§ 1.6035-1 Basis information to persons acquiring property from decedent. ( a ) *Overview.* This section implements the reporting requirements under section 6035 of the Internal Revenue Code (Code) applicable to executors and certain trustees. In general, the reporting requirements of this section require providing information to the IRS on the identity of persons acquiring property from a decedent and providing basis information to persons acquiring that property from the decedent. Basis information is needed by certain persons acquiring property from a decedent in order to comply with the consistent basis requirement of section 1014(f) of the Code. *See* § 1.1014-10 for rules applicable to the consistent basis requirement.
( b ) *Applicability of section 6035 reporting requirements* — ( 1 ) *In general.* The reporting requirements under section 6035 of the Code apply only in the case of an estate in which the executor is required to file an estate tax return under section 6018 of the Code (determined without regard to § 20.2010-2(a)(1) of this chapter) (*required estate tax return*) and the executor files that return after July 31, 2015. The requirements do not apply in the case of an estate whose 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. Whether an estate tax return is a required estate tax return depends on the relevant factors identified in section 6018 and the corresponding regulations, including 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. An election under section 2032 or 2032A of the Code to determine the value of the gross estate in accordance with those respective provisions is not relevant to whether an executor is required to file an estate tax return under section 6018. If an estate tax return is not required to be filed under section 6018 based on the relevant factors identified in section 6018, then an estate tax return filed for another purpose (such as to make a portability election under section 2010(c)(5) of the Code, an allocation or election under section 2632 of the Code with regard to a decedent's generation-skipping transfer tax exemption, or a protective filing to avoid a penalty or satisfy a State law requirement) is not a required estate tax return for purposes of this section.
( 2 ) *Executor(s) subject to section 6035 reporting requirements.* For purposes of this section, the term *executor* has the same meaning as in section 2203 of the Code, as expanded to include all persons required under section 6018(b) to file an estate tax return. Thus, more than one person may be subject to the reporting requirements for the same decedent's estate. If one executor is unable to file a complete estate tax return (for example, if the executor has insufficient information about property in the decedent's gross estate that is not in the possession of that executor), each person required to file a return is subject to the reporting requirements of this section only with regard to the property reported (or required to be reported) on the estate tax return required to be filed by that person. Similarly, if no executor is appointed by a court, each person in actual or constructive possession of any property of the decedent is an executor for purposes of this section and is subject to the reporting requirements of this section, 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 under section 6018(b).
( 3 ) *Examples.* The following examples, in which the decedent D was a United States citizen at the time of the decedent's death, illustrates the application of this paragraph (b). ( i ) *Example 1* —*Executor required to file a return under section 6018.* The value at death of property includible in D's gross estate exceeds the basic exclusion amount in effect for the year of D's death under section 2010(c). On the timely-filed estate tax return, D's executor makes a valid alternate valuation election under section 2032 to value the property of D's gross estate as of a date subsequent to the date of death. As a result, the value of property includible in D's gross estate is decreased to a value that is less than the basic exclusion amount in effect for the year of D's death. Because D's executor is required to file an estate tax return under section 6018, D's executor also is subject to the reporting requirements of section 6035. This is true even though no estate tax liability was incurred, and the requirements of section 1014(f) do not apply to any property includible in D's gross estate. *See* § 1.1014-10(c)(1).
( ii ) *Example 2* —*Executor not required to file a return under section 6018.* The value at death of property includible in D's gross estate does not exceed the basic exclusion amount in effect for the year of D's death under section 2010(c) of the Code. In accordance with the terms of D's will, D's executor distributes D's entire estate to D's only child. D's executor files an estate tax return solely for the purpose of making a portability election under section 2010(c)(5). Because D's executor is not required to file an estate tax return under section 6018, D's executor is not subject to the reporting requirements of section 6035.
( iii ) *Example 3* —*No executor appointed.* The value at death of property includible in D's gross estate exceeds the basic exclusion amount in effect for the year of D's death under section 2010(c) and consists entirely of D's interests in Property A and Property B that D owned with Nephew A and Nephew B, respectively, as joint tenants with rights of survivorship. Pursuant to local law, Nephew A becomes the sole owner of Property A and Nephew B becomes the sole owner of Property B upon D's death. No executor or administrator is appointed, qualified, or acting within the United States for D's estate on the due date of D's estate tax return. Because Nephew A has actual or constructive possession of Property A, Nephew A is an executor described in paragraph (b)(2) of this section with regard to D's interest in Property A. Because Nephew A is required to file an estate tax return under section 6018 with regard to D's interest in Property A, Nephew A also is subject to the reporting requirements of section 6035 with respect to Property A. Similarly, because Nephew B has actual or constructive possession of Property B on the due date of D's estate tax return, Nephew B is an executor described in paragraph (b)(2) of this section with regard to D's interest in Property B. Because Nephew B is required to file an estate tax return under section 6018 with regard to D's interest in Property B, Nephew B also is subject to the reporting requirements of section 6035 with respect to Property B.
