Bulletin No. 2024–40

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2024–40

September 30, 2024

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE, INCOME TAX

Notice 2024-66 provides relief from the addition to tax under

§ 6655 for underpayment of estimated income tax by a corporation to the extent the amount of any underpayment is

attributable to the corporation’s corporate alternative minimum tax (CAMT) liability under § 55. The notice also incorporates the relief provided in Notice 2024-33, 2024-18 I.R.B.

959, and Notice 2024-47, 2024-27 I.R.B. 1, and obsoletes

those notices.

regulations provide guidance regarding when this initial basis

may not exceed the final value of the property as determined

for purposes of the estate tax imposed on the decedent’s

estate, or if not finally determined, the value reported on a

statement furnished to the person acquiring the property

(the consistent basis requirement). In addition, these final

regulations provide guidance on the basis reporting requirements that facilitate taxpayers’ compliance with the consistent basis requirement. These reporting requirements are

applicable to executors and others required to file an estate

tax return, as well as to trustees who distribute property they

acquired from a decedent.

ESTATE TAX

INCOME TAX

REG-119683-22, page 716.

REG-106851-21, page 684.

Notice 2024-66, page 682.

The proposed regulations would modify regulations applicable to qualified domestic trusts (QDOTs) under section 2056A

of the Internal Revenue Code (Code). The proposed regulations would remove references to temporary regulations that

have been finalized and replace references to obsolete official IRS titles, offices, office addresses, and an outdated publication with current references. The proposed regulations

would also update the procedure for filing required security

instruments and correct outdated information related to when

the value of assets passing to a QDOT is finally determined

for Federal estate tax purposes. The proposed regulations

primarily would affect the estates of decedents passing property to or for the benefit of a noncitizen spouse in a QDOT

pursuant to section 2056A of the Code.

ESTATE TAX, INCOME TAX

T.D. 9991, page 646.

Generally, the initial basis of property in the hands of a person

acquiring the property from a decedent is the fair market of

the property at the date of the decedent’s death. These final

Finding Lists begin on page ii.

This document contains proposed regulations regarding the

exclusion from gross income of certain Tribal general welfare benefits. The proposed regulations address the requirements that would apply to determine whether the benefits

that an Indian Tribal government program provides qualify

as Tribal general welfare benefits. These proposed regulations would affect Indian Tribal governments, agencies or

instrumentalities of such governments, Federally-recognized

Tribes, members of such Tribes, such members’ spouses

and dependents, and other Tribal program participants. This

document also requests comments on certain provisions and

provides a notice of a public hearing on the proposed regulations that will be in addition to Tribal consultation on the

proposed regulations.

REG-116787-23, page 709.

These proposed regulations would amend the definition of

“coverage month,” and amend certain other rules, in existing

income tax regulations regarding the computation of an individual taxpayer’s premium tax credit (PTC). The proposed

coverage month amendment generally would provide that,

in computing a PTC, a month may be a coverage month for

an individual if the amount of the premium paid, including

by advance payments of the PTC (APTC), for the month for

the individual’s coverage is sufficient to avoid termination

of the individual’s coverage for that month. The proposed

regulations also would amend the rule in the existing regulations relating to the amount of enrollment premiums a taxpayer considers in computing the taxpayer’s monthly PTC if

a portion of the monthly enrollment premium for a coverage

month is unpaid. In addition, the proposed regulations would

clarify a rule in the existing regulations relating to when an

individual is considered to be ineligible for coverage under a

state’s Basic Health Program (BHP).

Rev. Rul. 2024-20, page 646.

Fringe benefits aircraft valuation formula. For purposes of

section 1.61-21(g) of the Income Tax Regulations, relating to

the rule for valuing non-commercial flights on employer-provided aircraft, the Standard Industry Fare Level (SIFL) centsper-mile rates and terminal charge in effect for the second

half of 2024 are set forth.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

September 30, 2024 

Bulletin No. 2024–40

Part I

Section 61. Gross Income

Defined

For purposes of the taxation of fringe

benefits under section 61 of the Internal Revenue Code, section 1.61-21(g)

of the Income Tax Regulations provides a rule for valuing noncommercial

flights on employer-provided aircraft.

Section 1.61-21(g)(5) provides an aircraft valuation formula to determine

the value of such flights. The value of a

flight is determined under the base aircraft valuation formula (also known as

the Standard Industry Fare Level formula or SIFL) by multiplying the SIFL

cents-per-mile rates applicable for the

Period During Which the Flight Is Taken

7/1/24 - 12/31/24

Terminal Charge

$54.30

26 CFR 1.61-21: Taxation of Fringe Benefits

Rev. Rul. 2024-20

DRAFTING INFORMATION

ACTION: Final rule.

The principal author of this revenue ruling is Kathleen Edmondson of the Office

of Associate Chief Counsel (Employee

Benefits, Exempt Organizations and

Employment Taxes). For further information regarding this revenue ruling, contact

Ms. Edmondson at (202) 317-6798 (not a

toll-free number).

SUMMARY: This document contains

final regulations that provide guidance on

the statutory requirement that a recipient’s

basis in certain property acquired from a

decedent be consistent with the value of

the property as finally determined for Federal estate tax purposes. In addition, the

final regulations provide guidance on the

statutory requirements that executors and

other persons provide basis information

to the IRS and to the recipients of certain

property. The final regulations regarding

the statutory consistent basis requirement

affect recipients of property acquired from

a decedent if the inclusion of the value of

the property in the decedent’s gross estate

increases the Federal estate tax liability.

The final regulations regarding the statutory basis reporting requirements affect

executors and other persons required to

file an estate tax return based on the value

of the decedent’s gross estate and the

amount of decedent’s lifetime adjusted

taxable gifts, as well as trustees making

in-kind distributions of property initially

acquired from a decedent that was subject

to the statutory basis reporting requirements.

T.D. 9991

DEPARTMENT OF THE

TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

Consistent Basis Reporting

Between Estate and Person

Acquiring Property from

Decedent

AGENCY: Internal Revenue Service

(IRS), Treasury.

September 30, 2024

646

period during which the flight was

taken by the appropriate aircraft multiple provided in section 1.61-21(g)(7)

and then adding the applicable terminal

charge. The SIFL cents-per-mile rates

in the formula and the terminal charge

are calculated by the Department of

Transportation (DOT) and are reviewed

semi-annually.

The following chart sets forth the terminal charge and SIFL mileage rates:

SIFL Mileage Rates

Up to 500 miles

= $.2971 per mile

501-1500 miles

= $.2265 per mile

Over 1500 miles

= $.2178 per mile

DATES: Effective date: These regulations

are effective on September 17, 2024.

Applicability dates: For dates of applicability, see §§1.1014-1(d), 1.1014-10(f),

1.6035-1(j), and 1.6662-9(c).

FOR FURTHER INFORMATION

CONTACT:

Concerning

section

1014(f), Donna Douglas at 202-3176859; concerning section 6035, Karen

Wozniak at 202-317-6844 (not toll-free

numbers).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments

to the Income Tax Regulations (26 CFR

part 1) under sections 1014(f) and 6035

of the Internal Revenue Code (Code)

relating to the statutory consistent basis

requirement and basis reporting requirements, and amendments to the Procedure and Administration Regulations

(26 CFR part 301) under sections 6721

and 6722 of the Code relating to the

applicable penalties for failure to comply with the statutory basis reporting

requirements.

Bulletin No. 2024–40

1. General Statutory Background and

Enactment of the 2015 Act

Section 2004 of the Surface Transportation and Veterans Health Care Choice

Improvement Act of 2015 (2015 Act),

Public Law 114-41, 129 Stat. 443, 454

(July 31, 2015), enacted sections 1014(f),

6035, 6662(b)(8), 6662(k), 6724(d)(1)

(D), and 6724(d)(2)(II) of the Code to

require consistency between a recipient’s

basis in certain property acquired from a

decedent and the value of the property as

finally determined for Federal estate tax

purposes. Section 1014(f) sets forth the

consistent basis requirement, while the

procedural rules in sections 6035, 6662,

and 6724 set forth the applicable reporting

requirements, penalties, and definitions.

On March 23, 2018, section 104 of Division U of the Consolidated Appropriations

Act, 2018, Public Law 115-141, 132 Stat.

348, 1170, made a technical correction

to the definition of the term inconsistent

estate basis under section 6662(k) of the

Code, retroactive to the original date of

enactment of the 2015 Act. The technical

correction modified the definition to take

into account, for purposes of the accuracy-related penalty imposed under section

6662 of the Code, that the basis of property determined under section 1014(f)

is only the initial basis of such property.

Thus, nothing in section 1014(f) prevents

post-death basis adjustments pursuant to

other sections of the Code.

2. Existing Regulatory and Administrative

Guidance under Sections 1014(f) & 6035

On March 4, 2016, the Department

of the Treasury (Treasury Department)

and the IRS published in the Federal

Register (81 FR 11486) a notice of proposed rulemaking and notice of proposed

rulemaking by cross-reference to temporary regulations (REG-127923-15).

The proposed regulations would provide

guidance on the consistent basis requirement under section 1014(f) applicable

to recipients of certain property from a

decedent and the reporting requirements

under section 6035 applicable to executors and other persons required to file an

estate tax return. Section 1.6035-2 of the

proposed regulations (proposed §1.60352) cross-references temporary regulations

under §1.6035-2T (TD 9757), published

in the Federal Register (81 FR 11431)

on the same day, which provide transitional relief on the due date for filing the

information return required by section

6035 (Information Return) and furnishing the statement(s) required by section

6035 (Statement(s)). Specifically, the

temporary regulations extended the due

date for filing and furnishing the required

Information Return and Statement(s) to

March 31, 2016.1

On March 23, 2016, in response to

requests from the public for an additional

extension of time for filing and furnishing

the required Information Return and Statement(s), the Treasury Department and the

IRS issued Notice 2016-27, 2016-15 IRB

576, extending the due date for both to

June 30, 2016. On December 2, 2016, the

Treasury Department and the IRS published in the Federal Register (81 FR

86953) final regulations (TD 9797) confirming the extension until June 30, 2016,

to file and furnish the required Information Return and Statement(s).

3. Public Hearing and Comments

On June 27, 2016, the Treasury Department and the IRS held a public hearing on

the proposed regulations. In addition to

the comments received at the hearing, the

Treasury Department and the IRS received

approximately thirty written comments

on the proposed regulations. The written

comments are available for public inspection at https://www.regulations.gov or

upon request.

After consideration of all of the comments, the Treasury Department and the

IRS are adopting the proposed regulations with certain revisions. These revisions substantially reduce the burden on

both the IRS and taxpayers and increase

administrability of the proposed rules.

The revisions include (1) removing the

zero basis rule for unreported property;

(2) adopting a suggested interpretation of

the term acquiring for purposes of section 6035(a)(1) and thereby modifying the

reporting requirements applicable in the

case of property not acquired by a beneficiary before the estate tax return due date;

(3) eliminating the subsequent transfer

reporting requirement for all beneficiaries other than trustees; and (4) excepting

additional types of property interests from

the consistent basis requirements and

the reporting requirements under section

6035. In addition, a number of requested

technical changes have been made to

the proposed regulations. Besides the

changes made in response to comments,

non-substantive revisions have been made

to clarify the language and improve the

organization of the proposed regulations.

The public comments and revisions are

discussed in the Summary of Comments

and Explanation of Revisions section of

this preamble.

Summary of Comments and

Explanation of Revisions

1. Section 1014(f) – Consistent Basis

Requirement

A. Proposed §1.1014-10(a)(1):

Consistent basis requirement – In

general.

Section 1014(f)(1) provides that the

basis of certain property acquired from

a decedent cannot exceed that property’s

final value for purposes of the Federal

estate tax imposed on the estate of the

decedent, or, if the final value has not

been determined, the value reported on a

required Statement. This statutory rule is

referred to as the consistent basis requirement. Section 1.1014-10 of the proposed regulations (proposed §1.1014-10)

includes proposed rules that would implement the consistent basis requirement.

Proposed §1.1014-10(a)(1) provides

that a taxpayer’s initial basis in certain

property acquired from a decedent may

not exceed the property’s final value for

estate tax purposes within the meaning

of proposed §1.1014-10(c). Proposed

§1.1014-10(a)(1) additionally provides

that the consistent basis requirement

applies whenever the taxpayer reports a

taxable event to the IRS with respect to

1

Prior extensions of the due dates to file and furnish the required Information Return and Statement(s) were set forth in Notice 2015-57, 2015-36 IRB 24, and Notice 2016-19, 2016-09 IRB

362.

Bulletin No. 2024–40

647

September 30, 2024

the property and continues to apply until

the entire property is sold, exchanged,

or otherwise disposed of in one or more

transactions that result in the recognition

of gain or loss for Federal income tax purposes, regardless of whether the owner on

the date of the sale, exchange, or disposition is the same taxpayer who acquired the

property from the decedent or as a result

of the decedent’s death.

The final regulations retain the rule in

proposed §1.1014-10(a)(1) incorporating the consistent basis requirement as

it applies if a final value has been determined. However, proposed §1.1014-10(a)

(1) is revised in the final regulations to

incorporate the consistent basis requirement as it applies if no final value has

been determined (previously addressed

in proposed §1.1014-10(c)(2)). Proposed

§1.1014-10(a)(1) additionally is revised

in the final regulations to explain that the

property subject to the consistent basis

requirement is referred to as consistent

basis property, which now is described in

§1.1014-10(c)(1) of the final regulations.

A commenter inquired whether the

judicial doctrine of the duty of consistency

continues to apply if the consistent basis

requirement applies to property. For a discussion of the judicial doctrine of the duty

of consistency, see Van Alen v. Commissioner, T.C. Memo, 2013-235 (Oct. 2013)

and Janis v. Commissioner, 461 F.3d 1080

(9th Cir. 2006). The final regulations do

not limit the arguments that may be applicable under case law, including the judicial doctrine of the duty of consistency in

appropriate cases.

With regard to the rule describing the

duration of the consistent basis requirement in proposed §1.1014-10(a)(1), several comments were received. Commenters asserted, and the Treasury Department

and the IRS agree, that the consistent basis

requirement should not continue to apply

to property that is sold at a price that is

equal to its basis because this sale is a recognition event even though no gain or loss

is recognized. Other commenters asserted,

and the Treasury Department and the IRS

agree, that the consistent basis requirement should not continue to apply to property once that property is included in the

gross estate of another decedent. Finally,

commenters questioned whether substituted property obtained in an exchange

September 30, 2024

under section 1031 of the Code (that is, a

like-kind exchange) is subject to the consistent basis requirement.

Accordingly, the rule in proposed

§1.1014-10(a)(1) describing the duration

of the consistent basis requirement, which

is moved to §1.1014-10(a)(3) of the final

regulations, is revised to clarify that the

consistent basis requirement applies until

the entire property is sold, exchanged,

or otherwise disposed of in a recognition transaction for income tax purposes

(whether or not any amount of gain or loss

is actually recognized) or the property

becomes includible in another decedent’s

gross estate. Under this rule, because a

like-kind exchange is not a recognition

event for income tax purposes, substituted

property obtained in such a transaction

is subject to the consistent basis requirement until the owner’s basis in every portion of the substituted property no longer

is related, in whole or in part, to the final

value of the property that was acquired

from the decedent.

B. Proposed §1.1014-10(a)(2):

Subsequent basis adjustments.

Proposed §1.1014-10(a)(2) provides

that the final value of consistent basis

property is the taxpayer’s initial basis in

the property. Proposed §1.1014-10(a)(2)

further confirms that, in computing the

taxpayer’s basis in property acquired from

the decedent or as a result of the decedent’s death, the taxpayer’s initial basis in

that property may be adjusted due to the

operation of other Code provisions that

govern basis without violating the consistent basis requirement. Proposed §1.101410(a)(2) also gives examples of such

adjustments, such as gain recognized by

the decedent’s estate or trust upon distribution of the property, post-death capital

improvements and depreciation, and postdeath adjustments to the basis of an interest in a partnership or an S corporation (as

defined in section 1361(a)(1) of the Code).

