Even though there was no estate tax in 2010, many estates still have to file an estate tax return. Those estates with non cash assets exceeding $1.3 million must file Form 8939 with the IRS. The reason for this is that the IRS wants to know how the executor allocated the basis to heirs. In addition, the heirs will need to know the basis of the inherited assets so that when the inherited property is sold they can calculate their gain or loss. In addition, if the property is business property, the heirs can take depreciation if there is a basis step up.
On property that is not given a basis step up, the basis of the decedent is the basis for the heir.
In 2010, executors can increase the basis of estate assets by $1.3 million plus an extra $3 million for assets that go to a surviving spouse. The filing of the Form 8939 is due by April 18, 2011, although the Service may extend the deadline because the agency has not yet issued any public guidance on the allocation rules.