( iv ) *Example 4* —*Executor unable to make a complete return.* The value at death of property includible in D's gross estate exceeds the basic exclusion amount in effect for the year of D's death under section 2010(c). E is appointed the executor of D's estate. During the administration of D's estate, E discovers that D has made transfers each year for the past ten years to T as trustee of Trust. E contacts T, but T refuses to provide E with any information regarding Trust. E timely files D's estate tax return reporting the value of all of the property in D's gross estate except Trust. Pursuant to § 20.6018-2 of this chapter, E includes with the return a statement that gives T's name and contact information and the date and amount of each transfer from D to T as trustee of Trust, which is all the information E has about Trust. The IRS provides notice to T of T's obligation to make D's estate return as to Trust. Because E is required to file an estate tax return under section 6018, E is subject to the reporting requirements of section 6035 as to the property reported on the estate tax return filed by E. Because T is required to file an estate tax return under section 6018, T is subject to the reporting requirements of section 6035 as to Trust.
( c ) *Required Information Return and Statement* (*s*) — (1) *Required Information Return.* An executor required to file an estate tax return under section 6018 must file with the IRS an Information Return by the date required under paragraph (c)(3) of this section. The term *Information Return* refers to the Form 8971, *Information Regarding Beneficiaries Acquiring Property from a Decedent,* and all required attachments. Required attachments include a copy of each Statement described in paragraph (c)(2) of this section (if any) required to be furnished to a beneficiary who acquires property within the meaning of paragraph (c)(4) of this section on or before the due date of the estate tax return or, if earlier, the date on which the estate tax return is filed with the IRS. Required attachments also include a copy of each Statement (if any) furnished pursuant to paragraph (c)(5) of this section before the filing of the Information Return. The term *Information Return* also refers to any successor form or procedure designated by the IRS for this purpose. The Information Return must identify each beneficiary who has acquired or will acquire property subject to reporting (under paragraph (e) of this section), as well as other information prescribed by the Information Return and the instructions for that form. For the duty to supplement the Information Return in the event such property is acquired by a beneficiary after the filing of the estate tax return, see paragraph (c)(3)(ii) of this section. For the duty to supplement the Information Return in the event of a change to the information required to be reported, see paragraph (d) of this section. ( 2 ) *Required Statement* (*s*). An executor required to file an estate tax return under section 6018 also must furnish a Statement to each beneficiary who acquires property subject to reporting under paragraph (e) of this section. For purposes of this section, the term *Statement* refers to the payee statement described as Schedule A of the Information Return to be furnished to a beneficiary, or any successor form, schedule, or procedure designated by the IRS for this purpose. The Statement furnished to a beneficiary must identify that beneficiary's acquired property and its value and other information prescribed by the Statement and the instructions for that form. For each property reported on a Statement, the value the executor reports on that Statement is the value of the property as reported on the estate tax return filed with the IRS. Generally, this is the value of the property on the date of the decedent's death, except in the case of an election in which the value is determined under section 2032 or 2032A, in which case it is the value determined under the applicable provision. If different interests in the same property pass from the decedent to one or more income beneficiaries or life tenants and remaindermen, the value to be reported is the value of the entire property and each recipient will be responsible for identifying his or her respective share of uniform basis. For the duty to supplement the Statement in the event of a change to the information required to be reported, including a change in the identified value of property reported on a Statement, see paragraph (d) of this section.
( 3 ) *Due dates* — ( i ) *General rule.* Except as provided in paragraphs (c)(3)(ii) and (iii) of this section and in § 1.6035-2, the executor must file the Information Return with the IRS on or before the due date specified in this paragraph (c)(3)(i). In addition, each Statement, a copy of which is required to be attached to the Information Return, must be furnished to the named beneficiary on or before this same due date. The Information Return must be filed, and each such Statement (if any) must be furnished to its named beneficiary, on or before the earlier of— ( A ) The date that is 30 days after the due date of the estate tax return required under section 6018 (including extensions, if any); or
( B ) The date that is 30 days after the date on which that estate tax return is filed with the IRS.