Proposed §1.1014-10(a)(2) states that the

existence of recourse or non-recourse debt

secured by property at the time of the

decedent’s death does not affect the property’s basis, whether the gross value of

the property and the outstanding debt are

reported separately on the estate tax return

or the net value of the property is reported.

648

Therefore, the proposed regulations state

that post-death payments on recourse or

non-recourse debt secured by property do

not result in an adjustment to the property’s basis.

Section 1.1014-10(a)(2) of the final

regulations maintains the rule identifying

the initial basis of consistent basis property if a final value has been determined,

as well as the rule and examples regarding acceptable adjustments to initial basis.

However, proposed §1.1014-10(a)(2) is

revised in the final regulations by identifying the initial basis of consistent basis

property during the period before the final

value of such property is determined and

by moving the rule regarding recourse and

non-recourse debt secured by property to

§1.1014-10(b)(3)(i) of the final regulations.

The rule regarding recourse and

non-recourse debt secured by property

is addressed separately in the final regulations in order to address more specifically, in response to comments, the effect

of recourse and non-recourse debt on the

initial basis of consistent basis property. A

commenter requested that the final regulations clarify that, if the decedent’s estate

includes property subject to non-recourse

debt and the executor reports the value of

the property on the decedent’s estate tax

return as the value of the property less the

debt (the net value or equity of redemption

value), then the final value of the property

is nevertheless the gross value of the property undiminished by the debt. The Treasury Department and the IRS adopt this

suggestion in §1.1014-10(b)(3)(i) of the

final regulations, which provides that the

final value or, if applicable, the reported

value, of property subject to recourse or

non-recourse debt is determined based

on the gross value of that property undiminished by debt, regardless of whether

the estate tax return reports the net value

(equity of redemption value) of the property or separately reports the gross value

of the property and claims an estate tax

deduction for the outstanding debt.

Another commenter requested that the

final regulations clarify whether the existence of recourse or non-recourse debt

on partnership property reduces the final

value of a partnership interest includible

in the decedent’s gross estate. The existence of recourse or non-recourse debt on

Bulletin No. 2024–40

partnership property relates to the value

of the partnership and the gross value of

a decedent’s partnership interest, determinations of which are outside the scope of

these final regulations. Accordingly, this

request is not adopted. However, the Treasury Department and the IRS note that,

with respect to a deceased partner having

a loan secured by a partnership interest,

the same rule in §1.1014-10(b)(3)(i) of

the final regulations will apply so that the

final value of the partnership interest is

the gross value of the partnership interest

undiminished by the debt, regardless of

whether the estate tax return reports the

net value (equity of redemption value)

of the partnership interest or separately

reports the gross value of the partnership

interest and claims an estate tax deduction

for the outstanding debt.

C. Proposed §1.1014-10(b)(1): Property

subject to consistency requirement – In

general.

Section 1014(f)(2) provides that the

consistent basis requirement applies only

to property whose inclusion in the decedent’s gross estate increased the estate

tax liability. Based on this rule, proposed

§1.1014-10(b)(1) provides that the property subject to the consistent basis requirement is any property includible in the

decedent’s gross estate under section 2031

of the Code, any property subject to tax

under section 2106 of the Code, and any

other property the basis of which is determined in whole or in part by reference to

the basis of such property (for example,

as the result of a like-kind exchange or an

involuntary conversion) that generates an

estate tax liability in excess of allowable

credits, except for the credit for prepayment of estate tax.

This rule is maintained in §1.101410(c)(1)(i) of the final regulations with

certain modifications in response to

comments. First, the final regulations,

in §1.1014-10(c)(1)(i)(A), include the

preliminary criterion for the applicability of the consistent basis requirement in

section 1014(f)(1) that only property to

which section 1014(a) applies is consistent basis property. Second, the Treasury

Department and the IRS have corrected

the final regulations to reflect that section 2103 of the Code, not section 2106,

Bulletin No. 2024–40

defines the gross estate for purposes of the

estate tax on the estate of a nonresident

non-citizen. The correction is found in the

definition of the term included property in

§1.1014-10(d)(4) of the final regulations,

which term is referenced in §1.1014-10(c)

(1)(i)(B) of the final regulations. Finally,

the Treasury Department and the IRS

have corrected the final regulations in

§§1.1014-10(c)(1)(i)(C) and 1.1014-10(d)

(5) to remove the reference to the prepayment of estate tax as a credit, because an

estate tax prepayment is not an identified

credit but instead is a payment of estate

tax.

Commenters inquired whether the

allowable credits referenced in proposed

§1.1014-10(b)(1) include credits provided

under treaties. One commenter inquired

whether, in order to treat the prorated

unified credit under section 2102(b)(3) of

the Code as an allowable credit, the executor is required to attach a Form 8833,

Treaty-Based Return Position Disclosure

Under Section 6114 or 7701(b), to the

nonresident non-citizen decedent’s Form

706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return,

Estate of nonresident not a citizen of the

United States. In response to these comments, §1.1014-10(d)(5) of the final regulations defines the term allowable credits

to include both credits against the estate

tax allowable by any section of the Code

and credits against the estate tax allowable by any treaty obligation of the United

States, provided that the estate qualifies for

the credit and complies with all applicable

rules for claiming the credit, including filing all necessary forms or statements.

With regard to the applicability date of

the consistent basis requirement to property, commenters requested clarification

on whether the filing after July 31, 2015,

of an estate tax return supplementing an

estate tax return filed on or before that

date would subject any of the assets in

the decedent’s gross estate to the consistent basis requirement. Other commenters

requested clarification on whether the filing on or before July 31, 2015, of an estate

tax return that was due after July 31, 2015,

would subject any of the assets in the

decedent’s gross estate to the consistent

basis requirement. In response to these

comments, §1.1014-10(c)(1)(ii) of the

final regulations clarifies that neither the

649

supplementing of an estate tax return after

July 31, 2015, nor a due date of an estate

tax return after July 31, 2015, causes property to be subject to the consistent basis

requirement if an estate tax return was

filed on or before July 31, 2015.

D. Proposed §1.1014-10(b)(2):

Exclusions.

Proposed §1.1014-10(b)(2) provides

that property that qualifies for an estate

tax charitable or marital deduction under

section 2055, 2056, or 2056A of the Code

does not generate a tax liability under

chapter 11 of the Code (chapter 11) and

therefore is excluded from the property

subject to the consistent basis requirement. Proposed §1.1014-10(b)(2) further

provides that tangible personal property

for which an appraisal is not required

under §20.2031-6(b) of the Estate Tax

Regulations (26 CFR part 20) is deemed

not to generate a tax liability under chapter 11 and therefore also is excluded from

the property subject to the consistent basis

requirement.

With regard to the exclusion for property qualifying for an estate tax charitable

or marital deduction under section 2055,

2056, or 2056A, multiple commenters

sought clarification on whether property qualifying for only a partial marital

or charitable deduction is subject to the

consistent basis requirement. In the case

of property qualifying for only a partial

marital or charitable deduction, the property increases the estate tax liability to the

extent that it does not qualify for a marital

or charitable deduction and, therefore, the

property is subject to the consistent basis

requirement. In such a case, applying the

consistent basis requirement only to the

partial interest not qualifying for a deduction is impractical and incompatible with

the uniform basis rules under §1.1014-4

of the Income Tax Regulations. Accordingly, §1.1014-10(c)(2)(xi) of the final

regulations identifies only wholly deductible property, under any of sections 2055,

2056, 2056A, 2106(a)(2) and (3), as property not subject to the consistent basis

requirement. Partially deductible property

(property that qualifies for only a partial

marital or charitable deduction) is outside the scope of this rule and, therefore,

is consistent basis property subject to the

September 30, 2024

consistent basis requirement. Some examples of property qualifying for only a partial marital or charitable deduction, and,

therefore, not excepted from the consistent basis requirement, are: (1) a charitable

remainder trust, a charitable lead trust, or

a pooled income fund; (2) a trust subject

only to a partial QTIP election under section 2056(b)(7); and (3) property divided

between the decedent’s surviving spouse

and a charity if the sum of the deductions

for the two interests given to those recipients is less than the value of the property

included in the value of the gross estate.

With regard to the exclusion for tangible personal property, §1.1014-10(c)(2)

(ix) of the final regulations retains as an

exception to the consistent basis requirement tangible personal property for

which an appraisal is not required under

§20.2031-6(b). However, in response to

a comment, these items are described in

the final regulations as household and personal effects, rather than as tangible personal property, to conform more closely

with §20.2031-6(b).

Multiple commenters advocated for

additional exclusions from the consistent basis requirement either because

certain property is not subject to the consistent basis requirement under the plain

language of the statute or because certain property, in the commenters’ views,

should be excepted from the consistent

basis requirement by the exercise of regulatory authority. In response, §1.101410(c)(2) of the final regulations provides

a list of property that is identified as property excepted from or not subject to the

consistent basis requirement. A particular

property may be described in more than

one item on that list.

One commenter suggested that the final

regulations confirm that the consistent

basis requirement applies only to property to which section 1014(a)(1) through

(3) applies, as only such property has a

basis that is adjusted to the property’s

Federal estate tax value as a result of the

decedent’s death. Specifically, the commenter requested that the final regulations

provide that, if the basis of property is

not determined under section 1014(a)(1)

through (3), then the property is not subject to the consistent basis requirement.

Under such a provision, the commenter

concluded that the following property

September 30, 2024

would be excluded from the consistent

basis requirement: (1) property subject to

a conservation easement resulting from

the section 2031(c) election (the subject of

section 1014(a)(4)); (2) income in respect

of a decedent (IRD) (the subject of section 1014(c)); (3) DISC stock (the subject

of section 1014(d)); (4) pre-death gifts of

appreciated property (the subject of section 1014(e)); (5) stock in a passive foreign

investment company (PFIC) by reason

of section 1291(e)(1); and (6) annuities

subject to section 72 (the subject of section 1014(b)(9)(A)). Section 1014(f)(1)

applies the consistent basis requirement

to all property to which section 1014(a)

applies. The Treasury Department and the

IRS agree that section 1014(b)(9)(A), (c),

and (e) describes property not subject to

section 1014(a), and therefore property

that does not acquire a new basis based in

any way on the Federal estate tax value of

that property. Stock of a PFIC subject to

section 1296(i) also is property not subject

to section 1014(a), but only if the basis of

such stock is its adjusted basis in the hands

of the decedent immediately before the

decedent’s death. Accordingly, §1.101410(c)(2)(x) of the final regulations clarifies that such interests are not subject to

the consistent basis requirement.

However, the adjustments to the basis

of property to be made pursuant to section

1014(a)(4) and (d) and otherwise under

section 1291(e)(1), do not make section

1014(a), and therefore section 1014(f),

inapplicable to the property described

in those sections. In each of these cases,

the property’s Federal estate tax value is

a factor used in determining the property’s basis under these sections. Thus, the

consistent basis requirement applies to the

property described in these sections, even

though the basis of the property may differ from the Federal estate tax value of the

property.

Several commenters requested confirmation that certain property is not subject to the consistent basis requirement

because the value of that property is not

included in the decedent’s gross estate for

Federal estate tax purposes. For instance,

a commenter requested confirmation that

the consistent basis requirement does

not apply to property the basis of which

is adjusted in a manner similar to section 1014(a) on the occurrence of a tax-

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able termination that occurs on a person’s

death pursuant to section 2654(a)(2).

Such property generally becomes subject

to the generation-skipping transfer tax

on the death of a trust beneficiary and, as

long as the property is not includible in

a person’s gross estate for Federal estate

tax purposes, it is not property to which

section 1014(a) applies. Other commenters requested confirmation that the consistent basis requirement does not apply to

a surviving spouse’s interest in community property to which section 1014(b)(6)

applies because, although this property is

deemed to have been acquired from the

decedent and thus is subject to section

1014(a), such property is not includible in

the decedent’s gross estate for estate tax

purposes. The Treasury Department and

the IRS agree with the commenters that,

in both cases, the property is not subject to

the consistent basis requirement because

it is not property includible in the gross

estate. Accordingly, §1.1014-10(c)(2)(xii)

and (xiii) of the final regulations clarify

that such interests are not subject to the

consistent basis requirement.

Finally, in addition, §1.1014-10(c)(2)

of the final regulations excepts certain

types of property whose basis generally

does not differ from the property’s face

value, such as United States dollars and

certain equivalents.

E. Proposed §1.1014-10(b)(3):

Application.

Proposed §1.1014-10(b)(3) provides

that, if an estate tax liability is payable

after the application of all available

credits (other than a credit for a prepayment of estate tax), the consistent basis

requirement applies to the entire gross

estate (other than property excluded by

proposed §1.1014-10(b)(2)) because all

such property contributes to the estate

tax liability and therefore is treated as

generating an estate tax liability. Proposed §1.1014-10(b)(3) clarifies that if,

after the application of all such available

credits, no tax under chapter 11 is payable, the entire gross estate is excluded

from the application of the consistency

requirement. The final regulations in

§1.1014-10(c)(1)(ii) adopt the substance

of this proposed rule with minor language changes.

Bulletin No. 2024–40

F. Proposed §1.1014-10(c)(1): Final

value – Finality of estate tax value.

Proposed §1.1014-10(c)(1) provides

that the final value of property reported

on an estate tax return is its value as

finally determined for purposes of the

estate tax. Proposed §1.1014-10(c)(1)

further provides that the finally determined value is (i) the value reported on

a return filed with the IRS pursuant to

section 6018 of the Code once the period

of limitations for assessment of the estate

tax has expired without that value having been timely adjusted or contested by

the IRS, (ii) if the preceding rule in (i)

does not apply, the value determined or

specified by the IRS once the periods of

limitations for assessment and for claim

for refund or credit of the estate tax have

expired without that value having been

timely contested, (iii) if the preceding

rules in (i) and (ii) do not apply, the value

determined in an agreement, once that

agreement is final and binding on all parties, or (iv) if the preceding rules in (i),

(ii), or (iii) do not apply, the value determined by a court, once the court’s determination is final.

The rules in proposed §1.1014-10(c)

(1) are adopted in redesignated §1.101410(b)(1) of the final regulations, with

certain clarifications and other changes.

First, §1.1014-10(b)(1)(ii) of the final

regulations omits the reference to the

period of limitations on credit or refund,

which makes the rules defining the “final

value” of consistent basis property in the

final regulations more consistent with the

rules defining a final determination for gift

tax purposes. This is appropriate because

both regulatory definitions are based on

similar statutory language. Second, the

final regulations in §1.1014-10(d)(1) add

a definition of the term contested to clarify that an executor cannot contest the

IRS’s determination of value with only a

“protective” statement generally contesting the IRS’s determination of value. The

challenge must be specific to a particular

item of property, rather than a general

objection that would provide no meaningful information respecting the value of the

property at issue. Thus, the challenge must

put at issue the value of property by providing to the IRS a written statement that

identifies the specific property, states that

Bulletin No. 2024–40

the executor does not accept as correct

the value determined or specified by the

IRS, and provides the executor’s claimed

value for the property as determined in

accordance with the requirements of section 2031, the regulations thereunder, and

other applicable guidance. In cases in

which the value of property is contested,

the final value will be determined either

by agreement between the executor and

the IRS, as described in §1.1014-10(b)(1)

(iii) of the final regulations, or by litigation, as described in §1.1014-10(b)(1)(iv)

of the final regulations.

G. Proposed §1.1014-10(c)(2): No

finality of estate tax value.

