New Basis Consistency and Reporting Proposed Regulations – Did the IRS Go Too Far?

The IRS has issued proposed regulations under new Code Sections 1014(f) (relating to requirements that the initial income tax basis of an asset received from a decedent cannot exceed the estate tax basis of that asset) and Section 6035 (relating to the reporting of basis on property acquired from a decedent). You can read those regulations here and here.

The proposed regulations have two requirements which are eyebrow raising (to say the least), and of questionable validity.

Zero Basis for Assets Not Reported on an Estate Tax Return. The regulations provide that if an asset is required to be reported on an estate tax return, is otherwise subject to the basis consistency rules of Section 1014(f) (e.g., assets that do not increase the estate tax after credits are not subject to the rules), and is NOT reported on a return before the expiration of the estate tax statute of limitations, the basis of the asset in the hands of the recipient is adjusted to ZERO!

Looking back at Section 1014(f), I do not see…

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