( ii ) *Due date and applicable rules if property is acquired subsequently by beneficiary.* If a beneficiary acquires property subject to reporting after the due date of the estate tax return (or the earlier filing of the Information Return), the executor must furnish a Statement to that beneficiary with regard to that acquired property on or before January 31 of the year following the beneficiary's acquisition of that property. By that same January 31, the executor also must attach a copy of the Statement to a supplement to the Information Return (a supplemental Information Return) and must file the supplemental Information Return with the IRS. The supplemental Information Return must include a copy of each Statement required to be furnished for that year pursuant to this paragraph (c)(3)(ii), as well as a copy of each Statement (if any) furnished in accordance with paragraph (c)(5) of this section that has not already been filed with the IRS as an attachment to the Information Return or a supplement to the Information Return. The requirements of this paragraph (c)(3)(ii) do not apply if the property already has been reported on a Statement furnished pursuant to paragraph (c)(5) of this section. See this paragraph (c)(3) and paragraph (d)(4) of this section for the due date of other required supplements to this reporting.
( iii ) *Transition rule.* If the due date of an estate tax return required to be filed by section 6018 is on or before July 31, 2015, but the executor does not file the estate tax return with the IRS until after July 31, 2015, then the Information Return and all required Statements are due on or before the date that is 30 days after the date on which the estate tax return is filed, except as provided in § 1.6035-2.
( 4 ) *Acquiring an interest in property.* For purposes of this section, the term *acquired property* refers to property subject to reporting under paragraph (e) of this section that a beneficiary acquires. A beneficiary acquires such property when, under local law, 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 (such as, for example, to sell or depreciate the property). In many cases, a beneficiary's acquisition of property occurs upon an executor's or trustee's distribution of the property. For property passing by contract or by operation of law, the beneficiary's acquisition of that property generally occurs automatically upon the death of the decedent.
( 5 ) *Option to furnish Statement(s) prior to the acquisition of property by a beneficiary.* An executor may satisfy the requirement in paragraph (c)(2) of this section to furnish a Statement to a beneficiary by furnishing the Statement to the beneficiary prior to the beneficiary's acquisition of the property subject to reporting under paragraph (e) of this section, provided that the executor has reason to believe that the beneficiary will acquire that property. The Statement furnished to such a beneficiary 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 for that form (and must include information relating to other property actually acquired by such beneficiary as may be required under paragraph (c)(2) of this section). If, after satisfying the requirements of this paragraph (c)(5), the property is acquired by a different beneficiary, the executor must update the beneficiary information in the Information Return and furnish a Statement to that beneficiary pursuant to the duty to supplement to report a change in beneficiary information as described in paragraph (d)(2)(i) of this section. The executor additionally is subject to the duty to supplement to report other changes to the information required to be reported as identified in paragraph (d) of this section.
( 6 ) *Example.* The following example illustrates the application of this paragraph (c). ( i ) The decedent D was a United States citizen at the time of D's death and the executor of D's estate E is required to file an estate tax return under section 6018. The terms of D's will provide for D's entire estate to be distributed to a marital trust. Prior to timely filing the estate tax return for D's estate, E funded the marital trust with a portion of the property, the value of which is included in D's gross estate. Under paragraph (c)(4) of this section, the marital trust has acquired this property upon the funding of the trust by E. Under paragraphs (c)(1) and (c)(3)(i) of this section, within 30 days of filing the estate tax return, E must file with the IRS the Information Return identifying the marital trust as the beneficiary (as well as other information prescribed by the Information Return or instructions) and must include with the Information Return all required attachments. Under paragraphs (c)(2) and (c)(3)(i) of this section, by the same date, E must furnish to the marital trust the Statement identifying the portion of the property distributed to the marital trust and its estate tax value (as well as any other information prescribed by the Statement or instructions). A copy of the Statement is a required attachment to be included with the Information Return. Pursuant to paragraph (c)(5) of this section, E may choose to expand the property identified on the Statement to also include the property the marital trust is expected to acquire subsequently. If E so chooses, the Statement to be furnished to the marital trust will identify all such property and its value at the date of death and, except in the case of any changes to the information required to be reported, no further Statement will be required at the time of the completion of the funding of the trust.