Proposed §1.1014-10(c)(2) of the proposed regulations provides that, prior to

the determination of the final value of

property subject to the consistent basis

requirement, the recipient of that property

may not claim an initial basis in excess of

the value reported on the required Statement. Proposed §1.1014-10(c)(2) further

provides that, if the final value of the property subsequently is determined (under

proposed §1.1014-10(c)(1)) and that value

differs from the value reported on the

required Statement, then the taxpayer may

not rely on the required Statement initially

furnished for the value of the property and

the taxpayer may have a deficiency and

underpayment resulting from this difference. The Treasury Department and the

IRS received several comments on these

proposed rules.

One commenter opined that the proposed regulations unfairly hold a beneficiary responsible for not using the final

value to determine initial basis if the beneficiary sells property before its final value

is determined. The commenter asserted

that, in any event, if the final value of

property is determined after its sale, any

accuracy-related penalty imposed under

section 6662 should be waived if the beneficiary acted in good faith. Similarly, commenters requested confirmation that no

income tax deficiency would result if the

final value of the property is determined

after the expiration of the period of limitations on assessment applicable to the

beneficiary’s income tax return.

If a beneficiary uses the value reported

on the required Statement to calculate gain

651

or loss on the sale of property, the beneficiary is using the value reported on the

estate tax return. This may or may not be

the final value of the consistent basis property as determined under section 1014(f)

(3). Nevertheless, section 1014(f)(1)(A)

provides specifically that, in the case of

property the final value of which has been

determined, the beneficiary’s initial basis

is limited to that final value. It would be

inconsistent with the language of the statute to fail to provide that an income tax

deficiency and underpayment may result

if a value exceeding the final value is used

to determine initial basis.

Accordingly, the final regulations, in

redesignated §1.1014-10(b)(2), maintain the rules in proposed §1.1014-10(c)

(2), and add several clarifying provisions. Section 1.1014-10(b)(2)(i) of

the final regulations clarifies that the

reported value is the value reported on

the Statement required under §1.6035-1

or, if supplemented, on the most recent

supplement to that Statement. That section further clarifies that the value from

any Statement that reports either a value

from an estate tax return filed after the

expiration of the period of limitations

on assessment applicable to that return,

or a value for property not reported on

the estate tax return, is not a reported

value. In effect, before a final value is

determined, the value reported on the

estate tax return controls. This rule recognizes that section 1014(f)(3) requires

an assessment process to determine the

final value of property. The IRS cannot

assess tax on property reported only

on the required Information Return or

required Statement(s) because these

constitute only information returns and

payee statements as defined in section

6724(d)(1)(D) and (d)(2)(II), respectively. Section 1.1014-10(b)(2)(ii) of the

final regulations clarifies that an income

tax deficiency can result if the final value

of property is determined before the

expiration of the period of limitations on

assessment for an income tax return that

reports a taxable event with regard to the

property. Section 1.1014-10(b)(2)(ii) of

the final regulations also includes a reference to section 6664 and the regulations

thereunder for rules relating to waivers of

penalties for certain failures due to reasonable cause.

September 30, 2024

H. Proposed §1.1014-10(c)(3): Afterdiscovered or omitted property.

Proposed §1.1014-10(c)(3) provides

basis rules for property that is discovered

after the filing of the estate tax return or

otherwise is omitted from the estate tax

return. Proposed §1.1014-10(c)(3)(i)(A)

provides that, if the executor reports the

after-discovered or omitted (unreported)

property on an estate tax return filed before

the expiration of the period of limitations

on assessment of the estate tax, the final

value of the property is determined under

proposed §1.1014-10(c)(1) or (2). Alternatively, proposed §1.1014-10(c)(3)(i)(B)

provides that, if the unreported property

is not reported before the period of limitations on assessment expires, the final

value of that property is zero. Finally, to

address situations in which no estate tax

return was filed, proposed §1.1014-10(c)

(3)(ii) provides that the final value of all

property includible in the gross estate subject to the consistent basis requirement

is zero until the final value is determined

under proposed §1.1014-10(c)(1) or (2).

Because the application of proposed

§1.1014-10(c)(3)(i)(B) or §1.1014-10(c)

(3)(ii) results in the beneficiary having an

initial basis of zero in unreported property,

these proposed provisions are collectively

referred to as the zero basis rule.

Comments received on the zero basis

rule generally fall into two categories:

those relating to the statutory interpretation of section 1014(f) and the authority

to impose the zero basis rule; and those

relating to the practical effects of the zero

basis rule. With respect to the former,

many commenters contended that section 1014(f), by its terms, applies only to

property that is reported on an estate tax

return. Therefore, the commenters concluded that the basis of unreported property, as determined under section 1014(a),

is not limited by the consistent basis

requirement in section 1014(f). Commenters further contended that section 1014(f)

(4) limits the regulatory authority of the

Treasury Department and the IRS to providing exceptions to the application of

the consistent basis requirement, and that

expanding the consistent basis requirement to address unreported property

is beyond the scope of this regulatory

authority. Some commenters contended

September 30, 2024

that the Code does not support a regulatory interpretation that denies at least a

carryover basis for an inherited asset.

Commenters commenting on the practical effects of the zero basis rule contended that the rule is onerous, unduly

harsh, and unfair. Commenters noted that

a beneficiary receiving unreported property in many cases will not be the executor

or other person having the responsibility

to report the property and the beneficiary

may have no ability to compel the executor to report the property on the return.

Yet, under the zero basis rule, the beneficiary receiving unreported property will

have an increased tax burden due to the

denial of basis, whether determined under

section 1014(a) (fair market value on the

decedent’s date of death) or, in the alternative, a carry-over basis of the decedent’s

adjusted basis in the property. Commenters noted that unreported property is more

likely to arise by inadvertent omission

from the estate tax return or as a result of

being undiscovered, rather than willful

omission. Therefore, except in the case of

willful omission by a beneficiary who is

the executor or other person responsible

to report the property, commenters contended that the zero basis rule is unduly

harsh and unfair because it creates a 100

percent taxable gain on the sale of the

property by the beneficiary.

The Treasury Department and the IRS

do not agree that providing a zero basis

rule for unreported property is beyond its

regulatory authority for implementing the

congressional mandate of section 1014(f).

See section 7805(a) and, more specifically,

section 1014(f)(3)(B) (referencing the

ability of the IRS to specify the value of

property not reported on a return required

by section 6018). However, the Treasury

Department and the IRS recognize that

such a rule primarily impacts the recipients of unreported property, who may

have had no knowledge of or involvement

in the failure to report the property for

Federal estate tax purposes, but, nevertheless, have an increased tax burden under

the rule.

The Treasury Department and the IRS

additionally recognize that, under applicable State law, an executor is personally

accountable to discharge its fiduciary duty

to seek out and collect every asset and to

acquire possession of the property of the

652

decedent. See 31 Am. Jur. 2d Executors

and Administrators § 369 (2018); Eger v.

Eger, 314 N.E.2d 394 (Ohio App. 1974);

Matter of Deutsch, 114 A.D.2d 413, 493

N.Y.S 884 (2d Dep’t 1985). Further, the

Treasury Department and the IRS recognize that, in the absence of a zero basis rule

for unreported property, existing Federal

tax enforcement mechanisms under subtitle F of the Code, including criminal liability, serve to deter willful nonreporting

of property on the estate tax return. See,

e.g., section 6651(a)(3) of the Code for a

potential addition to tax; sections 6662(a),

(g), and (h), 6663, 6721, and 6722 of the

Code for potential accuracy-related, fraud,

and other penalties; section 6501(c)(1)

and (2), and (e)(2) of the Code for potential exceptions to the general three-year

period of limitations on assessment; and

sections 7203, 7206, and 7207 of the Code

for potential criminal liability and penalties.

In view of these considerations, the

final regulations do not include the zero

basis rule. Instead, §1.1014-10(c)(1)(i) of

the final regulations clarifies that the consistent basis requirement applies only to

included property, a term that is defined

in §1.1014-10(d)(4) of the final regulations to refer to property, the value of

which is included in the value of the decedent’s gross estate, as defined in section

2031 or 2103. Section 1.1014-10(d)(4)

of the final regulations explains that this

refers to property whose value is reported

on an estate tax return or otherwise is

included in the total value of the gross

estate so that a final value is or will be

determined for that property under chapter 11. Consequently, the basis of property acquired or passed from a decedent

that is not reported on an estate tax return

and not otherwise included in the gross

estate generally is determined under section 1014(a), without regard to the rules

of section 1014(f). The rule identifying

property subject to the consistent basis

requirement in §1.1014-10(c)(1)(i) of the

final regulations, together with the definition of the term included property in

§1.1014-10(d)(4) of the final regulations,

is sufficient to clarify the scope of the

consistent basis requirement, and therefore these final regulations do not include

a specific rule on the basis of unreported

property.

Bulletin No. 2024–40

I. Proposed §1.1014-10(d): Executor.

Proposed §1.1014-10(d) provides that,

for purposes of proposed §1.1014-10, the

term executor has the same meaning as

in section 2203 of the Code and includes

any other person required under section 6018(b) to file a return. In response

to comments or as needed for clarity, proposed §1.1014-10(d) is expanded in the

final regulations to define several additional terms for purposes of §1.1014-10,

including the terms contested, estate tax

liability, included property, allowable

credits, and United States dollars.

J. Proposed §1.1014-10(e): Examples.

Proposed §1.1014-10(e) provides four

examples to illustrate the application of

proposed §1.1014-10. In general, the

examples illustrate rules applicable to the

final value of property, subsequent basis

adjustments, and reliance on a required

Statement. In particular, one example

illustrates the application of the zero basis

rule on the final value of unreported property.

Section 1.1014-10(e) is revised in the

final regulations by reordering the examples and adding headings to provide clarity. Because the zero basis rule from proposed §1.1014-10(c)(3) is not included

in the final regulations, §1.1014-10(e)

is further revised in the final regulations

by removing the example illustrating the

zero basis rule. Finally, §1.1014-10(e) is

revised in the final regulations by adding

examples to illustrate rules regarding the

duration of the consistent basis requirement, the meaning of included property

that is subject to the consistent basis

requirement, and the treatment of partially

deductible property that is subject to the

consistent basis requirement.

K. Applicability date.

Proposed §1.1014-10(f) provides that,

upon publication of the Treasury Decision

adopting these rules as final in the Federal

Register, §1.1014-10(f) of the final regulations will apply to property acquired from

a decedent or by reason of the death of a

decedent whose estate tax return is filed

after July 31, 2015. The final regulations

revise the applicability date of §1.1014-

Bulletin No. 2024–40

10(f) of the proposed regulation consistent with section 7805(b)(1). Accordingly,

§1.1014-10(f) of the final regulations does

not reference the July 31, 2015, effective date of section 1014(f), and provides

instead that §1.1014-10 of the final regulations applies to property described in

§1.1014-10(c)(1) of the final regulations

that is acquired from a decedent or by

reason of the death of a decedent if the

decedent’s estate tax return is filed after

the date of publication of these final regulations in the Federal Register.

L. Comments requesting new process for

beneficiary to challenge value.

Several commenters expressed concern that beneficiaries have no input in

the determination of final value even if

they believe the estate tax return reports

an incorrect or understated value. These

commenters posited that binding a beneficiary’s initial basis to the final value

may deprive the beneficiary of due process. Consequently, they requested a

procedure through which a beneficiary

may challenge the determination of final

value. Some commenters suggested that

the procedure allow the beneficiary an

opportunity to provide evidence of a different date-of-death value at the time of

examination by the IRS of the beneficiary’s income tax return (on which a taxable event with respect to the property is

reported).

The Treasury Department and the IRS

considered and briefly responded to a

request to create a new process for challenging the value reported by the executor

in part 16 of the Summary of Comments

on Notice 2015-57 and Explanation of

Provisions section of the preamble of the

proposed regulations. In the proposed regulations, the Treasury Department and the

IRS declined to create a new Federal process for challenging the value reported by

the executor. Administrability and other

concerns weigh against creating a new

Federal process for challenging the value

reported by the executor. Specifically, this

would leave the IRS in the same position

it held prior to the enactment of section

1014(f). During that time, the IRS was

forced to litigate valuation issues with a

beneficiary, often years after relevant market information had ceased to be available,

653

and/or after having previously litigated

the same valuation issue with the estate.

In addition, regarding the suggestion to

create a procedure to allow the beneficiary

to provide evidence of value at the time of

examination by the IRS of the beneficiary’s income tax return, such a procedure

would be contrary to the statutory rule in

section 1014(f)(1) limiting the basis of

property within its scope to the property’s

final value for Federal estate tax purposes

or, otherwise, to the value reported on a

required Statement.

In response to the commenters’ concerns, however, the Treasury Department

and the IRS are considering issuing guidance in the future that grants a beneficiary

of property subject to the consistent basis

requirement the opportunity to provide

certain credible evidence of value. Out of

administrability concerns, the Treasury

Department and the IRS further anticipate

such an opportunity might be available

only during some limited period of time

and only if the credible evidence of value

indicates that the reported value represents

a substantial understatement of value.

2. Section 6035 – Required Information

Return(s) and Statement(s)

Section 1.6035-1 of the proposed regulations (proposed §1.6035-1) includes

proposed rules that would address the

statutory basis reporting requirements

under section 6035 applicable to executors and other persons required to file an

estate tax return. As noted in part 3 of the

Background section of this preamble, the

Treasury Department and the IRS made

amendments to the proposed rules that

substantially reduce burden and increase

administrability for both taxpayers and

the IRS. In particular, the final regulations

(1) adopt a suggested interpretation of

the term acquiring in section 6035(a)(1),

thereby modifying the reporting requirements applicable in the case of property

not acquired by a beneficiary before the

estate tax return due date, (2) eliminate the

subsequent transfer reporting requirement

for all beneficiaries other than trustees,

and (3) except additional types of property

interests from the reporting requirements

under section 6035. These and other

amendments to proposed §1.6035-1 are

laid out in a reorganized final regulation.

September 30, 2024

A. Overview of reporting requirements.

The final regulations under section

6035 add an overview paragraph in

§1.6035-1(a) to clarify the relationship

between the reporting requirements under

section 6035 and the consistent basis

requirement applicable to certain beneficiaries under section 1014(f).

B. Applicability of section 6035 reporting

requirements.

In order to provide greater clarity,

the final regulations set forth in separate

paragraphs the provisions governing the

applicability of the section 6035 reporting

requirements and the rule for the identification of the persons included as executors who are subject to them.

i. General rules regarding applicability of

section 6035 reporting requirements.

Section 1.6035-1(b)(1) sets forth the

rule in section 6035(a)(1) and proposed

§1.6035-1(a)(2) that only executors of an

estate who are required to file an estate

tax return (referred to as a required estate

tax return) under section 6018 are subject to the reporting requirements under

section 6035. In addition, §1.6035-1(b)

(1) sets forth the rule that the reporting

requirements apply only in the case of

a required estate tax return that is filed

after July 31, 2015, and sets forth the

rule in proposed §1.6035-1(a)(2) that

the reporting requirements do not apply

if no estate tax return is required to be

filed under section 6018 even if the executor files an estate tax return for other

purposes, including without limitation

to make a generation-skipping transfer

tax exemption allocation or election, a

portability election, or a protective filing to avoid a penalty if an asset value is

later determined to cause a return to be

required or otherwise.

Section 1.6035-1(b)(1) of the final

regulations also clarifies that whether an

estate tax return is a required estate tax

return depends on the date of death value

of property includible in the decedent’s

gross estate, the amount of adjusted taxable gifts, and the applicable filing threshold under section 6018(a), so that an election made under section 2032 or 2032A

September 30, 2024

of the Code to determine the value of

property includible in the gross estate in

accordance with either of those respective

provisions is not relevant to the determination of whether a return is a required

estate tax return. See section 6018(a) and

§20.6018-1(a).

