76356 Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 

1Prior 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. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 301 

[TD 9991] 

RIN 1545–BM97 

Consistent Basis Reporting Between 

Estate and Person Acquiring Property 

From Decedent 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final rule. 

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. 

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 202–317–6859; 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. 

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 accuracyrelated 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 

§ 1.6035–2) 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 


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Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 76357 

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 

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 under 

section 1031 of the Code (that is, a likekind 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 § 1.1014–10(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 post-death 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. 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 nonrecourse 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 


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§ 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 nonrecourse debt on 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 § 1.1014– 

10(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, 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, TreatyBased 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 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 

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 


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Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 76359 

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, § 1.1014–10(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 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, § 1.1014–10(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 taxable 

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. 

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. 


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The rules in proposed § 1.1014– 

10(c)(1) are adopted in redesignated 

§ 1.1014–10(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 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 accuracyrelated 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 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. 

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 


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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 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 decedent. See 31 

a.m. Jur. 2d Executors and 

Administrators § 369 (2018); Eger v. 

Eger, 314 NE2d 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. 

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 § 1.1014–10(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. 


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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, 

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. 

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 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 


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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 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 coexecutors 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. 

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 § 1.6035– 

1(g)(3) and requires an executor to 

furnish a Statement to each beneficiary 

who acquires certain property. Section 

1.6035–1(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 § 1.6035–1(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 § 1.6035– 

1(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 

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 

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 


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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 

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 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-byStatement 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 

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. 


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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 

§ 1.6035–1(g)(2), with one exception, 

and requires an executor to file the 

Information Return by the due date set 

forth in § 1.6035–1(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 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 § 1.6035– 

1(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 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, § 1.6035– 

1(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 

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 


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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 

property 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. 

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 

§ 1.1014–10(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. 

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 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 


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Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 76367 

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 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 one-half interest in 

community property that is 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, § 1.6035–1(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 reporting 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 § 1.6035–1(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 


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2 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. 

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 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 dollardenominated 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 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)(3)(D), 

including virtual currency 2 or 

cryptocurrency, do not fall within the 

list of excepted property set forth in 

§ 1.6035–1(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 


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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, § 1.6035–1(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 

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 taxdeferred). 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 § 1.6035–1(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 

distributed 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 


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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. 

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 § 1.6045A–1(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 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 § 1.6035–1(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 § 1.6035–1(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 

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 


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received by a person or entity that is 

likely to engage in an income tax 

recognition event with respect to the 

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 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, § 1.6035–1(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 

§ 1.6035–1(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 

1.6035–1(g)(3) of the final regulations 

clarifies 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, § 1.6035– 

1(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 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 


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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 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 § 1.6035–1(h)(1) of the final 

regulations, reporting requirements are 

imposed on 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 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 subject 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 


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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 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 § 1.6035–1(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 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 

§ 1.1014–10(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 

§ 1.6662–9(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. 

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 reporting apply to a 

larger universe of property than the 

universe of property subject to the 

consistent basis requirement under 

section 1014. 


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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 GenerationSkipping 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 (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. 

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. 

5. Executive Order 13132: Federalism 

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. 

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, 


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Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 76375 

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. 

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: 

PART 1—INCOME TAXES 

■ 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: 

§ 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. 

§ 1.1014–3 Other basis rules. 

(a) Fair market value. 

(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) In general. 

(b) Portion of property acquired from 

decedent before his death included in 

decedent’s gross estate. 

(1) In general. 

(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: 

§ 1.1014–1 Basis of property acquired 

from a decedent. 

(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 

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 

§ 1.1014–10, it is not necessary for the 

application of this paragraph (b)(2) that 

an estate tax return be required to be 


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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: 

§ 1.1014–10 Basis of property acquired 

from a decedent must be consistent with 

property’s Federal estate tax value. 

(a) Consistent basis requirement—(1) 

General rule. 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 no final value has yet 

been determined, the property’s 

reported value for Federal estate tax 

purposes as described in paragraph 

(b)(2) of this section. The property 

subject to the consistent basis 

requirement is referred to in this section 

as consistent basis property and is 

described in paragraph (c)(1) of this 

section. 