( ii ) However, if E chooses not to expand the reporting to property not yet acquired by the marital trust, then, once the marital trust has acquired additional property, E is subject to further reporting. Under paragraph (c)(3)(ii) of this section, in each year that E distributes additional property to the marital trust, E must furnish, by January 31 of the following year, a Statement to the marital trust identifying all of the property the marital trust has acquired from D's estate that year and the property's estate tax value (as well as any other information prescribed by the Statement or instructions). By the same date, E must file with the IRS a supplemental Information Return and attach a copy of that Statement as well as any other required attachments.
( d ) *Duty to supplement* — ( 1 ) *Duty to supplement to report changes to the information reported on the Information Return or Statement* (*s*). An executor to whom the reporting requirements of this section apply must file a supplemental Information Return with the IRS and furnish a Statement or supplemental Statement to each affected beneficiary if 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. The executor must file the supplemental Information Return with the IRS, including copies of each Statement or supplemental Statement furnished to affected beneficiaries, and must furnish a Statement or supplemental Statement to each affected beneficiary, by the due date described in paragraph (d)(4) of this section.
( 2 ) *Changes requiring supplement.* This paragraph (d)(2) provides a nonexhaustive list of changes that require supplemental reporting under paragraph (d)(1) of this section. ( i ) *Change in beneficiary information.* The receipt, discovery, or acquisition by the executor of information that changes the beneficiary to whom property is to be distributed (pursuant to a death, disclaimer, bankruptcy, or otherwise), or corrects or completes other beneficiary information originally reported, will give rise to a duty to supplement.
( ii ) *Change in the identified value of property.* The supplementing of an estate tax return to report a corrected estate tax value of property that was previously reported on an estate tax return and a Statement will give rise to a duty to supplement. In addition, a final determination of value of property for Federal estate tax purposes (within the meaning of § 1.1014-10(b)(1)) that differs from the value provided on a Statement or supplement to a Statement will give rise to a duty to supplement.
( iii ) *Change or addition of property subject to reporting.* The supplementing of an estate tax return to report the estate tax value of property subject to reporting under paragraph (e) of this section, if that property and/or its value previously was not reported on an estate tax return or supplement to the estate tax return, will give rise to a duty to supplement. A duty to supplement also will arise if such property or its value that previously was not reported on an estate tax return or supplement to the estate tax return is included in the decedent's gross estate pursuant to an examination by the IRS or otherwise.
( iv ) *Change in property to be acquired by beneficiary.* A duty to supplement will arise if an executor furnishes a Statement to a beneficiary prior to the beneficiary's acquisition of property pursuant to paragraph (c)(5) of this section and the beneficiary ultimately acquires property different from the property identified on that Statement. A beneficiary's acquisition of different property may occur for any reason, including an executor's receipt of different property in a transaction in which the basis of the new property received by the executor is determined, in whole or in part, by reference to the final value of property acquired from or as a result of the death of the decedent (for example, as the result of a like-kind exchange under section 1031 or an involuntary conversion).
( 3 ) *Exceptions; no duty to supplement despite certain changes.* Notwithstanding paragraph (d)(2) of this section, no supplemental reporting under this section is required for: ( i ) Inconsequential errors or omissions within the meaning of § 301.6722-1(b) of this chapter;
( ii ) Changes resulting from an event that triggers an additional estate tax under section 2032A, including changes in value in the event of a beneficiary election under section 1016(c) of the Code;
( iii ) Adjustments to the basis of property pursuant to sections of the Code other than section 1014(f); and
( iv ) Any other change that is identified as requiring no supplemental reporting under this section in published guidance in the Federal Register or in the Internal Revenue Bulletin (*see* § 601.601(d)(2)(ii)( b ) of this chapter).
( 4 ) *Due date of supplemental reporting.* The supplemental reporting required by this paragraph (d) must be filed with the IRS and furnished to each affected beneficiary 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 information provided on the Information Return or Statement (or supplement to either) requires supplemental reporting. For changes occurring as a result of supplementing the estate tax return, the date on which the information becomes available to the executor is deemed to be the filing date of the supplemental information. Therefore, for changes occurring as a result of supplementing the estate tax return, the due date of the supplemental reporting required by this paragraph (d) is 30 days after the filing date of the supplemental information. For changes occurring as a result of a determination of final value, the date on which the information becomes available to the executor is deemed to be the date a value becomes the final value under § 1.1014-10(b)(1). Therefore, for changes occurring as a result of a determination of final value, the due date of the supplemental reporting required by this paragraph (d) is 30 days after the date a value becomes the final value under § 1.1014-10(b)(1). However, with regard to property that has not been acquired by a beneficiary on or before the due date described in this paragraph (d)(4) and for which a Statement was not provided to the beneficiary pursuant to paragraph (c)(5) of this section, the due date may be delayed until the due date described in paragraph (c)(3)(ii) of this section.