Some commenters inquired whether

the reporting requirements apply in the

event estate tax returns are filed before

August 1, 2015, if either the due date for

the return is after July 31, 2015, or the

executor files a supplement to the return

after July 31, 2015. Section 1.6035-1(b)

(1) of the final regulations provides that

the reporting requirements do not apply

if a required estate tax return is filed on

or before July 31, 2015, even if the due

date of the return is after July 31, 2015,

or if one or more supplements to that

return are filed with the IRS after July

31, 2015.

ii. Executors subject to the section 6035

reporting requirements.

Section 1.6035-1(b)(2) of the final

regulations defines the term executor

consistent with the definition of that

term in proposed §1.6035-1(g)(1), but

includes further explanation in response

to comments. One commenter noted the

possibility that more than one person

may be considered an executor for purposes of section 2203(a) and §20.2203-1

and asked for clarification of the filing

requirements in that situation. The commenter posited a scenario in which an

executor who is appointed, qualified,

and acting on behalf of the estate (an

appointed executor) files an estate tax

return, but is unable to make a complete

return as to a trust the value of which is

includible in the gross estate of the decedent. In that case, the trustee of that trust,

upon notice from the IRS, is required

to file a return reporting the trust property and the value thereof. See section

6018(b) and §20.6018-2. In response, the

final regulations provide that each person

required to file a return is subject to the

section 6035 reporting requirements, but

only with regard to the property reported

or required to be reported on the estate

tax return required to be filed by that

person. The commenter also suggested

clarifying the application of the section

654

6035 reporting requirements if no executor is appointed but multiple persons

are in actual or constructive possession

of property of the decedent. Under the

final regulations, each person in actual

or constructive possession of property of

the decedent is an executor and is subject to the section 6035 reporting requirements, but only with regard to the property reported or required to be reported

on the estate tax return required to be

filed by that executor. Finally, the commenter suggested clarifying the application of the reporting requirements in the

case of successor or co-executors. While

all co-executors are responsible for the

reporting, it is sufficient for only one of

the co-executors to file the Information

Return and to furnish the Statement(s).

Commenters questioned who is

required to comply with the reporting

requirements if a qualified revocable trust

makes a section 645 election and there is

a probate estate. Under section 645, the

trustee of a qualified revocable trust and

an appointed executor (if any) may elect

to treat the trust as part of the estate for

income tax purposes. The section 645

election relates only to the income tax liability of a qualified revocable trust. Therefore, the section 645 election, by itself,

does not affect whether the trustee of a

qualified revocable trust is an executor

within the meaning of §1.6035-1(b)(2).

The expanded definition of the term executor in §1.6035-1(b)(2) of the final regulations adequately clarifies who is subject to

the reporting requirements.

C. Required Information Return and

Statements.

Section 1.6035-1(c) of the final regulations incorporates modifications to the

rules applicable to an executor’s duty

to file the required Information Return

(defined in §1.6035-1(c)(1) of the final

regulations) and furnish each required

Statement (defined in §1.6035-1(c)(2) of

the final regulations) and the due dates

for the satisfaction of those duties. The

modifications reflect the adoption of

comments relating to an executor’s duty

to furnish Statements to beneficiaries

who have not acquired property before

the due date (or earlier filing date) of the

estate tax return.

Bulletin No. 2024–40

i. Furnishing Statements to beneficiaries

reporting property the beneficiaries have

not yet acquired.

Section 6035(a)(1) requires the executor to furnish Statements to each person

acquiring any interest in property included

in the decedent’s gross estate for Federal

estate tax purposes. Section 1.6035-1(c)

(2) of the final regulations defines Statement consistent with proposed §1.60351(g)(3) and requires an executor to furnish a Statement to each beneficiary who

acquires certain property. Section 1.60351(c)(2) of the final regulations clarifies

that the value the executor reports on that

Statement is the value of the property as

reported on the estate tax return required

to be filed with the IRS.

Proposed §1.6035-1(d)(1), relying on

the language of section 6035(a)(3)(A),

requires that Statements be provided to all

beneficiaries on or before the earlier of the

date that is 30 days after the due date of

the estate tax return or the date that is 30

days after the date the estate tax return is

filed with the IRS. If, by this due date, the

executor has not determined what property will be used to satisfy the interest

of each beneficiary, proposed §1.60351(c)(3) requires executors to report on

the Statement for each beneficiary all of

the property that the executor could use

to satisfy that beneficiary’s interest. Proposed §1.6035-1(c)(3) further provides

that, once the exact distribution has been

determined, the executor may, but is not

required to, file and furnish a supplemental Information Return and Statement.

The Treasury Department and the IRS

received numerous comments objecting to this proposed rule. Commenters

noted, and the Treasury Department and

the IRS agree, that proposed §1.60351(c)(3) would result in duplicate reporting because a single item of property (or

interest in the property) would be reported

on the Statement of several beneficiaries,

even though some of these beneficiaries

will never receive an interest or a partial interest in that property. According

to commenters, this duplicate reporting

may confuse beneficiaries by leading

them to expect to receive all of the property reported on the Statements furnished

to them. In addition, commenters have

contended that this duplicate reporting is

Bulletin No. 2024–40

burdensome and may violate a decedent’s

or beneficiary’s right to privacy, possibly

resulting in conflicts and litigation among

beneficiaries with competing interests in

the estate.

Commenters offered various suggestions for revising the rule for property

not acquired before the due date of the

required reporting under section 6035.

One commenter suggested that, in lieu

of the rule requiring an executor to identify specific property the beneficiary may

receive from the estate, the final regulations should permit executors to furnish

Statements indicating that a beneficiary is

to receive either (1) a certain percentage

of the estate’s property or (2) property valued at a certain dollar amount. Under this

suggested alternative, the executor then

would be required to file a supplemental

Information Return and furnish a supplemental Statement within 30 days after the

executor distributes the property to the

beneficiary.

Most commenters requested that the

IRS extend the time for furnishing Statements to beneficiaries to allow executors more time to distribute property or

to determine which property will go to

which beneficiary. One commenter suggested that the proper interpretation of

the language in section 6035(a)(1) requiring an executor to furnish a Statement

“to each person acquiring any interest in

property included in the decedent’s gross

estate for Federal estate tax purposes” is

that it does not include beneficiaries until

they have received an interest in particular

property. The commenter supported this

recommendation by pointing out that the

meaning of the word “acquiring” in the

Code generally means already received.

The commenter identified sixty-four other

sections of the Code in which the word

“acquiring” appears and noted that, in

only two of those sections, does “acquiring” refer to an event that has not yet

occurred. The commenter also pointed to

the description of earlier legislative proposals using identical language in which

the descriptions refer to the beneficiary

“receiving” the property or the “recipients” of an interest. The commenter reasoned that section 6035(a) requires the

reporting of the value (as reported on the

estate tax return) to the beneficiary acquiring that property, which assumes that the

655

property has already been identified by

having been received by the beneficiary.

In addition, the commenter suggested, in

effect, that this interpretation of the statutory language would not violate the statute’s prohibition of any delay in reporting

to a recipient beyond the determination of

that value because reporting triggered by

the beneficiary’s receipt of the property

would still provide the required valuation notice to the recipient as soon as the

recipient would have reason to use that

information. The commenter also noted

that section 6035(b) authorizes the Secretary to prescribe regulations as necessary

to carry out section 6035, and stated the

commenter’s belief that this authority is

sufficient to allow the creation of a due

date for Statements based on the date

property is acquired by a beneficiary.

The commenter suggested two alternatives for the due date for furnishing Statements reporting the value of property that

has not been acquired or received by the

beneficiary by the due date of the Information Return: 30 days after distribution of

the property to the beneficiary or January

31 of the year following the year of distribution of the property to the beneficiary.

The commenter acknowledged that the

first alternative appears to be consistent

with the 30-day concepts found in section

6035(a)(3) (due on or before 30 days after

the estate tax return due date or 30 days

after the estate tax return is filed, if filed

before the due date, and, in the case of an

adjustment, 30 days after the adjustment

is made), but the potential of multiple due

dates during a single year would be burdensome on both taxpayers and the IRS.

The commenter suggested that a due date

of January 31 of the year following distribution would minimize those burdens

while nevertheless ensuring that every

beneficiary acquiring property from the

decedent would have the information necessary for filing a timely income tax return

reporting a sale or other relevant event

regarding this property.

One commenter requested that, if the

final regulations create a due date for

furnishing Statements that is based on

the date property is acquired by a beneficiary, then executors nevertheless have

the option of furnishing all required Statements with the Information Return. Under

this suggestion, if an executor determines

September 30, 2024

that it would be less burdensome, an executor would have the option to furnish a

Statement to a beneficiary even if the beneficiary has not yet acquired the property.

The Treasury Department and the IRS

are sympathetic to the various concerns

raised by the commenters. Many estates

subject to the section 6035 reporting

requirements are complex and will require

a period of time well beyond the estate

tax return filing due date to determine the

appropriate distributions of property to

beneficiaries. In light of these concerns,

the final regulations adopt a suggested

interpretation of the term acquiring in section 6035(a)(1) that modifies, and reduces

the burden of, the reporting requirements

applicable in the case of property not

acquired by a beneficiary before the estate

tax return due date (or earlier filing date).

With regard to property the beneficiaries

acquire after the estate tax return due date,

the Treasury Department and the IRS

agree with the commenters that a due date

for furnishing Statements to such beneficiaries that is after the acquisition of property would have several benefits. It would

eliminate the potential confusion and lack

of privacy that could result from giving

each beneficiary a Statement showing all

of the property that could be used to satisfy

their respective bequests. It also would be

consistent with the understanding of the

Treasury Department and the IRS of the

intent of section 6035 to provide accurate,

timely, and useful information to beneficiaries and the IRS. After consideration of

the comments, the Treasury Department

and the IRS conclude that it is appropriate to interpret the term acquiring consistent with its most common meaning and

consistent with the discretionary authority granted in section 6035(b) to provide

a due date, which is after the acquisition

of property, for furnishing Statements to

beneficiaries who acquire property after

the due date (or earlier filing date) of the

decedent’s estate tax return.

With regard to what the due date for

Statements with regard to this property

should be, the Treasury Department and

the IRS conclude that a due date of January 31 of the year following acquisition by

the beneficiary of this property is the most

administrable and least burdensome alternative. This alternative is the most administrable and least burdensome because a

September 30, 2024

January 31 due date would allow an executor to file the supplemental Information

Return on an annual basis with copies

of all Statements furnished to beneficiaries acquiring property in any given year,

rather than having to file multiple supplemental Information Returns each year on

a Statement-by-Statement basis as each

Statement is furnished to a beneficiary

within 30 days of acquisition.

Accordingly, §1.6035-1(c)(3) of the

final regulations provides that the due

date for furnishing a Statement to a beneficiary who acquired property on or before

the due date or earlier filing of the estate

tax return is 30 days after the due date or

earlier filing of the estate tax return. The

due date for furnishing a Statement to a

beneficiary who acquires property at a

later date is January 31 of the calendar

year following the year of acquisition.

Section 1.6035-1(c)(4) of the final regulations provides that a beneficiary acquires

property when title vests in the beneficiary

or when the beneficiary otherwise has sufficient control over or connection with

the property that the beneficiary is able

to take action related to the property for

which basis is relevant for Federal income

tax purposes. Depending upon the particular property and how it was titled at the

decedent’s death, this could occur at the

moment of death, or upon distribution by

the executor or a trustee.

The Treasury Department and the IRS

further agree that providing executors the

option of furnishing all Statements within

30 days of filing the estate tax return,

regardless of whether all assets by then

have been acquired by the beneficiaries,

may reduce the burden associated with

these reporting requirements and is reasonable if an executor has cause to believe

that a beneficiary will acquire certain

property. However, in the event that a different beneficiary acquires that property,

requiring supplemental reporting ensures

that beneficiaries receive the information they need to satisfy the consistent

basis requirement of section 1014(f) and

otherwise. Accordingly, §1.6035-1(c)

(5) of the final regulations provides an

option to furnish Statement(s) prior to the

acquisition of property by a beneficiary.

Under this rule, an executor may satisfy

the requirement to furnish a Statement

to a beneficiary acquiring property from

656

the decedent or by reason of the death of

the decedent by furnishing the Statement

prior to the beneficiary’s acquisition of

the property, but only if the executor has

reason to believe that the beneficiary in

fact will acquire the property. The Statement must identify the property the beneficiary is expected to acquire as well as

the value of that property and other information prescribed by the Statement and

the instructions. A Statement described in

this paragraph also must include information with respect to property that has been

acquired by that beneficiary as required

under §1.6035‑1(c)(2) of the final regulations. Also, under the rule in §1.6035‑1(c)

(5) executors are required to update the

beneficiary information on a supplemental Information Return and Statement

if, after satisfying the requirements for

this optional reporting, the property is

acquired by a different beneficiary.

ii. Explanation of provisions regarding

the required Information Return and

Statement(s).

In light of the due date set forth in the

final regulations for the furnishing of Statements with regard to property acquired by

a beneficiary after the due date or earlier

filing of the estate tax return, §1.6035-1(c)

of the final regulations makes coordinating changes in the description of the Information Return and the due dates of that

return and of any required supplements to

the Information Return.

In particular, §1.6035-1(c)(1) of the

final regulations defines Information

Return consistent with proposed §1.60351(g)(2), with one exception, and requires

an executor to file the Information Return

by the due date set forth in §1.60351(c)(3) of the final regulations. The one

change is that the required attachments

to the Information Return include only

a copy of each Statement reporting the

value of property acquired by a beneficiary on or before the due date or earlier

filing of the Federal estate tax return, and

a copy of each Statement (if any) reporting the value of property that has not by

then been acquired by a beneficiary as

described in §1.6035-1(c)(5) of the final

regulations (the option to furnish Statement(s) prior to the acquisition of property by a beneficiary). The Information

Bulletin No. 2024–40

Return must be timely filed even if there

are no Statements (as described in the preceding sentence) required to be attached

to that return.

As discussed in part 2.C.i. of this Summary of Comments and Explanation of

Revisions, a Statement reporting the value

of property acquired by a beneficiary subsequent to the due date or earlier filing

date of the estate tax return must be furnished to the beneficiary on or before January 31 of the calendar year following the

date of that acquisition. Under §1.60351(c)(3)(ii) of the final regulations, a copy

of each Statement due by that January 31,

along with a copy of each Statement (if

any) provided to beneficiaries in advance

of their receipt of property as permitted

under §1.6035-1(c)(5) of the final regulations, must be attached to a supplemental Information Return filed with the IRS

on or before that same January 31. Section 1.6035-1(c)(3)(iii) of the final regulations confirms the transition rule in proposed §1.6035-1(d)(2), with an updated

reference to §1.6035-2 of the final regulations. Finally, §1.6035-1(c)(6) of the final

regulations includes an example illustrating the application of §1.6035-1(c) of the

final regulations.

Several commenters requested that a

six-month extension of time (distinct from

the automatic six-month extension of time

for filing the estate tax return) be permitted for filing and furnishing the Information Return and Statements in order to

allow the executor sufficient time to accurately determine which assets will be used

to satisfy the interests of the various beneficiaries. The due date set forth in the final

regulations for furnishing Statements to

beneficiaries with regard to property they

acquire after the estate tax return due date

adequately addresses the concern identified by the commenters. Therefore, this

suggestion is not adopted.

D. Duty to supplement.

i. Duty to supplement and changes

requiring supplemental reporting.

Section 1.6035-1(d)(1) of the final regulations sets forth the rules in proposed

§1.6035-1(e)(1) that impose a supplemental reporting obligation (both to the IRS

and to the beneficiary) on an executor if

Bulletin No. 2024–40

a change to the information required to

be reported on the Information Return or

Statement (or supplement to either) causes

the information as reported to be incorrect

or incomplete. Several examples of adjustments requiring supplemental reporting

are identified in proposed §1.6035-1(e)

(2), and several comments were received

with regard to these examples. In response

to these comments, some of the examples

listed in §1.6035-1(d)(2) of the final regulations differ from those proposed, and the

final regulations clarify some of the other

examples of adjustments.

