transfer property, an interest the decedent s surviving spouse in a obligation not in registered form. For more passing to the surviving spouse shall not manner that would qualify property as information, see section 165(j) and be considered as an interest which will qualified spousal property, and Regulations section terminate or fail on the death of such b. Attaches to Form 8939 each spouse if both of the following two document providing a bequest or devise Figure the unrealized losses that can conditions are met. to the surviving spouse. be included in the General Basis Increase The spouse s death will cause a without regard to the limitation in section termination or failure of such interest only For more information, see Rev. Proc. 165(f) on the allowance of losses from the if it occurs within a period not exceeding , section 4.02(3). sale or exchange of capital assets. The months after the decedent s death, or For detailed information on how to amount of any loss that would have been only if it occurs as a result of a common report the property described in item 2, allowable under section 165 if the disaster resulting in the death of the see the specific instructions for Schedule property acquired from the decedent had decedent and the surviving spouse, or A, line 4, column (e)(i) and (e)(ii). been sold at FMV immediately before the only if it occurs in the case of either such decedent s death is determined without event. the dollar limitations on capital losses Such termination or failure does not in under section fact occur. Specific Instructions For rules about unrealized losses Qualified terminable interest arising from community property, see property (QTIP). For purposes of the Checkbox for Amended sections 4.05 and 4.06(4) of Rev. Proc. Spousal Property Basis Increase, QTIP is Return property that passes from the decedent and in which the surviving spouse has a If this is an amended or supplemental Spousal Property Basis qualifying income interest for life. The return, check the box for an amended Increase surviving spouse has a qualifying income return. If the amended return is filed Spousal Property Basis Increase is interest for life if both of the two following under Regulations section , $3,000,000. conditions are met. also write FILED PURSUANT TO -5-

6 SECTION at the top of the return. Checkbox for Revoking Section 1022 Election If this Form 8939 revokes a previous Section 1022 Election made on an earlier Form 8939, check the box for revocation of an election. Decedent s Name and Address Enter the decedent s name and address. Line 2. Decedent s Social Security Number If the decedent was a nonresident or resident alien and did not have and was not eligible to get a social security number (SSN), the executor must apply for an individual taxpayer identification number (ITIN) on behalf of the decedent. For details on how to do so, see Form W-7 and its instructions. It takes 6 to 10 weeks to get an ITIN. If the decedent already had an ITIN, enter it wherever the Line 11. Capital Loss Carryforward Enter the aggregate amount of any capital loss carryforward under section 1212(b) that would (but for the decedent s death) have been carried from the decedent s last tax year to a later tax year of the decedent. In the case of a decedent who was a nonresident not a citizen of the United States, enter zero. For more information, see Carryforwards, earlier. Line 12. Net Operating Loss Carryforward Enter the aggregate amount of any NOL carryover under section 172 that would (but for the decedent s death) have been carried from the decedent s last tax year to a later tax year of the decedent. In the case of a decedent who was a nonresident not a citizen of the United States, enter zero. For more information, see Carryforwards, earlier. You can use Schedule A of Form 1045, Application for Tentative Refund to figure the amount, if any, of the decedent s NOL. reason of the death of the decedent to the extent that such property passed without consideration. Each property or interest in property required to be disclosed on Form 8939 must be reported on a Schedule A. Multiple and partial interests in property. For an undivided or fractional interest in property held by and received from the decedent by the recipient listed on line 2a, describe only the undivided or fractional interest. For a life estate or remainder interest in property, where the partial interest received by the recipient listed on line 2a was created by the bequest or devise made by the decedent, however, Basis Increase may be allocated only to the entire property owned by the decedent. Therefore, assuming the decedent s adjusted basis in the entire property is less than the FMV of the property at the date of death, describe the undivided interest in property (including the decedent s adjusted basis, the property s FMV at the date of death, and the amount of Basis Increase allocated by the executor) on an attachment to Line 4 or in column (a) of Line 4. Also include in this description the decedent s SSN is requested on Form Line 12a. applicable section 7520 rate, the life Add lines 10, 11, and 12. This line 12a is tenant s age, and the recipient s actuarial Note. An ITIN is for tax use only. It does not entitle the holder to social security benefits or change the holder s employment or immigration under U.S. law. Line 6a. Executor s Name the amount of the Carryovers/Unrealized Losses Increase. Line 12b. For nonresident decedents who were not United States citizens, enter $60,000. For all others, enter $1,300,000. Line 12c. General Basis factor at the decedent s date of death. Compute the recipient s portion of adjusted basis, FMV, and basis increase allocation (allocated on an actuarial basis between the income and the remainder interests), and list the recipient s share of each in columns (b) through (f) on line 4. If there is more than one executor, enter Note. For property transferred in trust the name of the executor filing this Form with an income and remainder interest, Increase List the other executors names, the trust is considered the sole recipient addresses, and SSNs (if applicable and if Add lines 12a and 12b. This line 12c is of the property. known) on an attached sheet. the total General Basis Increase that is available to allocate to property acquired Example. Donald died on October from and owned by the decedent. 