Other Tax Questions
Questions and comments on other topics covered in Fairmark.com, such as UTMA accounts, and any tax questions that don't fit our other categories.
What is Form 8971 (Basis Reporting of Inherited Assets)
Posted by: Geraldson, April 14, 2017 01:29PM
Am I correct that this is for heirs to document the basis of inherited assets? It would seem that an Estate Tax Return would do this, but I guess heirs might not have access to a decedant's Estate Tax Return. It's my understanding that this form is only necessary if an Estate Tax Return is filed. OK, that being the case, what about the heir who receives, say, an entire $5M estate, where no Estate Tax return is required? Wouldn't that heir still need to document? Why exempt most inherited assets from this requirement? Put another way, why require only assets from large estates to be documented this way?

Re: What is Form 8971 (Basis Reporting of Inherited Assets)
Posted by: triad, April 14, 2017 03:11PM
The government apparently figured there wasn't much money in it for them.

Where there isn't an 8971, it would be up to the beneficiary to defend their cost basis. Even on smaller estates, it behooves the executor to hire appraisers. If one or more heirs thinks they are being short-changed, it can get nasty.

I have been an executor twice, both times before 2010. (2010 was a unique year and the 8971 is new.)

I ended up hiring 5 appraisers: 2 for real estate (different parts of the country), 1 for stocks and bonds to get date of death valuations, 1 for jewelry, and 1 for household goods. Their reports became the go to documents for basis. If I'd had to do an 8971, it would have been from those documents. The appraisers were fairly cheap.

Only a few items were expected to go up in value and most of those were sold before the estate was closed.

Re: What is Form 8971 (Basis Reporting of Inherited Assets)
Posted by: Sven, April 16, 2017 04:45PM
The range of difficulty goes from zero for stock traded on a public exchange to ten for how does one value a privately owned business. The other stuff is in the middle, with real estate probably needing a professional appraisal unless sold pretty quickly, to jewelry, which definitely seems to warrant an appraisal if for no reason other than insurance purposes, to personal property. I like the pick a rational number out of the hat for personal property items, unless they are Aubodon bird pictures or Faberge eggs. I also subscribe to the one heir, who cares school, but with multiple heirs the personal representative does need to be a little more defensive than that lest somebody contend they got slighted.

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