Section 1.6035-1(d)(2)(i) of the final

regulations sets forth the rule in proposed

§1.6035-1(e)(2) imposing a duty to supplement upon the executor’s receipt,

discovery, or acquisition of information

that changes the beneficiary to whom the

property is to be distributed (pursuant to

a death, disclaimer, bankruptcy, or otherwise). However, the rule is clarified in the

final regulations to provide more detail

in response to comments. Commenters

asked how an executor is to comply with

the reporting requirements under section 6035 if all of the required beneficiary

information is not available to the executor, for instance, if the beneficiary cannot

be located or the beneficiary is a trust not

as yet established. The final regulations

describe the requirements in these circumstances and include the requirement

to supplement the required reporting to

update the beneficiary information when

it becomes available to an executor. See

§1.6035-1(d) and (g) of the final regulations. Accordingly, §1.6035-1(d)(2)(i) of

the final regulations includes, as a change

requiring supplemental reporting, the discovery of any information that corrects or

completes other beneficiary information

originally reported.

In response to comments, §1.60351(d)(2)(ii) of the final regulations clarifies the rule in proposed §1.6035-1(e)(2)

providing that a change in the value of

property pursuant to an examination or

litigation is a change requiring supplemental reporting. One commenter asked

for clarification as to whether supplemental reporting is required if, during examination or litigation, a settlement with the

IRS increases the estate tax liability but

the increase is not related to a particular

property. Another commenter requested

657

confirmation that only an adjustment in

value that represents the final value for

Federal estate tax purposes gives rise to

a duty to supplement. With respect to the

first comment, the Treasury Department

and the IRS observe that a settlement of

estate tax liability typically is related to

an adjustment to the value of particular,

identified property includible in the gross

estate, a claimed deduction or credit, gift

tax paid within three years before death,

adjusted taxable gifts, or gift tax paid and/

or payable. If a settlement does not change

the value of particular, identified property,

the settlement does not impact the final

value of the estate’s property and is not a

change requiring supplemental reporting

with respect to that specific property. With

respect to the second comment, an adjustment representing the final value for estate

tax purposes undoubtedly gives rise to the

statutory duty to supplement. In addition,

an adjustment to value on a supplemental estate tax return becomes the reported

value for purposes of section 6035(a)(1)

and §1.1014-10(b)(2) of the final regulations. Therefore, reporting a different

value on a supplemental estate tax return

also comes within the scope of an executor’s duty to supplement. In response to

these comments, §1.6035-1(d)(2)(ii) of

the final regulations clarifies that both a

final determination of value of property

for Federal estate tax purposes that differs

from the value identified on a Statement

or supplement to a Statement and an executor’s reporting of a change in value on a

supplemental estate tax return give rise to

a duty to supplement.

Commenters objected to the rule in

proposed §1.6035-1(e)(2) providing that

the discovery of unreported property is a

change requiring supplemental reporting;

they suggested that this is an impermissible broadening of the estate tax filing

requirement. In response, the final regulations instead provide that it is only the

supplementing of an estate tax return, to

report the value of previously unreported

property, that triggers a duty to supplement the reporting under section 6035,

and not the mere discovery of unreported

property. Consistent with the definition

of included property in §§1.1014-10(d)

(4) and 1.6035-1(e)(1) of the final regulations, §1.6035‑1(d)(2)(iii) of the final

regulations sets forth the rule that prop-

September 30, 2024

erty that is included in a decedent’s gross

estate, either by the filing of an estate tax

return, a supplemental estate tax return, or

pursuant to an examination by the IRS or

otherwise, will give rise to a duty to supplement if the fair market value of that

property was not previously reported on

the estate tax return or is changed.

The rule in proposed §1.6035-1(e)(2)

relating to a change in the property to be

acquired by a beneficiary is updated in

the final regulations to conform with the

reporting requirements in the final regulations for property not acquired by a

beneficiary before the due date or earlier

filing date of the estate tax return. Section 1.6035-1(d)(2)(iv) of the final regulations provides that a change requiring

supplemental reporting includes an executor’s disposition of property in a transaction in which the basis of new property received by the estate is determined

in whole or in part by reference to the

final value of property acquired from the

decedent or as a result of the death of the

decedent (for example, as the result of a

like-kind exchange or involuntary conversion). However, §1.6035-1(d)(2)(iv) of

the final regulations also imposes a duty

to supplement if an executor furnishes a

Statement to a beneficiary prior to the beneficiary’s acquisition of property pursuant

to the optional reporting afforded under

§1.6035-1(c)(5) of the final regulations

and the beneficiary ultimately acquires

property different than that identified on

that Statement.

ii. Changes not requiring supplemental

reporting.

Section 1.6035-1(d)(3)(i) of the final

regulations adopts the rule in proposed

§1.6035-1(e)(3)(i)(A) excluding from the

duty to supplement changes to correct an

inconsequential error or omission. However, the rule in proposed §1.6035-1(e)

(3)(i)(B) excluding from the duty to supplement a change in the distribution of

property from that previously reported is

omitted from the final regulations because

it relates only to the proposed reporting

requirements for property not acquired by

a beneficiary before the estate tax return

due date. The reporting requirements for

such property have been modified in the

final regulations.

September 30, 2024

Section §1.6035-1(d)(3)(ii) of the

final regulations provides an exception

to the duty to supplement for a change in

value as the result of an event described

in section 2032A(c)(1) that triggers an

additional estate tax liability with regard

to property for which a special use election was made, including a beneficiary’s

election to increase the beneficiary’s basis

in that property under section 1016(c) in

response to that event. Although such an

election by a beneficiary does result in a

change in value under the rule in §1.101410(b)(3)(ii), the qualified heir is in a better

position than the executor to know this

information, so no supplemental reporting

is required of the executor. A commenter

requested an example illustrating the

adjustment to basis if there is a disposition

of property subject to section 2032A under

section 2032A(c)(1). Because an example

would serve the purpose of illustrating the

workings of section 1016(c), rather than

the reporting requirements under section

6035, the Treasury Department and the

IRS decline to include such an example in

these regulations under section 6035.

Section 1.6035-1(d)(3)(iii) of the final

regulations adopts the suggestion of a

commenter by excepting from the duty

to supplement any post-death or other

adjustment to the basis of property made

pursuant to sections of the Code other

than section 1014(f). The executor generally is required to provide only supplemental Statements that show a change

in the identification, value, or recipient

of property as reported on the estate tax

return. Therefore, section 6035 does not

require the reporting of adjustments in

basis attributable to the operation of Code

sections other than section 1014(f). That

commenter also suggested that the final

regulations provide a uniform method for

reporting post-death adjustments to the

beneficiary if the executor chooses to do

so. The Treasury Department and the IRS

understand that an executor may choose to

furnish a beneficiary information regarding changes to basis that occur pursuant to

Code sections other than section 1014(f).

If the executor does so, and if the executor

chooses to use the Statement to provide

that information, that information must

be shown separately from the information

required to be reported on the beneficiary’s Statement.

658

Finally, §1.6035-1(d)(3)(iv) of the

final regulations provides an exception

to the duty to supplement for any other

change that is identified as requiring no

supplemental reporting under this section

in guidance published in the future in the

Federal Register or in the Internal Revenue Bulletin.

iii. Due date of supplemental reporting.

The rules in proposed §1.6035-1(e)(4)

(i) relating to the due date for supplemental reporting are updated in the final regulations to align with the modified reporting requirements in the final regulations.

Section 1.6035-1(d)(4) of the final regulations provides that supplemental reporting

is due on or before 30 days after the date

on which information becomes available

to the executor from which the executor

can conclude that a change to the earlier

reporting is required to be supplemented

in accordance with these final regulations.

Section 1.6035-1(d)(4) of the final regulations clarifies that, for changes occurring

as a result of supplementing the estate tax

return, the date on which that information

becomes available to the executor is the

filing date of the supplement to that return

and, for changes occurring as a result of a

determination of final value, that date is

the date a value becomes the final value

under §1.1014-10(b)(1) of the final regulations. In the case of property not

acquired by a beneficiary before the due

date or earlier filing date of the estate tax

return, §1.6035-1(d)(4) of the final regulations provides that, for property for which

a Statement has not been provided to the

beneficiary pursuant to the option to furnish Statements prior to the acquisition of

property by a beneficiary in §1.6035-1(c)

(5) of the final regulations, the due date

of any required supplemental reporting

may be delayed until the due date for supplemental reporting for subsequently-acquired property in §1.6035-1(c)(3)(ii) of

the final regulations.

iv. Duration of duty to supplement.

Commenters inquired whether the

executor’s duty to file supplemental Information Returns and furnish supplemental

Statements is limited in time. In response,

§1.6035-1(d)(5) of the final regulations is

Bulletin No. 2024–40

added to provide, in effect, that the duty

to supplement is limited to changes that

occur on or before the later of a beneficiary’s acquisition of the property or the

determination of the final value of the

property under §1.1014-10(b)(1) of the

final regulations.

v. Illustration of duty to supplement.

Section 1.6035-1(d)(6) was added to

the final regulations to provide examples

to illustrate the application of the rules

regarding the duty to supplement as provided in §1.6035-1(d) of the final regulations.

E. Property for which reporting is

required.

Proposed §1.6035-1(b)(1) provides in

part that the property to which the section 6035 reporting requirements apply

is all property reported or required to be

reported on an estate tax return required

under section 6018. The reporting requirements also apply to any other property the

basis of which is determined in whole or in

part by reference to the property described

in the preceding sentence (for example,

as the result of a like-kind exchange or an

involuntary conversion).

As discussed in part 1.H of this Summary of Comments and Explanation of

Revisions, the final regulations do not

include the proposed zero basis rule for

unreported property to which numerous

commenters objected. Therefore, the final

regulations narrow the scope of property

for which reporting is required as compared to the rule in proposed §1.6035-1(b)

(1) that would have subjected all property

reported or required to be reported on an

estate tax return under section 6018. Section 1.6035-1(e)(1) of the final regulations

provides that only property whose value is

included in the value of a decedent’s gross

estate for Federal estate tax purposes (and

any other property the basis of which is

determined, in whole or in part, by reference to the basis of such included property) is subject to the section 6035 reporting requirements. Section 1.6035-1(e)(1)

of the final regulations defines the term

included property consistently with the

definition of that term in §1.1014-10(d)(4)

of the final regulations to mean property

Bulletin No. 2024–40

the value of which is included in the value

of the decedent’s gross estate as defined in

section 2031 or 2103. Section 1.6035-1(e)

(1) of the final regulations further clarifies

that included property does not include

property whose value is not reported on

an estate tax return and whose value is

not otherwise included in the value of the

decedent’s gross estate as finally determined for Federal estate tax purposes.

Some commenters suggested that property subject to reporting should be limited

to property to which the consistent basis

requirement of section 1014(f) applies.

While both sections 6035 and 1014(f)

apply with respect to property includible in a decedent’s gross estate only if an

executor is required to file an estate tax

return under section 6018, section 1014(f)

(2) limits the application of the consistent basis requirement to property whose

inclusion in the gross estate increases the

estate tax liability for the estate. Section

6035 includes no similar limitation and,

therefore, applies to a broader universe

of property than section 1014(f), and it

applies whether or not any estate tax must

be paid. Therefore, this comment is not

adopted.

Another commenter sought clarification as to whether property for which a

marital or charitable deduction is claimed

is property for which reporting is required.

Property that qualifies, in whole or in

part, for a marital or charitable deduction for which a deduction is claimed is

included property as that term is defined

in §1.6035-1(e)(1) of the final regulations.

Accordingly, as §1.6035-1(e)(1) of the

final regulations also clarifies, such property is subject to reporting. Consequently,

the executor is required to file an Information Return and to furnish Statements

if the value of the estate is sufficient to

require the filing of an estate tax return,

even if no estate tax is due as a result of a

charitable and/or marital deduction.

Some commenters had questions about

the application of the reporting requirements to community property. Proposed

§1.6035-1(b)(1) provides that the reporting requirements are limited to only the

decedent’s one-half interest in community

property. Commenters asked for confirmation that the reporting requirements do

not apply to the surviving spouse’s onehalf interest in community property that is

659

subject to section 1014(b)(6). Under section 1014(b)(6), the spouse’s interest also

is deemed to have been acquired from the

decedent and thus is subject to the basis

adjustment under section 1014(a). However, section 1014(a) and section 6035 are

different. The spouse’s interest is not includible in the decedent’s gross estate and

thus is not required to be reported on the

estate tax return. Accordingly, §1.60351(e)(1) of the final regulations sets forth

the rule that the reporting requirements do

not apply to the surviving spouse’s interest in community property.

Some commenters asked whether there

is a reporting requirement if the executor

makes a non pro rata division and distribution of community property authorized

by applicable State law. See, for example, West’s Ann. Cal. Prob. Code sections

100(b) and 101(b). Under applicable State

law, an executor may distribute the surviving spouse’s interest in community

property (property belonging to the surviving spouse, in which the decedent has

no interest includible under section 2033)

to a beneficiary other than the surviving

spouse to satisfy a bequest. In lieu of the

surviving spouse’s interest in the community property, the executor may distribute

to the surviving spouse all or any part of

decedent’s interest in other property includible in the gross estate. The executor’s

distribution does not convert property

included in the gross estate into property

not included in the estate and, therefore,

does not eliminate the applicability of

the reporting requirements with regard to

the property distributed to the surviving

spouse. Accordingly, §1.6035-1(e)(1) of

the final regulations identifies, as property

subject to reporting, property included in

the decedent’s gross estate that is distributed to a decedent’s surviving spouse in

lieu of the surviving spouse’s interest in

community property pursuant to State law.

Section 1.6035-1(e)(2) of the final regulations adds two examples to illustrate

property subject to reporting under section

6035.

F. Excepted property requiring only

limited reporting.

The proposed regulations under

§1.6035-1(b)(1) list four types of property

proposed to be excepted from the report-

September 30, 2024

ing requirements: (i) cash (other than

a coin collection or other bills or coins

with numismatic value); (ii) income in

respect of a decedent (as defined in section

691); (iii) tangible personal property for

which an appraisal is not required under

§ 20.2031-6(b); and (iv) property sold,

exchanged, or otherwise disposed of (and

therefore not distributed to a beneficiary)

by the estate in a transaction in which capital gain or loss is recognized.

Many commenters suggested additions

or modifications to this list of exceptions.

In response, the list in proposed §1.60351(b)(1) is expanded in redesignated

§1.6035-1(f)(2) of the final regulations. A

particular property included in the decedent’s gross estate may qualify under

more than one of these exceptions. In

addition, §1.6035-1(f)(1) of the final regulations explains the reporting requirements applicable to property described in

§1.6035-1(f)(2) of the final regulations,

referred to as excepted property, and

§1.6035-1(f)(4) of the final regulations

provides examples of excepted property

and illustrates the reporting requirements

applicable to this property. A discussion

of the comments and responses to the

comments follows.

i. Limited reporting of excepted property.

Some commenters noted that it is

unclear whether an executor is subject to

any reporting requirements under section

6035 if all distributions from the estate are

of property excepted from the reporting

requirements by proposed §1.6035-1(b)

(1). For example, commenters questioned

whether an executor is subject to any

reporting requirements under section 6035

if the executor has liquidated (or will liquidate) the estate so that all distributions will

be made in cash. In response, §1.6035-1(f)

(1) of the final regulations clarifies that

included property is subject to more limited reporting if the property is excepted

property (as identified in §1.6035-1(f)(2)

(i) through (xiv) of the final regulations).