10, 2010, owning real property. Donald Line 6c. Executor s Social originally acquired the property on Line 13. December 10, As of Donald s date Security Number of death, the property has an FMV of Only individual executors should Enter the sum of the totals from all $967,000 and an adjusted basis of complete this line. If there is more than Schedules A, line 4B, column (e)(i) on this $425,000. Donald devised the property to one individual executor, all should list line. This total may not exceed the Larry for life, with remainder to Rachel. At their SSNs on an attached sheet. amount listed on line 12a. the time of Donald s death, Larry is 48 years old. The section 7520 rate for Line 14. October 2010 is 2.0 percent. Donald s Line 9. Names and Enter the total from each Schedule A, line executor, Edward, makes the Section Addresses of Recipients. 4B, column (e)(ii) on this line. This total 1022 Election by timely filing Form may not exceed $3,000,000. Edward allocates $542,000 of General Enter the name and address of any Basis Increase to the property. See recipient, other than the decedent s Schedule A Attachment to Larry s Schedule A, on the surviving spouse, of property acquired Complete a separate Schedule next page and Attachment to Rachel s from the decedent. Schedule A, later. A Disclosure of Property Acquired From the Decedent (and Recipient Statement) Line 10. Built-in Loss for each recipient of property acquired Line 1a Executor s Name Enter the aggregate amount of any losses from the decedent, including each of the Enter the name of the executor shown on that would have been allowable under following. line 6a of Form section 165 if the property acquired from The decedent s estate. the decedent had been sold at FMV The decedent s surviving spouse, if immediately before the decedent s death. any. Line 2a Name and Address of In the case of a decedent who was a Any QTIP or other trust. Recipient nonresident not a citizen of the United Each other person who acquires Enter the name and address of the States, enter zero. For more information, property from the decedent by bequest, recipient of the property acquired from the see Unrealized Losses, earlier. devise, inheritance, or otherwise by decedent reported on this Schedule A. -6-

7 EPS Filename: 55218y01 Size Width= 44.0 picas, Depth= Page ATTACHMENT TO LARRY'S SCHEDULE A: Description: Real Property located at 1234 South Avenue, City, State. Date Decedent Acquired Property: 12/10/2007 Adjusted basis at decedent's death: $425,000 FMV at decedent's death: $967,000 General Basis Increase allocated by executor: $542,000 Spousal Property Basis Increase allocated by executor: $0 Section 7520 Rate for October 2010: 2.0% Life Tenant's (Larry) Age: 48 Life Estate Factor (from Table S of (d)): Computation of Actuarial Interest Adjusted Basis: $425,000 X = $191,441 FMV: $967,000 X = $435,585 General Basis Increase: $542,000 X = $244,144 Spousal Property Basis Increase: $0 X = $0 LARRY'S SCHEDULE A: Line 4 Item No. (a) Description of property (b) Date decedent acquired property (c) Adjusted basis at death (d) FMV at death (e)* Allocation of basis increase (i) General basis increase (ii) Spousal property basis increase (f) Amount of gain that would be ordinary income 1 Life interest in real property located at 1234 South Avenue, 12/10/2007 $191,441 $435,585 $244,144 $0 $0 City, State Line 2b Recipient s Taxpayer Identification Number If the person named in line 2a is an individual, enter the SSN or ITIN, as applicable, of that individual. If the person named in line 2a is a corporation, partnership, trust, estate, or other entity, enter the entity s employer identification number (EIN). 1. For each parcel of real estate, property. If the actual date of acquisition report the area. is not known, and cannot be determined 2. For city or town property, report the after reasonable inquiry, enter the street and number, ward, subdivision, approximate date of acquisition and write block and lot, etc. approximate after the date. 3. For rural property, report the Column (c). Adjusted Basis at Death. township, range, landmarks, etc. For each item of property, enter the Stocks. For stocks, list: adjusted basis of the property as of the 1. The number of shares; date of the decedent s death. See 2. The exact name of corporation; and Decedent s Adjusted Basis, earlier, for Line 3 Property Acquired 3. The principal exchange upon which more details. from the Decedent with sold, if listed on an exchange. Adjusted Basis Greater Than or Bonds. For bonds, list: Equal to FMV List each item of property (other than cash) acquired from the decedent by the person listed on line 2a the basis of which at the time of death is greater than or equal to its FMV at the date of death. Number each item of property in the left-hand column. Column (a). Description of the Column (d). FMV at Death. For each item of property, enter the FMV of the 1. The quantity and denomination; property as of the date of the decedent s 2. The name of obligor; death. See Fair Market Value (FMV), 3. Date of maturity; earlier, for more information. 