(2) Initial basis in consistent basis 

property and effect of basis adjustments. 

The initial basis in consistent basis 

property is the final value of the 

property, as determined under 

paragraph (b)(1) of this section, and, 

until the final value of this property is 

determined, the property’s initial basis 

is the reported value, as described in 

paragraph (b)(2) of this section. The 

initial basis in consistent basis property 

may be adjusted pursuant to the 

operation of section 1014 or other 

provisions of the Internal Revenue Code 

(Code) governing basis, as applicable, 

and those adjustments will not violate 

the consistent basis requirement in 

paragraph (a)(1) of this section. For 

example, the initial basis in consistent 

basis property may be adjusted for gain 

recognized by the estate upon 

distribution of the property and for postdeath capital improvements and 

depreciation. It also may be adjusted in 

the manner provided in section 1014(d) 

in the case of DISC stock and in the 

manner provided under subchapter K or 

S of chapter 1 of the Code, respectively, 

in the case of an interest in a 

partnership or S corporation. 

(3) Duration of consistent basis 

requirement. The consistent basis 

requirement applies as long as the 

initial basis in consistent basis property 

is related, in whole or in part, to the 

property’s final value, as determined 

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

or, if applicable, the property’s reported 

value, as determined under paragraph 

(b)(2) of this section. Therefore, 

regardless of the number of successive 

owners, the consistent basis 

requirement continues to apply until the 

entire property is sold, exchanged, or 

otherwise disposed of in one or more 

transactions that result in a recognition 

event for income tax purposes (whether 

or not resulting in a gain or loss) or until 

the entire property becomes includible 

in another decedent’s gross estate. The 

consistent basis requirement applies 

whenever there is a taxable event with 

respect to the property, such as, but not 

limited to, a sale or exchange, 

depreciation, or amortization of the 

property. The expiration of the period of 

limitations on assessment for an income 

tax return that uses an incorrect basis in 

reporting a taxable event with respect to 

consistent basis property has no effect 

on the duty to determine basis under the 

rules of this section for purposes of 

reporting any subsequent taxable event 

with respect to the property if the 

consistent basis requirement continues 

to apply under the rule of this paragraph 

(a)(3). 

(b) Final value and reported value— 

(1) Final value. The final value of 

consistent basis property is its fair 

market value as finally determined for 

Federal estate tax purposes. That value 

is— 

(i) The value reported on an estate tax 

return filed with the IRS, once the 

period of limitations on assessment (see 

section 6501) of estate tax has expired 

without that value having been timely 

adjusted by the IRS; or 

(ii) The value determined or specified 

by the IRS that differs from the value 

reported on an estate tax return filed 

with the IRS and the value specified by 

the IRS for other included property, as 

defined in paragraph (d)(4) of this 

section, once the period of limitations 

on assessment applicable to the estate 

tax has expired without that value 

having been timely contested by the 

executor, as defined in paragraphs (d)(1) 

and (2) of this section, respectively; or 

(iii) The value determined in a written 

agreement with the IRS, (whether 

entered into in the course of the 

administrative proceedings between the 

estate and the IRS or after the 

commencement of litigation), once that 

written agreement has been executed by 

both the executor and the IRS and is 

binding on all parties (including, but 

not limited to, the executor, the IRS, and 

the beneficiaries); or 

(iv) The value determined by a court 

for the purpose of determining the estate 

tax liability of the estate, as defined in 

paragraph (d)(3) of this section, once the 

court’s determination no longer can be 

appealed to any court. 

(2) Reported value if no final value yet 

determined—(i) In general. Prior to the 

determination of the final value in 

accordance with paragraph (b)(1) of this 

section, a taxpayer may not claim an 

initial basis in consistent basis property 

in excess of the property’s value as 

reported on the Statement described in 

§ 1.6035–1(c)(2) and required under 

§ 1.6035–1 (as supplemented). This 

value is referred to in this section as the 

reported value. A value reported on a 

Statement (or a supplement to the 

Statement) that either reports 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 reported for property not 

reported on the estate tax return, is not 

a reported value for purposes of this 

section. See § 1.6035–1(d) regarding an 

executor’s duty to supplement the 

Statement. 