Specifically, the requirement to file an

Information Return with the IRS pursuant

to §1.6035-1(c)(1) of the final regulations

remains the same even if all property is

excepted property. However, in the case of

excepted property, an executor is required

only to disclose on the Information Return

September 30, 2024

that some or all of the property included

in the decedent’s gross estate is excepted

from the full reporting requirements pursuant to §1.6035-1(f)(2) of the final regulations; an executor is not required to identify the excepted property or to provide a

Statement to a beneficiary with regard to

excepted property.

ii. Exceptions for cash and other

property.

Proposed 1.6035-1(b)(1)(i) excepts

cash (other than a coin collection or

other bills or coins with numismatic

value) from the reporting requirements

under section 6035. To provide more

precision and clarity, §1.6035-1(f)(2)

(i) of the final regulations replaces the

exclusion for cash with an exclusion

for United States dollars. United States

dollars are defined in §1.6035-1(f)(3) of

the final regulations as the official currency of the United States. For purposes

of section 6035, the term United States

dollars includes physical bills and coins

if the value of each bill or coin is equivalent to the face amount of that bill or

coin. This definition does not include

other physical United States bills or

coins with numismatic value because

these bills or coins typically do not have

a value equal to their face value.

Many commenters requested that the

exception for cash in the proposed regulations be expanded to include cash equivalents. In response to these comments,

§1.6035-1(f)(2) of the final regulations

expands the list of excepted property to

include property the value of which is

equal to its face value and that either is

expressed in United States dollars or will

be paid in United States dollars. This

excepted property includes: (1) United

States dollar-denominated demand deposits; (2) Cash collateral denominated in

United States dollars held by a third party

to secure a liability (such as a deposit of

purchase money or a security deposit);

(3) Life insurance proceeds on the life

of the decedent payable in a lump sum

in United States dollars; and (4) Federal,

State, and local tax refunds and other

refunds payable in United States dollars.

Certificates of deposit are excepted property because their Federal estate tax value

generally equals their face value plus

660

interest accrued to the date of death. Similarly, shares in money market funds are

excepted property under the final regulations.

A commenter suggested that notes

having a Federal estate tax value equal to

the outstanding principal balance of the

note should be considered a cash equivalent. Another commenter suggested that

such notes should be excepted because

the disposition of such property will

never be a recognition event. The Treasury Department and the IRS decline to

adopt these suggestions because notes

have basis and the face value of the note

may not always equal the final value of

the note for Federal estate tax purposes.

See §20.2031-4. However, if a note is forgiven in full by the decedent at death, the

underlying indebtedness is discharged

and no property having basis remains for

distribution to a beneficiary. Accordingly,

excepted property also includes notes

that are forgiven in full by the decedent

at death, whether or not denominated in

United States dollars.

In further response to the aforementioned comments as well as additional

comments received regarding property

qualifying for limited reporting under the

cash exception, the Treasury Department

and the IRS note that the following items

do not fall within the list of excepted property in §1.6035-1(f)(2) of the final regulations: (1) currency other than in United

States dollars; (2) any payments not made

in United States dollars; (3) life insurance

policies not paid in United States dollars,

and life insurance policies payable to a

beneficiary in United States dollars annually or at some other interval for a period

of time after the decedent’s death; (4)

notes (other than an installment obligation

subject to section 453) that the decedent

did not forgive in full upon the decedent’s

death, whether or not expressed in United

States dollars; (5) U.S. Savings bonds;

and (6) accounts receivable (unless such

property consists entirely of the right to

receive an item of income in respect of a

decedent as defined in section 691 (IRD)).

This property generally has basis, its value

generally may not equal its face value and,

accordingly, this property is not excepted

from the reporting requirements in the

final regulations. For the same reasons,

digital assets as defined in section 6045(g)

Bulletin No. 2024–40

(3)(D), including virtual currency2 or

cryptocurrency, do not fall within the list

of excepted property set forth in §1.60351(f)(2) of the final regulations. Consistent

with all of the above, the list of excepted

property is expanded and clarified in

§1.6035-1(f)(2) of the final regulations.

With respect to future modifications to

property qualifying as excepted property,

§1.6035-1(f)(2)(xiv) of the final regulations provides that excepted property will

include any other property that is identified as excepted property in published

guidance in the Federal Register or in the

Internal Revenue Bulletin.

The Treasury Department and the IRS

note that certain beneficiaries in receipt

of included property may have a basis in

that property different from the value of

that property as expressed in United States

dollars, and therefore may have to convert

the final value of that property into a currency other than United States dollars in

order to determine their initial basis in

that property. Such a beneficiary includes

a qualified business unit (within the meaning of section 989) of a person that has a

functional currency other than the United

States dollar. See sections 985 through

989 for rules regarding the functional currency of a qualified business unit.

iii. Exception for household and personal

effects.

Proposed 1.6035-1(b)(1)(iii) excepts

from the reporting requirements tangible

personal property for which an appraisal is

not required under §20.2031-6(b). Section

20.2031-6(b) requires an appraisal if the

decedent’s household and personal effects

include articles having marked artistic or

intrinsic value with a total value in excess

of $3,000. In response to a comment, these

items are described in the final regulations

as household and personal effects, rather

than as tangible personal property, to conform more closely with §20.2031-6(b).

Commenters asked whether the $3,000

threshold applies to each article or to the

collective value of all the tangible personal

property includible in the gross estate.

In addition, one commenter asked how

to allocate the final value of articles of

household and personal effects appraised

as a single set or group if the estate distributes parts of that set or group among

different beneficiaries (for example, the

gross estate includes a 24-piece silver flatware set with a final value of $4,000, and

the set is divided between two beneficiaries). The commenter suggested that the

executor be given the authority to use any

reasonable method to allocate the final

value (and thus the basis) of the parts of

the set or group among the beneficiaries.

Finally, commenters noted that the $3,000

threshold amount found in §20.2031-6(b)

has remained static since 1958 and asked

that it be increased.

The Treasury Department and the IRS

understand the need for clarity on how to

apply the exception in the proposed regulations for tangible personal property.

However, addressing this issue in the

final regulations necessarily would impact

determinations of whether an appraisal is

required under §20.2031-6(b) and how to

allocate the value of estate property among

beneficiaries. These issues, including any

change to the threshold amount under

§20.2031-6(b), are more appropriately

addressed in guidance under section 2031

related to the valuation of household and

personal effects. Accordingly, §1.60351(f)(2)(ix) of the final regulations preserves the exception and does not address

the commenters’ questions.

iv. Exceptions for property whose basis is

unrelated to the Federal estate tax value

of the property.

Because section 1014(a) does not apply

to the right to income in respect of a decedent as defined in section 691 (IRD), the

Federal estate tax value of IRD does not

affect its basis in the hands of the beneficiary acquiring that property. Accordingly,

proposed §1.6035-1(b)(1)(ii) excepts IRD

from the reporting requirements. The

Treasury Department and the IRS deem

it appropriate in the final regulations to

more generally except from full section

6035 reporting requirements property

having a basis that is determined without

reference to the property’s Federal estate

tax value, including IRD. A beneficiary

receiving such property has no need to

receive a Statement providing the Federal

estate tax value of such property. Several

types of IRD are listed separately in the

regulations. These assets, such as individual retirement accounts (IRAs), may have

an IRD component and a non-IRD component of basis. The following paragraphs

discuss comments relating to reporting

exceptions or suggested exceptions for

property having a basis that is determined

without reference to the property’s Federal estate tax value.

Multiple commenters sought clarification on whether certain IRD property having a basis component is excepted from

the full section 6035 reporting requirements, particularly in the case of certain

retirement plans, annuities, installment

obligations, and interests in passthrough

entities holding an item of IRD.

With regard to annuity contracts subject to section 72 and installment obligations subject to section 453, commenters

suggested that the final regulations clarify

that, despite having a basis component,

such property be excepted because no

basis adjustment occurs with respect to

such property at the decedent’s death. The

Treasury Department and the IRS agree

and, accordingly, such property is identified in §1.6035-1(f)(2)(xi) of the final regulations as examples of property having a

basis that is determined without reference

to the property’s Federal estate tax value.

For the same reason, §1.6035-1(f)(2)(xi)

of the final regulations also includes, as an

example of such excepted property, any

amounts received under an annuity contract, such as a lump sum payment paid

to terminate an annuity contract or a death

benefit paid under an annuity contract.

Multiple commenters sought clarification as to whether IRAs and other retirement plans and deferred compensation

plans come within the IRD exception in

the proposed regulations. Commenters

noted that, in certain scenarios, a decedent will have basis in such an account or

plan, in addition to IRD. One commenter

asserted that the reporting typically

Virtual currency is defined for Federal income tax purposes as a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value other than

the United States dollar or a foreign currency. See Notice 2014-21, 2014-16 I.R.B. 938; Rev. Rul. 2019-24, 2019-44 I.R.B. 1004. Some digital assets are referred to as virtual currency or

cryptocurrency.

2

Bulletin No. 2024–40

661

September 30, 2024

required for these accounts or plans outside of the section 6035 reporting requirements is sufficient and suggested adding

an exception to the final regulations so

that the section 6035 reporting requirements will not apply to property in or distributions from retirement plans (whether

or not tax-deferred). Such property, when

acquired from a decedent, generally has a

basis that is determined without reference

to the property’s Federal estate tax value.

Therefore, distributions from retirement

plans and deferred compensation plans,

including individual retirement arrangements as defined in sections 408 and

408A, are included as examples of property coming within the exception from

full reporting in §1.6035-1(f)(2)(xi) of the

final regulations.

In other instances in which property

consists only in part of a right to receive

IRD, such as an interest in a passthrough

entity that holds an interest constituting

IRD, commenters sought clarification on

the scope of the IRD exception to section

6035 reporting. In most cases, the basis

of such property is determined under

section 1014(a), even though the basis

under section 1014(a) may be adjusted

to account for the items of IRD. Because

the Federal estate tax value of such property is relevant to the determination of

the recipient’s basis in the property, such

property does not come within the exception for property having a basis determined without reference to the property’s

Federal estate tax value in §1.6035-1(f)

(2)(xi) of the final regulations. That

exception is limited to property that consists entirely of IRD.

Finally, in response to other requests

for clarification, appreciated property

described in section 1014(e) that is

acquired by a decedent within 1 year of

death, for which basis is not adjusted

under section 1014(a), also is included as

an example of property coming within the

exception from full reporting in §1.60351(f)(2)(xi) of the final regulations.

v. Exceptions for property sold,

exchanged, or disposed of prior to

distribution.

Proposed §1.6035-1(b)(1)(iv) excepts

property sold, exchanged, or otherwise

disposed of (and therefore not distrib-

September 30, 2024

uted to a beneficiary) by the estate in a

transaction in which capital gain or loss

is recognized. Commenters asserted

that this exception as proposed suggests

that the reporting requirements would

continue to apply to property sold,

exchanged, or otherwise disposed of by

the estate if no gain or loss is recognized

because the sales price equals the estate’s

basis in the property. Commenters suggested, and the Treasury Department and

the IRS agree, that the reporting requirements should not apply to property disposed of in a recognition transaction

for the estate for income tax purposes,

whether or not gain or loss is recognized,

because the basis of this property is no

longer related to the property’s Federal

estate tax value. The Treasury Department and the IRS also agree with commenters that, for purposes of the reporting required under section 6035, it is

irrelevant whether any gain or loss the

estate recognizes is capital or ordinary.

The final regulations under §1.6035-1(f)

(2)(x) include these clarifying changes.

In addition, in response to requests for

additional clarification, §1.6035-1(f)

(2)(x)(A) through (E) of the final regulations include examples of excepted

property pursuant to this rule as follows:

(1) property distributed in satisfaction of

a pecuniary bequest on which the estate

recognizes any gain or loss pursuant to

§1.661(a)-2(f); (2) property for which an

election under section 643(e)(3) has been

made for the estate to recognize any gain

or loss; (3) interests in business entities

that are redeemed for United States dollars prior to distribution to a beneficiary;

(4) property disposed of in a transaction

described in section 267(a) and (b)(13),

which disallows a loss from the sale or

exchange of property, directly or indirectly, between the executor and the beneficiary of the estate, except in a sale or

exchange in satisfaction of a pecuniary

bequest; and (5) property subject to the

mark to market accounting method at the

time of distribution from the estate or

from the decedent’s revocable trust.

Similarly, §1.6035-1(f)(2)(xii) of the

final regulations excepts bonds to the

extent that they are redeemed by the issuer

for United States dollars prior to being distributed to a beneficiary so that any gain or

loss is recognized by the estate.

662

vi. Exception for property included in the

gross estate of a beneficiary.

A commenter suggested that an exception to the reporting requirements should

apply if the beneficiary of property

acquired from a decedent dies shortly

after that decedent and that property then

is included in the deceased beneficiary’s

gross estate. In this case, the deceased beneficiary does not need a Statement identifying the value of that property because

the basis of that property will be determined as of the beneficiary’s date of death,

thus independently of the determination of

the final value of that property in the decedent’s estate. Accordingly, §1.6035-1(f)

(2)(xiii) of the final regulations identifies

property included in the gross estate of a

beneficiary who died before the due date

of the Information Return as excepted

property subject to only limited reporting.

vii. Publicly traded securities.

Two commenters suggested that publicly traded securities should be excepted

from the reporting requirements, both to

reduce burden and because §1.6045A1(b)(8) already requires basis reporting

for certain publicly traded securities. This

suggestion is not adopted in the final regulations because, while §1.6045A-1(b)(8)

requires basis reporting between brokers

if certain securities are transferred, it does

not always require reporting to the IRS

and the beneficiary. It would be burdensome for both taxpayers and the IRS to

distinguish between those covered securities and others, including shares held

in certificate form, for purposes of complying with these reporting requirements.

Further, the information to be transferred

between brokers might not always be

the final value of the security for Federal

estate tax purposes. Additional detailed

information regarding the reporting of

securities requested by commenters may

be provided in forms and instructions.

viii. Other.

One commenter requested a reporting exception for property transferred to

a charity or nonresident who is not a citizen of the U.S. (nonresident noncitizen)

based on the assumption that charities and

Bulletin No. 2024–40

nonresident noncitizens have no need for

basis information. Basis information for

such property is relevant in certain circumstances, such as for the computation

of the excise tax on a private foundation, and, therefore, this suggestion is not

adopted.

G. Identification of beneficiaries.

The proposed regulations under

§1.6035-1(c)(1) describe the reporting

requirements as they apply to different

beneficiaries, including a beneficiary

who is also an executor, a beneficiary of

a life estate, a beneficiary of a remainder

interest and a beneficiary of a contingent interest. Proposed §1.6035-1(c)(2)

describes the reporting requirements as

they apply to a beneficiary that is a trust,

estate, or other entity. Proposed §1.60351(c)(3) describes the reporting requirements applicable if the beneficiary of

particular included property has not been

identified by the due date of the required

reporting. Finally, proposed §1.6035-1(c)

(4) describes the reporting requirements

applicable if a beneficiary cannot be

located by the executor.

As discussed in part 2.C.i. of this Summary of Comments and Explanation of

Revisions, many commenters objected

to the proposed reporting requirements

under §1.6035-1(c)(3) that would have

applied in the case of an executor who has

not determined what property will be used

to satisfy the interest of each beneficiary

by the due date of the Information Return.

The section 6035 reporting requirements

have been modified in §1.6035-1(c) of the

final regulations to address the concerns

of the commenters. However, additional

comments were received on the other beneficiary provisions in proposed §1.60351(c). A discussion of these comments and

responses to these comments, as well as

a discussion of certain clarifying changes

made in §1.6035-1(g) of the final regulations, follows.

i. Definition of beneficiaries.

Section 1.6035-1(g)(1) of the final

regulations defines the term beneficiary

to refer to a person who acquires (or

will acquire) property subject to reporting described in §1.6035-1(e) of the final

Bulletin No. 2024–40

regulations. A beneficiary may be an individual (including one who is the executor

as well as a beneficiary), the estate of a

deceased individual who survived the

decedent, a trust (referred to as a beneficiary trust), or an entity other than a trust,

including without limitation a business

entity or an organization described in section 501(c).

ii. Beneficiary trust.