4. Interest rate; Column (e). Ordinary Gain. For each 5. Interest due date; and item of property, enter the maximum 6. The principal exchange, if listed on amount of gain, if any, that would be an exchange. ordinary. Attach a statement detailing how Tangible personal property. Accurately you figured the amount of gain that would describe any tangible personal property be ordinary. (for example, works of art, jewelry, furs, Property. For each item of property silverware, books, statuary, vases, Line 4 Property Acquired acquired from the decedent, accurately oriental rugs, coin or stamp collections) describe the property received by the From the Decedent With received by the person listed on line 2a in Adjusted Basis Less Than FMV person named on line 2a. The following enough detail so that such property could guidelines can be used in describing the be easily identified by its description. List each item of property (other than property. cash) acquired from the decedent by the Real property. Describe the real estate Column (b). Date Decedent Acquired person listed on line 2a the basis of which in enough detail so that the property could the Property. For each item of property, at the time of death is less than its FMV at be easily located. enter the date the decedent acquired the the date of death. -7-

8 EPS Filename: 55218y02 Size Width= 44.0 picas, Depth= Page ATTACHMENT TO RACHEL'S SCHEDULE A: Description: Real Property located at 1234 South Avenue, City, State. Date Decedent Acquired Property: 12/10/2007 Adjusted basis at decedent's death: $425,000 FMV at decedent's death: $967,000 General Basis Increase allocated by executor: $542,000 Spousal Property Basis Increase allocated by executor: $0 Section 7520 Rate for October 2010: 2.0% Life Tenant's (Larry) Age: 48 Life Estate Factor (from Table S of (d)): Computation of Actuarial Interest Adjusted Basis: $425,000 X = $233,559 FMV: $967,000 X = $531,415 General Basis Increase: $542,000 X = $297,856 Spousal Property Basis Increase: $0 X = $0 RACHEL'S SCHEDULE A: Line 4 Item No. (a) Description of property (b) Date decedent acquired property (c) Adjusted basis at death (d) FMV at death (e)* Allocation of basis increase (i) General basis increase (ii) Spousal property basis increase (f) Amount of gain that would be ordinary income 1 Remainder interest in real property located at 1234 South Avenue, 12/10/2007 $233,559 $531,415 $297,856 $0 $0 City, State Number each item of property in the If the property is property in which the is not known, and cannot be determined left-hand column. Four categories of surviving spouse acquires a qualified after reasonable inquiry, enter the property can be reported here. terminable interest, include a description approximate date of acquisition and write 1. Property that receives an allocation of the spouse s interest in the property approximate after the date. of both General Basis Increase in column and include the designation QTIP in the description of the property. Column (c). Adjusted basis at death. (e)(i) and also Spousal Property Basis For each item of property, enter the Increase in column (e)(ii). If the property is any of the kinds of adjusted basis of the property as of the 2. Property that receives only an property listed under Property Not Eligible date of the decedent s death. See allocation of Spousal Property Basis for Increase to Basis earlier, include Decedent s Adjusted Basis, earlier, for Increase in column (e)(ii). sufficient information to identify the kind of more details. 3. Property that receives only an ineligible property and the designation allocation of General Basis Increase in Ineligible Property in the description of Column (d). FMV at death. For each column (e)(i). the property. Attach a statement that lists item of property, enter the FMV of the 4. Property that receives no allocation the item number from Schedule A, Line 4 property as of the date of the decedent s of increase to basis. and an explanation as to why the property death. See Fair Market Value (FMV), is ineligible for a basis increase. earlier, for more information. Do not include in column (e)(i) or (e)(ii) If the item of property acquired from Column (e)(i). Basis Increase allocated of line 4 any adjustments to basis other the decedent is treated as not having to property. List the amount of General than adjustments to basis under section been owned by the decedent at the time Basis Increase (as defined in Rev. Proc. 1022(b) or (c). For example, do not of death, so state. If the item of property , section 4.02(2)) allocated to the include in column (e)(i) or (e)(ii) any acquired from the decedent is treated as property described in column (a). adjustments to basis required or having been owned by the decedent at permitted under sections 469, 1016, or the time of death to the extent provided in Do not include in column (e)(i) any rule 2 or rule 3 under Jointly held adjustments to basis other than those property, earlier, attach a statement and provided for in section 1022(b). Column (a). Description of the property. For each item of property show how the extent of the decedent s Column (e)(ii). Spousal Property Basis acquired from the decedent, accurately ownership is figured. Increase allocated to property. List the describe the property received by the Column (b). Date decedent acquired amount of Spousal Property Basis person listed on line 2a. Use the the property. For each item of property, Increase (as defined in Rev. Proc. guidelines discussed under the enter the date the decedent acquired the , section 4.02(2)) allocated to the instructions to line 3, column (a), earlier. property. If the actual date of acquisition property described in column (a). -8-