( 5 ) *Duration of duty to supplement.* An executor's duty to supplement as described in this section continues to apply until a final determination of value for Federal estate tax purposes (a final value within the meaning of § 1.1014-10(b)(1)) is determined for all property subject to reporting (under paragraph (e) of this section) or, if later, until such property has been acquired by a beneficiary. Therefore, the executor's final supplemental reporting is the reporting to the IRS and the furnishing of Statements to beneficiaries with regard to the last to occur of these two events, assuming that either event would create a change requiring supplemental reporting.
( 6 ) *Examples.* The following examples illustrate the application of this paragraph (d). In each case, the decedent D was a U.S. citizen and D's executor E was required under section 6018 to file an estate tax return. ( i ) *Example 1* —*Change in identified value of property.* D's estate includes stock in a closely-held corporation. E distributes the stock to a beneficiary B of the estate before the due date of the estate tax return. D's executor reports the value of the stock at $14 million on D's estate tax return and on the Statement furnished to B. On examination of D's estate tax return, the IRS adjusts the value of the closely-held stock to $18 million. A court subsequently determines that the fair market value of the closely-held stock for Federal estate tax purposes is $17 million and the court's decision becomes final on June 15th. On or before July 15th of the same year, E must furnish a supplemental Statement to B showing the final value of $17 million for the closely-held stock, and must attach a copy of that supplemental Statement to a supplemental Information Return and file it with the IRS.
( ii ) *Example 2* —*Duration of the duty to supplement.* D's gross estate includes stock in closely-held corporation X, stock in closely-held corporation Y, and cash. D's will directs E to distribute 50% of the value of D's estate to A and 50% to B in any manner to which A and B agree. A and B agree that A will take the stock in corporation X and B will take stock in corporation Y and they will divide the cash in such amounts as to cause each to take an equal share of the value D's estate. E timely files D's estate tax return and furnishes a Statement to A and to B pursuant to paragraph (c)(5) of this section. The IRS accepts the return as filed and the period of limitations on assessment of estate tax expires. Thereafter, A and B agree to revise their agreement. E distributes the stock in corporation X to B and the stock in corporation Y to A in accordance with a revised agreement between A and B. E's final supplemental reporting is the filing of a supplemental Information Return and furnishing of a supplemental Statement to A describing the shares and value of stock distributed to A and a supplemental Statement to B describing the shares and value of stock distributed to B.
( e ) *Property for which reporting is required* — ( 1 ) *In general.* Except for excepted property subject to only limited reporting as described in paragraph (f) of this section, the property subject to reporting under this section is *included property* and any other property the basis of which is determined, in whole or in part, by reference to the basis of the included property (for example, property acquired in a like-kind exchange or an involuntary conversion). For purposes of this section, *included property* is property the value of which is included in the value of the decedent's gross estate as defined in section 2031 or 2103. Generally, included property refers to property whose value is reported on an estate tax return, but it also refers to property whose value otherwise is included in the total value of the gross estate (for example, during examination by the IRS). Thus, included property includes property that qualified, in whole or in part, for an estate tax marital deduction under section 2056, 2056A, or 2106(a)(3) or for an estate tax charitable deduction under section 2055 or 2106(a)(2). It further includes property included in the decedent's gross estate that is distributed to a surviving spouse in satisfaction of that surviving spouse's interest in community property not included in the gross estate that the executor has distributed to a non-spouse pursuant to State law properly applied. However, 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, such as the property of a deceased nonresident noncitizen that is not subject to United States estate tax, and the surviving spouse's share of community property described in section 1014(b)(6).