Proposed §1.6035-1(c)(2) directs that,

if the beneficiary is a trust, estate, or other

entity, the executor is to furnish the beneficiary’s Statement to the trustee of the

trust or similar representative of the estate

or other entity, rather than to the beneficiaries or other owners of that trust or other

entity. This provision generated several

comments. Some commenters questioned

whether the Statement should be given

to the trustee or to the trust’s beneficiary.

They noted that, because there are many

different types of trusts and varying circumstances, an inflexible rule is not necessarily appropriate in this context. For

instance, some trusts terminate at death or

shortly thereafter and the trustee distributes the trust property in kind, while other

trusts continue in existence for many generations. In some cases, it may be unclear

when a trust terminates because an existing trust may be decanted or divided into

several trust shares or different trusts.

Some trusts are for the benefit of only one

beneficiary, such as a marital trust, but

other trusts may be for a class of different

beneficiaries. In addition, sometimes, the

executor may not be able to get information about the provisions or beneficiaries

of an inter vivos trust, although the trust

property is includible in the decedent’s

gross estate for Federal estate tax purposes.

After consideration of the comments,

the Treasury Department and the IRS

agree that there are circumstances under

which it would be appropriate for an executor to furnish the Statement to the trustee

of a beneficiary trust and different circumstances warranting the furnishing of the

Statement directly to the trust beneficiary(s). Section 6035 contemplates that the

Statement will be received by a person or

entity that is likely to engage in an income

tax recognition event with respect to the

663

property. A trust that terminates at the

death of the decedent or shortly thereafter

is unlikely to have such an event, unlike a

trust that continues for many years. Any

rule attempting to distinguish between

these different circumstances would be

both complex and likely to fail to address

the entire universe of possibilities.

Accordingly, in order to respond to the

comments, and to avoid undue complexity

in regulations, the Treasury Department

and the IRS conclude that it is appropriate to adopt a flexible rule for identifying the beneficiary to whom the executor

must furnish the Statement in the case of

a beneficiary trust. Section 1.6035-1(g)(2)

(i) of the final regulations provides that

the executor must furnish the Statement

to the trustee, rather than to the beneficiaries of the trust, but allows the executor

instead to furnish the Statement directly to

the beneficiaries of the trust, with a copy

to the trustee, if the executor reasonably

believes that it is unlikely that the trust

will depreciate, sell, or otherwise dispose

of the property in a recognition event for

income tax purposes. For this purpose, a

trust’s beneficiaries include all potential

current income beneficiaries and each

remainderman who would have had a current interest in the trust if one or more of

the income beneficiaries had died immediately before the decedent.

Commenters also requested clarification of the executor’s obligation to furnish

a Statement regarding the property of an

inter vivos trust included in the decedent’s

gross estate for Federal estate tax purposes. In this situation, the executor is not

distributing the trust property to the trustee

and, assuming the executor reported the

trust on the estate tax return, the trustee is

not the executor required to file that estate

tax return. If the trust property is reported

on the estate tax return filed by the executor of the estate, that executor is subject

to the reporting requirements as described

in this section with regard to the trust

property. Except for the reporting required

under §1.6035-1(h) of the final regulations, it is only in the situations described

in §1.6035-1(b)(2) of the final regulations,

in which a trustee of a trust might be an

executor required to file an estate tax

return with regard to trust property, that

the trustee would be required to file the

Information Return and Statement(s) with

September 30, 2024

regard to the trust property reported on the

estate tax return filed by that trustee.

Commenters requested guidance on

how to comply with the reporting requirements to a beneficiary trust if that trust is

not yet established by the due date of the

Information Return. In response, §1.60351(g)(2)(ii) of the final regulations provides

that, if by the due date of the Information

Return, a beneficiary trust does not have

at least one trustee and a tax identification

number from the IRS, an executor must

report on the Information Return that the

beneficiary trust is not yet established in

accordance with the instructions. Supplemental reporting is required once the beneficiary trust is established.

iii. Furnishing Statement to beneficiary of

split interest in property, not in trust.

Section 1.6035-1(g)(3) of the final

regulations retains and clarifies certain

aspects of the rules in proposed §1.60351(c)(1) applicable to beneficiaries of split

interests in property not in trust. Under

§1.6035-1(g)(3) of the final regulations,

the beneficiary of a life estate not in trust

is the life tenant, and the beneficiary of

a remainder interest not in trust is each

remainderman, identified as if the life

tenant were to die immediately after the

decedent. For purposes of determining

the due date for furnishing Statements to

such beneficiaries under §1.6035-1(c)(3)

of the final regulations, each beneficiary

will be deemed to have acquired the property subject to reporting on the date of the

decedent’s death. Section 1.6035-1(g)(3)

of the final regulations further provides

that the beneficiary of a contingent interest not in trust is a beneficiary only if the

contingency occurs before the end of the

period during which the executor has an

obligation to supplement the reporting as

provided in §1.6035-1(d)(5) of the final

regulations. If the contingency occurs

during this period, §1.6035-1(g)(3) of the

final regulations provides that the executor must update the beneficiary information on the Information Return and

furnish a Statement to that beneficiary

pursuant to the executor’s duty to supplement to report a change in beneficiary

information as described in §1.6035-1(d)

of the final regulations. Section 1.60351(g)(3) of the final regulations clarifies

September 30, 2024

that usufruct interests are treated in the

same manner.

Several commenters requested confirmation that, for purposes of complying

with the reporting requirements of section

6035(a), the executor is not required to

determine the allocation of uniform basis

among the beneficiaries with interests in

an asset for different periods of time. The

Treasury Department and the IRS agree

that nothing in section 6035(a) requires

the executor to report to a beneficiary of

such an interest that beneficiary’s share

of uniform basis as of the decedent’s date

of death. It is only the value of the entire

property that is the subject of the required

reporting. Therefore, §1.6035-1(c)(2) of

the final regulations provides that an executor is required to identify the property

acquired by the beneficiaries, the value of

the property as reported on the estate tax

return filed with the IRS, and such other

information prescribed by the Statement

and the instructions.

iv. Reporting for a missing beneficiary.

In response to comments, §1.60351(g)(4) of the final regulations modifies

the rule in proposed §1.6035-1(c)(4) with

regard to the applicable reporting requirements if the executor cannot locate a

beneficiary. The proposed rule provides

that an executor must use reasonable due

diligence to identify and locate all beneficiaries and, if the executor is unable to

locate a beneficiary by the due date of the

Information Return, the executor must

so report on the Information Return and

explain the efforts the executor has taken

to locate the beneficiary and to satisfy the

obligation of reasonable due diligence.

Commenters requested an explanation or

definition of “reasonable due diligence”

for this purpose. In referencing “reasonable due diligence” in the proposed regulations, the Treasury Department and

the IRS intended only to reference an

executor’s responsibility as a fiduciary

under local law to identify and locate all

beneficiaries and did not intend to create

a new standard. Therefore, the requirement of due diligence is removed in the

final regulations. Instead, §1.6035-1(g)

(4) of the final regulations provides that,

if the executor is unable to locate a beneficiary by the date required for filing the

664

Information Return with the IRS, then the

executor must report on the Information

Return the failure to locate the beneficiary

and the efforts the executor has made to

locate the beneficiary. The final regulations retain the requirement to supplement

the Information Return and to furnish the

required Statement to the beneficiary once

the beneficiary has been located or, if the

beneficiary is not located, to report the

distribution of the property to a different

beneficiary.

H. Subsequent transfers of property

subject to reporting.

Proposed §1.6035-1(f) would impose

a reporting requirement with regard to

certain subsequent transfers of property

previously reported (or required to be

reported) on a Statement. Specifically,

it would require the recipient of property to which section 6035 applies to file

with the IRS a supplemental Information

Return, and to furnish to a transferee of

the property a Statement, if the recipient

(who becomes the transferor) distributes

or transfers all or any portion of that property in a transaction in which the transferee determines its basis, in whole or in

part, by reference to the transferor’s basis.

Commenters asserted that section 6035

imposes reporting requirements on executors, but not on subsequent transferees and,

therefore, the Treasury Department and

the IRS lack authority to require reporting

under section 6035 by beneficiaries who

subsequently transfer property acquired

from a decedent. Commenters also noted

that this reporting requirement could continue for generations, and thus be impossible for the IRS to monitor and enforce,

especially with respect to nonresident

non-citizen beneficiaries if the property is

no longer in the United States. Commenters also noted that this subsequent reporting requirement creates uncertainty for

executors, estate tax return preparers, and

beneficiaries as to whether supplemental

reporting is required, and that the failure

to comply with the reporting requirement

is subject to penalties. They contended

this requirement is particularly unfair

with respect to unsophisticated individual

recipients who are likely to be unaware

of the reporting requirements and, as a

result, are more likely to become subject

Bulletin No. 2024–40

to noncompliance penalties. Finally, commenters noted that, in many cases, the

obligation to report the basis of property

transferred is duplicative of other required

filings.

The Treasury Department and the IRS

carefully have reconsidered the benefits and burdens of the proposed subsequent reporting requirement in light of

these comments. The enactment of section 1014(f) created the consistent basis

requirement, and the enactment of section

6035 gave the IRS the ability to enforce

the provisions of section 1014(f) and the

related penalty under section 6662(k)

for use of an inconsistent estate basis for

income tax purposes. Without this proposed reporting requirement, subsequent

ownership changes made through nonrealization events would erode the ability

of the IRS to enforce the consistent basis

requirement under section 1014(f) and the

penalty under section 6662(k) for violations of that requirement.

Nevertheless, the Treasury Department

and the IRS conclude that the burden of the

proposed subsequent reporting requirement, including the potential penalties for

noncompliance, is too heavy a burden to

impose on individual beneficiaries who,

as a practical matter, may have no way

of knowing of the existence of, or of how

to comply with, this subsequent reporting

requirement. The Treasury Department

and the IRS, however, also conclude that

trustees of trusts are one class of beneficiaries for whom the subsequent reporting requirement would not be sufficiently

burdensome to outweigh the needs of, and

benefits to, the IRS and trust beneficiaries.

Generally, the trustee of a trust is likely

to be aware of applicable tax requirements

and to be both able and motivated to comply with these requirements. In addition,

in discharging the trustee’s fiduciary obligations to the trust beneficiaries, a trustee

is likely (even without a supplemental

reporting requirement) to provide certain

relevant information (such as basis) to the

beneficiary to whom the trustee is distributing a trust asset.

Accordingly, the final regulations

retain a reporting requirement for subsequent transfers, but this requirement is

narrowed significantly. Under §1.60351(h)(1) of the final regulations, reporting

requirements are imposed on trustees of

Bulletin No. 2024–40

beneficiary trusts making a distribution of

property that was reported on a Statement

furnished to those trustees, or of any other

property the basis of which is determined,

in whole or in part, by reference to the

basis of this property. Such a trust distribution includes, for example, a transfer of

trust property pursuant to the exercise or

lapse of a person’s power of appointment

(whether general or limited). That section

further provides that trustees of trusts that

receive a distribution of such property,

whether from a beneficiary trust or from

any other trust that has received such

property, either directly or indirectly, also

are subject to these reporting requirements

when making a distribution of that property. This reporting obligation imposed on

trustees continues to apply for each subsequent transfer or distribution until the

property is distributed to a beneficiary not

in trust. However, these reporting requirements do not apply if property is disposed

of by the trustee in a transaction that is a

recognition event for income tax purposes

(whether or not resulting in a gain or loss)

that results in the entire property having

a basis that no longer is related, in whole

or in part, to the property’s final value or,

if applicable, reported value (within the

meaning of §1.1014-10(b)(1) or (2) of the

final regulations, respectively).

By imposing a reporting obligation on

trustees of beneficiary trusts and certain

other recipient trusts, the final regulations

ensure that an individual or entity likely

to incur an income tax realization event

with respect to the trust property has the

necessary information to determine the

correct initial basis. This facilitates the

proper reporting of basis and compliance

with the consistent basis requirement if it

is applicable.

Finally, to reduce burden and improve

administrability, §1.6035-1(h)(2) of the

final regulations adopts the same due date

for the filing of the Information Return and

the furnishing of the Statement with regard

to distributions of property by trustees as

is required under §1.6035-1(c)(3)(ii) of

the final regulations, which is January

31 of the year following the distribution.

Section 1.6035-1(h)(3) of the final regulations adds an example illustrating the

application of the reporting requirements

applicable to trustees making subsequent

transfers of property if the property is sub-

665

ject to reporting under §1.6035-1(e) of the

final regulations.

I. Penalties.

Section 1.6035-1(i) of the final regulations provides a cross-reference to

sections 6721 through 6724 and the regulations in part 301 under sections 6721

through 6724 that impose penalties on the

failure to timely file a correct Information

Return and the failure to timely furnish a

correct Statement as required by section

6035. Sections 301.6721-1(h)(2)(xii) and

301.6722-1(e)(2)(xxxv) of these final regulations clarify that the penalties under

those sections also apply to the failure

to report as required by section 6035. A

penalty applies separately to each initial

or supplemental Information Return that

the executor is required to file with the

IRS, and to each initial or supplemental

Statement that the executor is required

to furnish to a beneficiary. Accordingly,

only one penalty under section 6721 may

be imposed for filing an incorrect Information Return, even if copies of multiple

required Statements are not attached to the

Information Return, but multiple penalties

under section 6722 may be imposed for

furnishing multiple incorrect Statements,

even if the Statements were filed with the

IRS as attachments to a single Information

Return. Section 1.6035-1(i) of the final

regulations also refers to section 6724 and

the regulations in part 301 under section

6724 for rules relating to waivers of these

penalties if it is shown that the failure was

due to reasonable cause and not to willful

neglect.

For purposes of applying these penalties, commenters inquired whether an

appointed executor is relieved of the

reporting requirements if a successor

executor is appointed. The issue of an

executor’s continuing liability under the

Code if a successor executor is appointed

is not limited to the section 6035 reporting

requirements and may depend on varying

factors, including local law. Accordingly,

this issue is outside the scope of these regulations and is not addressed in these final

regulations.

Multiple commenters inquired about

how to complete the Information Return

and Statements in various scenarios, such

as cases in which a nonresident noncitizen

September 30, 2024

is a beneficiary and has no tax identification number, a partnership is a beneficiary,

an executor reports bulk assets and brokerage accounts on an estate tax return,

and others. To the extent not otherwise

addressed in the final regulations or this

preamble, these comments are best considered in contemplation of necessary or

appropriate revisions to the Information

Return and its instructions.

J. Applicability date.

Proposed §1.6035-1(i) provides that,

upon publication of the Treasury Decision

adopting these rules as final in the Federal

Register, §1.6035-1 of the final regulations will apply to property acquired from

a decedent or by reason of the death of a

decedent whose estate tax return is filed

after July 31, 2015. The final regulations

revise the applicability date of §1.60351(i) of the proposed regulation consistent

with section 7805(b)(1). Accordingly,

§1.6035-1(j) of the final regulations does

not reference the July 31, 2015, effective date of section 6035, and provides

instead that §1.6035-1 of the final regulations applies to executors of a decedent’s

estate who are required to file an estate tax

return under section 6018 if that return is

filed after the date of publication of these

final regulations in the Federal Register,

and to trustees receiving certain property

included in the gross estate of such a decedent.

3. Section 6662 — Inconsistent Estate

Basis Reporting

Section 6662(a) and (b)(8) impose an

accuracy-related penalty on the portion of

any underpayment of tax relating to property subject to the consistent basis requirement that is attributable to an inconsistent

estate basis. Proposed §1.6662-8(b) provides that there is an inconsistent estate

basis to the extent that a taxpayer claims

a basis, without regard to the adjustments

described in proposed §1.1014-10(a)

(2), in property described in proposed

§1.6662-8(c) that exceeds that property’s

final value as determined under proposed

§1.1014-10(c). Proposed §1.6662-8(c)

provides that proposed §1.6662-8(b)

applies to property described in proposed

§1.1014-10(b) that is reported or required

September 30, 2024

to be reported on an estate tax return filed

after July 31, 2015.

