March 23 Update:  The IRS has announced in Notice 2016-27 that the first forms will now be due on June 30, 2016, and not March 31, 2016 as originally provided in Notice 2016-19 that accompanied these proposed regulations.

Coming up on the second extended due date for the first filings of Form 8971, the “consistent basis reporting” form required to be filed by estates that filed a Form 706 that showed tax due after July 31, 2015 that would have been due on or before March 31, 2016, the IRS has released proposed regulations (REG-127923-15) and a temporary regulation (TD 9757) that provide guidance for the initial filings, as well as other filings due before the publication of final regulations.

In the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 Congress added new IRC §6035.  The provision imposed two reporting mandates on estates in order to prevent estates from paying estate tax based on one claimed value and then later having heirs claim a higher basis in the asset for income tax reporting, arguing that the estate’s value was in error or, more likely, just betting that the IRS would never actually discover the discrepancy.

Final regulations have been issued (TD 9729) to eliminate what some had claimed was a method that could allow the use of a charitable remainder trustto allow a donor to gain a charitable deduction, have the trust sell off the appreciated assets, acquire new high basis assets and then allow the grantor to sell off his retained interest (the right to future payments from the trust) while recognizing no or very little taxable gain.