( 2 ) *Examples.* The following examples illustrate the application of this paragraph (e). In each case, the decedent D was a U.S. citizen and D's executor E was required under section 6018 to file an estate tax return. ( i ) *Example 1* —*Included property.* Pursuant to the terms of D's will, a trust is established and funded with property, the value of which is includible in D's gross estate under section 2031. The trust is a charitable remainder annuity trust described in section 664(d)(1). The terms of the trust provide that, in each taxable year during the lifetime of D's surviving spouse S, the trustee must pay to S an annuity of 5% of the initial net fair market value of all property passing to the trust as finally determined for Federal estate tax purposes. Upon the death of S, the trustee must distribute all of the then-principal and income of the trust to organizations described in sections 170(c), 2055(a) and 2522(a) as the trustee selects, in the trustee's sole discretion. The property used to fund the trust is included property and is subject to the reporting requirements of this section. This is true whether or not the requirements of section 1014(f) apply to the property transferred to the trust. *See* § 1.1014-10(d)(4).
( ii ) *Example 2* —*Property the basis of which is determined by reference to the basis of included property.* D's gross estate includes the value of Property A. Before the due date for filing the estate tax return, E exchanges Property A for Property B in a like-kind exchange pursuant to section 1031, for which D's estate recognizes no gain or loss. Property B is property subject to reporting as prescribed in this section. With respect to Property B, the value E reports on the Statement is the value reported for Property A on the estate tax return filed with the IRS.
( f ) *Excepted property requiring only limited reporting* — ( 1 ) *Excepted property.* Certain included property that is described in paragraph (f)(2) of this section (excepted property) is subject to more limited reporting than the reporting required under paragraph (c) of this section. The requirement to file an Information Return with the IRS as described in paragraph (c)(1) of this section remains the same even if all property subject to reporting under paragraph (e) of this section is excepted property. However, the executor is not required to identify or provide any other information for excepted property on the Information Return, and the executor is not required to furnish a Statement to the beneficiary with regard to that property. Instead, the executor is required only to report on the Information Return, in accordance with the instructions for that form, that some or all of the property subject to reporting is excepted property described in this paragraph (f). Further, the executor is not required to identify or provide any other information for excepted property on any Statement furnished to a beneficiary and, if this property is the only property that a beneficiary has acquired, an executor is not required to furnish a Statement to that beneficiary.
( 2 ) *List of excepted property.* Excepted property includes— ( i ) United States dollars (as defined in paragraph (f)(3) of this section).
( ii ) United States dollar-denominated demand deposits.
( iii ) Certificates of deposit denominated in United States dollars.
( iv ) 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).
( v ) Shares of a registered investment company priced in United States dollars that is a money market fund under Rule 2a-7 under the Investment Company Act of 1940 (17 CFR 270.2a).
( vi ) Life insurance proceeds on the life of the decedent payable in a lump sum in United States dollars.
( vii ) Federal, State, and local tax refunds and other refunds payable in United States dollars.
( viii ) Notes that are forgiven in full by the decedent upon the decedent's death, whether or not denominated in United States dollars.
( ix ) Household and personal effects for which an appraisal is not required under § 20.2031-6(b) of this chapter.
( x ) Property that, prior to distribution from the estate or the decedent's revocable trust, is completely sold, exchanged, or otherwise disposed of in one or more transactions that are recognition events for Federal income tax purposes (whether or not resulting in a gain or loss, and whether or not any gain is capital or ordinary). Such property includes, but is not limited to— ( A ) Property distributed in satisfaction of a pecuniary bequest on which the estate recognizes any gain or loss pursuant to § 1.661(a)-2(f);
( B ) Property for which an election under section 643(e)(3) has been made for the estate to recognize any gain or loss;
( C ) Interests in a business entity that are redeemed for United States dollars prior to being distributed to the beneficiary;
( D ) Property disposed of in a transaction described in section 267(a) and (b)(13); and
( E ) Property subject to the mark to market accounting method at the time of distribution from the estate or from the decedent's revocable trust.
( xi ) Other property having an initial basis that is not in any way determined with regard to or derived from the property's fair market value for Federal estate tax purposes. For purposes of this section, such property includes but is not limited to— ( A ) Annuity contracts subject to section 72 and amounts received as an annuity subject to section 72;
( B ) An interest in property that consists entirely of the right to receive an item of income in respect of a decedent as defined in section 691;
( C ) Amounts received under installment obligations arising from a transaction for which the installment method for determining gain under section 453 applies;
( D ) Appreciated property described in section 1014(e) that is acquired by the decedent within 1 year of death;
( E ) Stock of a passive foreign investment company subject to section 1296(i), but only if the basis of such stock is the adjusted basis in the hands of the decedent immediately before the decedent's death; and
( F ) Interests in and distributions from retirement plans and deferred compensation plans, including individual retirement arrangements as defined in sections 408 and 408A, that are expressed entirely in United States dollars.