One commenter noted that the phrase

“without regard to the adjustments

described in §1.1014-10(a),” as used in

proposed §1.6662-8(b), eliminates adjustments that correctly may be made by

other sections of the Code on or after the

decedent’s date of death. The commenter’s concern was that this language would

void the effects of, or disallow the adjustments available under, other sections of

the Code.

Section 1.6662-9(b) of the final regulations clarifies that there is an inconsistent estate basis to the extent that a taxpayer claims a basis that was determined

by using an initial basis as defined in

§1.1014-10(a)(2) of the final regulations that exceeds the property’s final

value as determined under §1.101410(b)(1) of the final regulations. The

property to which this section applies

is property described in §1.1014-10(c)

(1) of the final regulations. In addition,

§1.1014-10(a)(2) of the final regulations

confirms that the taxpayer may compute

basis at any time by adjusting the property’s initial basis due to the operation

of other provisions of the Code without

violating the consistent basis requirement. Section 1.6662-9(b)(2) of the

final regulations provides an example

illustrating the provisions of §1.66629(b) of the final regulations. The provisions regarding the reasonable cause

exception to the penalty are contained in

section 6664 and the regulations in part

1 under section 6664.

In the final regulations, proposed

§1.6662-8 has been redesignated as

§1.6662-9. Section 1.6662-8 is being

reserved for future regulations to address

other provisions under section 6662.

Special Analyses

1. Regulatory Planning and Review

Pursuant to the Memorandum of

Agreement, Review of Treasury Regulations under Executive Order 12866 (June

9, 2023), tax regulatory actions issued by

the IRS are not subject to the requirements

of section 6 of Executive Order 12866, as

amended. Therefore, a regulatory impact

assessment is not required.

666

2. Paperwork Reduction Act

The collection of information contained in these final regulations has been

approved by the Office of Management

and Budget (OMB) in accordance with

the Paperwork Reduction Act of 1995

(44 U.S.C. 3507(d)) under control number 1545-2264. On March 4, 2016, proposed regulations (REG-127923-15)

were published in the Federal Register (81 FR 11486). The proposed regulations proposed amendments to the

Income Tax Regulations (26 CFR part

1) and the Procedure and Administration Regulations (26 CFR part 301).

Comments were specifically requested

concerning (1) whether the proposed

collection of information is necessary

for the proper performance of the functions of the IRS, including whether the

information will have practical utility;

(2) the accuracy of the estimated burden

associated with the proposed collection

of information; (3) how the quality, utility, and clarity of the information to be

collected may be enhanced; (4) how the

burden of complying with the proposed

collection of information may be minimized, including through the application of automated collection techniques

or other forms of information technology; and (5) estimates of capital or

start-up costs and costs of operation,

maintenance, and purchase of service to

provide information.

During the comment period, the IRS

received 5 comments on the collection of

information. With respect to the necessity and utility of the proposed collection

of information, a commenter contended

that the reporting requirements in section 6035 are intended solely to implement and enforce the basis consistency

requirement under section 1014(f) and,

therefore, reporting should be limited to

property subject to section 1014(f). The

Treasury Department and the IRS did not

accept this recommendation because this

comment appears to be based on a budget

proposal rather than on section 6035 as

enacted and its history. See U.S. Dept. of

the Treasury, General Explanations of the

Administration’s Fiscal Year 2015 Revenue Proposals, 160-161 (2014). Based

on the language of section 6035(a)(1)

and (2), Congress mandated that report-

Bulletin No. 2024–40

ing apply to a larger universe of property

than the universe of property subject to

the consistent basis requirement under

section 1014.

Regarding the accuracy of the estimated burden associated with the collection of information, commenters indicated that the IRS estimate of the total

annual reporting burden per respondent

of 5.31 hours was too low. Commenters

estimated that the total annual reporting

burden per respondent should be 20 to 50

hours. Taking into account the input from

the commenters regarding the number of

hours needed to comply, as well as new

rules in the final regulations that reduce

certain reporting burdens, the Treasury

Department and the IRS increased the

estimated total annual reporting burden

per respondent from 5.31 hours to 20

hours.

With respect to how the burden of

complying with the proposed collection of information may be minimized, a

commenter suggested that the IRS could

minimize the burden of complying with

the proposed collection of information by

accepting Form 706, United States Estate

(and Generation-Skipping Transfer) Tax

Return, and Form 709, United States Gift

(and Generation-Skipping Transfer) Tax

Return, along with a statement identifying the beneficiaries, rather than requiring

duplicative reporting on the 6035 Information Return (currently, Form 8971,

Information Regarding Beneficiaries

Acquiring Property From a Decedent).

Another commenter suggested that, if the

executor is the only beneficiary required

to receive the Statement, the IRS could

reduce the cost of compliance by allowing

the executor to check a box on Form 706

certifying that fact. This commenter also

suggested that the reporting requirements

could be satisfied by giving beneficiaries

an appropriately redacted copy of the filed

Form 706.

The Treasury Department and the

IRS did not accept this recommendation

because the filing of Form 709 does not

trigger a section 6035 filing requirement

of Form 8971 and Schedule A. Further,

through its amendment of section 6724(d)

(1) and (2) and the enactment of section

6035, both pursuant to section 2004 of the

2015 Act, Congress identified the statement required by section 6035(a)(1) and

Bulletin No. 2024–40

(2) to be filed with the IRS as an information return, and the statement required

by section 6035(a)(2) to be furnished to

a beneficiary as a payee statement. The

Treasury Department and the IRS conclude that replacing the information return

and payee statement identified in section

6724 with a beneficiary statement attached

to the Form 706, a redacted Form 706, or

the checking of a box on the Form 706

would be contrary to legislative intent and

the statutory language of section 6724(d)

(1)(D) and (d)(2)(II).

A commenter suggested that the

optional ability to electronically file

returns, including Forms 706 and 709,

would facilitate compliance with the

section 6035 reporting requirements and

enhance efficiency. The Treasury Department and the IRS concur that the ability

to electronically file not only Forms 706

and 709, but also Form 8971 and Schedule

A, would facilitate compliance with the

section 6035 reporting requirements and

enhance efficiency. At this time, however,

taxpayers are unable to electronically file

Forms 706 and 709.

Several comments were received with

substantive recommendations that relate

to whether the collection of information

will have practical utility and how the

burden of compliance could be minimized

(including specific recommendations to

expand the exceptions to the section 6035

reporting requirements, modify the reporting requirements in certain circumstances,

and limit or eliminate the subsequent

transfer reporting requirement). These

comments are addressed in the Summary

of Comments and Explanation of Revisions section of this preamble.

The collection of information in these

final regulations is in §1.6035-1(c)(1) and

(2), (d)(1) and (2), and (h)(1) and (2). The

collection of information is necessary to

comply with the reporting requirements

under section 6035(a). The likely respondents are executors and other persons

required to file an estate tax return under

section 6018 and trustees making in-kind

distributions of property that was subject

to reporting under section 6035 when initially acquired by the trustee.

Estimated number of respondents:

10,000.

Estimated average annual burden per

respondent: 20 hours.

667

Estimated total annual reporting burden: 200,000 hours.

An agency may not conduct or sponsor,

and a person is not required to respond

to, a collection of information unless the

collection of information displays a valid

control number assigned by the OMB.

3. Regulatory Flexibility Act

It is hereby certified that the collection

of information in these regulations will

not have a significant economic impact

on a substantial number of small entities.

This certification is based on the fact that

this rule primarily affects individuals (or

their estates) and trusts, which are not

small entities as defined by the Regulatory

Flexibility Act (5 U.S.C. 601). Although it

is anticipated that there may be an incremental economic impact on executors

that are small entities, including entities

that provide tax and legal services that

assist individuals in preparing tax returns,

any impact would not be significant and

would not affect a substantial number of

small entities. Therefore, a Regulatory

Flexibility Analysis under the Regulatory

Flexibility Act (5 U.S.C. chapter 6) is not

required.

Pursuant to section 7805(f) of the Code,

the notice of proposed rulemaking preceding this regulation was submitted to the

Chief Counsel for the Office of Advocacy

of the Small Business Administration for

comment on its impact on small business.

No comments were received from the

Chief Counsel for the Office of Advocacy

of the Small Business Administration.

4. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates

Reform Act of 1995 (UMRA) requires that

agencies assess anticipated costs and benefits and take certain other actions before

issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or

Tribal government, in the aggregate, or by

the private sector, of $100 million in 1995

dollars, updated annually for inflation.

The final regulations do not include any

Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of

that threshold.

September 30, 2024

5. Executive Order 13132: Federalism

PART 1 – INCOME TAXES

Executive Order 13132 (Federalism)

prohibits an agency from publishing any

rule that has federalism implications if

the rule either imposes substantial, direct

compliance costs on State and local governments, and is not required by statute, or

preempts State law, unless the agency meets

the consultation and funding requirements

of section 6 of the Executive order. These

proposed regulations do not have federalism

implications and do not impose substantial

direct compliance costs on State and local

governments or preempt State law within

the meaning of the Executive order.

Paragraph 1. The authority citation

for part 1 is amended by revising entries

for §§1.1014-1 and 1.1014-2, and adding

entries for §§1.1014-10, and 1.6035-1 in

numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.1014-1 also issued under 26

U.S.C. 1014(f).

Section 1.1014-2 also issued under 26

U.S.C. 1014(f).

Section 1.1014-10 also issued under 26

U.S.C. 1014(f).

*****

Section 1.6035-1 also issued under 26

U.S.C. 6035.

*****

Par 2. Add § 1.1014-0 to read as follows:

Statement of Availability of IRS

Documents

IRS Revenue Procedures, Revenue Rulings, Notices and other guidance cited in

this preamble are published in the Internal

Revenue Bulletin (or Cumulative Bulletin)

and are available from the Superintendent

of Documents, U.S. Government Publishing

Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov.

Drafting Information

The principal authors of these final regulations are Donna Douglas, Melissa Liquerman, and Karlene Lesho of the Office of

Associate Chief Counsel (Passthroughs and

Special Industries). However, other personnel from the Treasury Department and the

IRS participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

Employment taxes, Estate taxes, Excise

taxes, Gift taxes, Income taxes, Penalties,

Reporting and recordkeeping requirements.

Adoption of Amendments to the

Regulations

Accordingly, the Treasury Department

and the IRS are amending 26 CFR parts 1

and 301 as follows:

September 30, 2024

§1.1014-0 Table of contents.

This section lists the captions contained in §§1.1014-1 through 1.1014-10.

§1.1014-1 Basis of property acquired

from a decedent.

(a) General rule.

(b) Scope and application.

(c) Property to which section 1014

does not apply.

(d) Applicability date.

§1.1014-2 Property acquired from a

decedent.

(a) In general.

(b) Property acquired from a decedent

dying after December 31, 1953.

(1) In general.

(2) Rules for the application of paragraph (b)(1) of this section.

(3) Exceptions to application of this

paragraph.

(c) Special basis rules with respect to

certain property acquired from a decedent.

(1) Stock or securities of a foreign personal holding company.

(2) Spouse’s interest in community

property of decedent dying after October

21, 1942, and on or before December 31,

1947.

(b) Property acquired from a decedent

dying before March 1, 1913.

(c) Reinvestments by a fiduciary.

(d) Reinvestments of property transferred during life.

(e) Alternate valuation dates.

§1.1014-4 Uniformity of basis;

adjustment to basis.

(a) In general.

(b) Multiple interests.

(c) Records.

(d) Effective/applicability date.

§1.1014-5 Gain or loss.

(a) Sale or other disposition of a life

interest, remainder interest, or other interest in property acquired from a decedent.

(b) Sale or other disposition of certain

term interests.

(1) In general.

(2) Effective/applicability date.

(c) Sale or other disposition of a term

interest in a tax-exempt trust.

(1) In general.

(2) Tax-exempt trust defined.

(3) Taxable beneficiary defined.

(4) Effective/applicability date.

(d) Illustrations.

§1.1014-6 Special rule for adjustments to

basis where property is acquired from a

decedent prior to his death.

(a) In general.

(b) Multiple interests in property

described in section 1014(b)(9) and

acquired from a decedent prior to his death.

(c) Adjustments for deductions allowed

prior to the decedent’s death.

§1.1014-7 Example applying rules

§§1.1014-4 through 1.1014-6 to case

involving multiple interests.

§1.1014-8 Bequest, devise, or inheritance

of a remainder interest.

§1.1014-9 Special rule with respect to

DISC stock.

(a) Fair market value.

(a) In general.

(b) Portion of property acquired from

decedent before his death included in

decedent’s gross estate.

(1) In general.

668

Bulletin No. 2024–40

§1.1014-3 Other basis rules.

(2) Example.

(c) Estate tax valuation date.

(d) Examples.

§1.1014-10 Basis of property acquired

from a decedent must be consistent with

property’s Federal estate tax value.

(a) Consistent basis requirement.

(1) General rule.

(2) Initial basis in consistent basis

property and effect of basis adjustments.

(3) Duration of consistent basis

requirement.

(b) Final value and reported value.

(1) Final value.

(2) Reported value if no final value yet

determined.

(3) Special rules.

(c) Consistent basis property.

(1) Property subject to the consistent

basis requirement.

(2) Property excepted from or not subject to the consistent basis requirement.

(d) Definitions.

(e) Examples.

(f) Applicability date.

Par. 3. Section 1.1014-1 is amended by:

1. Adding two sentences after the

fourth sentence of paragraph (a).

2. Revising the last sentence and adding two sentences after the last sentence

of paragraph (b).

3. Revising paragraphs (c) and (d).

The addition and revisions read as follows:

described in §1.1014-10(c)(1). For property subject to the consistent basis requirement, the rules in §1.1014-10 modify the

rules set forth in paragraphs (a) and (c)

of this section and in §§1.1014-2 through

1.1014-9.

(c) Property to which section 1014

does not apply. Section 1014 has no application to property that constitutes a right

to receive an item of income in respect of

a decedent under section 691.

(d) Applicability date. This section

applies after September 17, 2024. For

rules on and before September 17, 2024,

see § 1.1014-1 as contained in 26 CFR

part 1 revised as of January 19, 2017.

Par. 4. Section 1.1014-2 is amended by

revising the second sentence of paragraph

(b)(2) as follows:

§1.1014-2 Property acquired from a

decedent.

*****

(b) * * *

(2) * * *Except as provided in §1.101410, it is not necessary for the application

of this paragraph (b)(2) that an estate tax

return be required to be filed for the estate

of the decedent or that an estate tax be

payable.* * *

*****

Par. 5. Section 1.1014-10 is added to

read as follows:

§1.1014-1 Basis of property acquired

from a decedent.

§1.1014–10 Basis of property acquired

from a decedent must be consistent

with property’s Federal estate tax

value.

(a) * * *For certain property acquired

from a decedent, the initial basis of the

property must not exceed the property’s

final value for Federal estate tax purposes. See section 1014(f) and §1.1014-10

for rules relating to the consistent basis

requirement. * * *

(b) * * *In §§1.1014-1 to 1.1014-6,

inclusive, and §1.1014-10, whenever the

words property acquired from a decedent are used, they also mean property

passed from a decedent, and the phrase

person who acquired it from the decedent

includes the person to whom it passed

from the decedent. The consistent basis

rules in §1.1014-10 apply to property subject to the consistent basis requirement, as

(a) Consistent basis requirement—(1)

General rule. The consistent basis requirement is the requirement that the initial basis

in certain property be equal to or less than

the property’s final value as determined

under paragraph (b)(1) of this section or, if

This text is long and has been trimmed here. Open the source document for the complete record.