( xii ) 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 resulting gain or loss is recognized by the estate.
( xiii ) Property included in the gross estate of a beneficiary who died before the due date of the Information Return.
( xiv ) Any other property that is identified as excepted property in published guidance in the Federal Register or in the Internal Revenue Bulletin (*see* § 601.601(d)(2)(ii)( b ) of this chapter).
( 3 ) *United States dollars defined.* For purposes of this paragraph (f), the term *United States dollars* means the official currency of the United States. The term United States dollars includes physical bills and coins for which 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.
( 4 ) *Examples.* The following examples illustrate the application of this paragraph (f). In each case, the decedent D was a U.S. citizen and D's executor E is required under section 6018 to file an estate tax return. ( i ) *Example 1* —*Reporting household and personal effects.* Included in D's gross estate are D's household and personal effects. The only item included in D's household and personal effects with a value in excess of $3,000 is a painting. E attaches to D's estate tax return an appraisal of the painting prepared in accordance with § 20.2031-6(b) of this chapter and a room-by-room itemization of D's other household and personal effects prepared in accordance with § 20.2031-6(a) of this chapter. E must furnish to the beneficiary of the painting the Statement required by paragraph (c)(2) of this section. E is not required to report on a Statement furnished to any beneficiary any information about D's other household and personal effects. If a beneficiary of D's household effects, other than the beneficiary of the painting, has acquired no other property, E is not required to furnish a Statement to that beneficiary. E is required to file the Information Return required by section (c)(1) of this section and attach to that Information Return a copy of the Statement furnished to the beneficiary of the painting. E must disclose on the Information Return that some or all of the property included in D's gross estate is excepted property described in this paragraph (f).
( ii ) *Example 2* —*Reporting if property is disposed of in taxable transaction.* Included in D's estate are shares in X, a publicly traded company. Shortly after D's death but prior to the filing of the estate tax return for D's estate, X is acquired by T, also a publicly traded company. In exchange for the shares in X, the estate receives shares in T and cash in a fully taxable transaction. E is required to report on the Information Return required by paragraph (c)(1) of this section that some or all of the property included in D's gross estate is excepted property described in this paragraph (f). E is not required to furnish a Statement to any recipient with respect to the cash, X stock, or T stock.
( iii ) *Example 3* —*Reporting if estate is liquidated prior to distribution.* Property A is the only property in D's estate. Prior to filing the estate tax return for D's estate, E sells Property A for $15,000,000. D's estate recognizes gain on the sale of Property A for income tax purposes. E distributes the $15,000,000 among the beneficiaries of D's estate. E must file the Information Return required by paragraph (c)(1) of this section even though all of the property included in D's gross estate is excepted property within the meaning of this paragraph (f). E is not required to furnish to the beneficiaries of D's estate a Statement with regard to Property A, and therefore is not required to attach a copy of any Statement to the Information Return. E is required to file an Information Return with the IRS indicating that all of the property included in D's gross estate is excepted property described in this paragraph (f), and must provide other information as required by the Information Return and the instructions.
( g ) *Beneficiaries* — ( 1 ) *In general.* Each person who acquires (or will acquire) property from a decedent or by reason of the decedent's death that is subject to the reporting described in paragraph (e) of this section is a beneficiary for purposes of this section and thus is a person to be listed on the Information Return and, except with respect to excepted property (described in paragraph (f) of this section), is a person to whom the executor must furnish a required Statement. Thus, a beneficiary may be: ( i ) An individual, including one who is both the executor and a beneficiary, who acquires (or will acquire) property subject to reporting not in trust;
( ii ) The estate of a deceased individual who survived the decedent if such individual or estate acquires (or will acquire) property subject to reporting not in trust;
( iii ) A trust, whether foreign or domestic, including without limitation a grantor retained annuity trust, charitable remainder trust, and charitable lead trust (each referred to in this section as *beneficiary trusts*); or
( iv ) An entity other than a trust, including without limitation a business entity or an organization described in section 501(c).
( 2 ) *Required Statement to beneficiary trust* — ( i ) *In general.* If a beneficiary trust is the beneficiary to be identified on the Information Return pursuant to paragraph (g)(1) of this section, the executor must furnish the Statement described in paragraph (c)(2) of this section to the trustee rather than to the beneficiaries of the trust. However, if the executor reasonably believes that it is unlikely that the beneficiary trust will depreciate, sell, or otherwise dispose of the property subject to reporting in a recognition event for income tax purposes but instead will distribute the property in kind to the trust beneficiaries, the executor instead may furnish the Statement described in paragraph (c)(2) of this section to each of the trust beneficiaries, with copies of the Statements to the trustee. For this purpose, the trust 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 after the decedent. For purposes of determining the due date of such Statements, each trust beneficiary will be deemed to have acquired the trust property when the trust acquired that property.
( ii ) *Beneficiary trust not yet established.* If, by the date required for filing the Information Return with the IRS, a beneficiary trust does not have at least one trustee and a tax identification number, an executor must report on the Information Return that the beneficiary trust has not yet been established in accordance with the instructions. Once the beneficiary trust has been established and the trust information becomes available to the executor, the executor must supplement the required reporting as described in paragraph (d) of this section to update the beneficiary information on the Information Return and Statement.
( 3 ) *Required Statement to the holder of a split interest in property, not in trust.* The beneficiary of a life estate not in trust, and thus the beneficiary to whom the executor is to furnish any required Statement, is the life tenant. Similarly, 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 of the Statements reporting these interests under paragraph (c)(3) of this section, each beneficiary will be deemed to have acquired the property subject to reporting on the date of the decedent's death. 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 paragraph (d)(5) of this section. If the contingency occurs during this period, 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 paragraph (d) of this section. Usufruct interests are treated in the same manner.
( 4 ) *Reporting for a missing beneficiary.* If the executor is unable to locate a beneficiary by the date required for filing the Information Return with the IRS, 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 executor must supplement the Information Return and must furnish the required Statement, as provided in paragraph (d) of this section, to report the subsequent location of the beneficiary or, if the beneficiary is not located, to report the distribution of the property subject to reporting to a different beneficiary.
( h ) *Reporting requirements applicable to trustees* — ( 1 ) *Circumstances under which trustees of beneficiary trusts and other trusts are subject to reporting.* Trustees of 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 property subject to reporting under paragraph (e) of this section, are subject to the reporting requirements described in paragraph (h)(2) of this section and the supplemental reporting requirements described in paragraph (d) of this section (to the extent applicable) with respect to such property. In addition, 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, no trustee of a beneficiary trust or of a subsequent recipient trust is subject to the reporting requirements described in paragraph (h)(2) of this section for a disposition of property 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), respectively).
( 2 ) *Required reporting.* On or before January 31 of the calendar year immediately following the year during which occurs a distribution of property subject to reporting under this paragraph (h), the trustee making the distribution must file an Information Return in accordance with the instructions for that form and must furnish a Statement to each recipient of the distribution. For purposes of this section, each recipient is a beneficiary.
( 3 ) *Example.* The following example illustrates the application of this paragraph (h). Decedent D was a U.S. citizen and D's executor E was required under section 6018 to file an estate tax return. Pursuant to the will of D, E distributed 100 shares of publicly traded stock in Company X to a trust (Children's Trust) for the benefit of D's two children A and B and their respective issue. E provided a Statement to the trustee of Children's Trust in accordance with the requirements of paragraph (c)(2) of this section. Shortly thereafter, pursuant to the terms of Children's Trust, Children's Trust terminates with the 100 shares of Company X stock being distributed in equal shares between Trust A, for the benefit of A and A's issue, and Trust B, for the benefit of B and B's issue. Pursuant to paragraph (h)(2) of this section, the trustee of Children's Trust files an Information Return with the IRS and furnishes a Statement to the trustees of Trust A and Trust B. Several years later, the trustee of Trust A distributes its 50 shares of Company X stock to C, the only child of A. Pursuant to this paragraph (h), the trustee of Trust A files an Information Return with the IRS and furnishes a Statement to C. Shortly thereafter, C gives the 50 shares of Company X stock, outright, to C's nephew N. C has no obligation to file an Information Return with the IRS or furnish a Statement to N to report the distribution of the 50 shares of Company X stock to N.
( i ) *Penalties.* For the penalties applicable to the filing of Information Returns and the furnishing of Statements required by this section, including waivers for reasonable cause, *see* sections 6721 through 6724 and the regulations in part 301 under sections 6721 through 6724.
( j ) *Applicability date.* This section applies to executors of the estate of a decedent who are required to file a Federal estate tax return under section 6018 if that return is filed after September 17, 2024, and to trustees receiving certain property included in the gross estate of such a decedent.
[T.D. 9991, 89 FR 76380, Sept. 17, 2024]