(ii) Limit on reliance on Statement not 

reporting final value. If the final value 

of consistent basis property is 

determined (as described in paragraph 

(b)(1) of this section) before the 

expiration of the period of limitations 

on assessment for a taxpayer’s income 

tax return that reports a taxable event 

with regard to the property, the 

taxpayer’s reliance on a Statement (or a 

supplement to the Statement) that does 

not report the final value of the property 

may result in an income tax deficiency 

and underpayment. See, however, 

section 6664 and the corresponding 

regulations for rules relating to waivers 

of penalties for certain failures due to 

reasonable cause. 

(3) Special rules—(i) Property subject 

to debt. 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 the 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 the outstanding debt. 

(ii) Special use property. The final 

value or, if applicable, the reported 

value of special use property with 

regard to which a recapture event 

(described in section 2032A(c)(1)) has 

occurred is increased as provided in 

section 1016(c) if the qualified heir 

makes the election under section 

1016(c) and pays the amounts required 

under that section. 

(c) Consistent basis property—(1) 

Property subject to the consistent basis 

requirement—(i) In general. Except as 

provided in paragraph (c)(2) of this 

section, consistent basis property is any 

property— 

(A) To which section 1014(a) applies; 

(B) That is included property, as 

defined in paragraph (d)(4) of this 

section, if the decedent’s Federal estate 

tax return is filed after July 31, 2015, 

and any other property the basis of 


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which is determined, in whole or in 

part, by reference to the basis of 

included property (for example, 

property acquired in a like-kind 

exchange or an involuntary conversion); 

and 

(C) Whose value increases the estate 

tax liability, as defined in paragraph 

(d)(3) of this section, that is payable 

after the application of allowable 

credits, as defined in paragraph (d)(5) of 

this section. 

(ii) Application. If the decedent’s 

Federal estate tax return is filed on or 

before July 31, 2015, no included 

property and no other property 

described in paragraph (c)(1)(i) of this 

section is subject to the consistent basis 

requirement, even if the due date of that 

return is after July 31, 2015, or if one or 

more supplements to that return are 

filed with the IRS after July 31, 2015. If 

an estate tax liability is payable after the 

application of allowable credits, all 

property described in paragraphs 

(c)(1)(i)(A) and (B) of this section is 

considered property whose value 

increases the estate tax liability for 

purposes of paragraph (c)(1)(i)(C) of this 

section and, therefore, is subject to the 

consistent basis requirement, except as 

provided in paragraph (c)(2) of this 

section. If, after the application of 

allowable credits, no estate tax liability 

is payable, no such property is subject 

to the consistent basis requirement. 

(2) Property excepted from or not 

subject to the consistent basis 

requirement. Notwithstanding 

paragraph (c)(1) of this section, the 

following property either is excepted 

from or is not subject to the consistent 

basis requirement— 

(i) United States dollars (as defined in 

paragraph (d)(6) 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 270.2). 

(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 

entirely in United States dollars. 

(viii) Notes that are forgiven in full by 

the decedent upon 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 the initial basis of which 

is not in any way determined with 

regard to or derived from the property’s 

final value as determined under 

paragraph (b)(1) of this section or its 

reported value as determined under 

paragraph (b)(2) of this section, if 

applicable. 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. 

(xi) Any interest in property that 

qualified for an estate tax marital 

deduction under section 2056, 2056A, 

or 2106(a)(3) for which such a 

deduction was properly claimed, and/or 

any interest in property that qualified 

for an estate tax charitable deduction 

under section 2055 or 2106(a)(2) for 

which such a deduction was properly 

claimed, provided that the value of the 

decedent’s entire interest in the 

included property is wholly deductible 

and equal to the total amount qualifying 

for those deductions. 

(xii) Property that represents the 

surviving spouse’s one-half share of 

community property to which section 

1014(b)(6) applies, regardless of whether 

this property is included property as 

defined in paragraph (d)(4) of this 

section. 

(xiii) Property the basis of which is 

adjusted in a manner similar to section 

1014(a) on the occurrence of a taxable 

termination that occurs on the death of 

a trust beneficiary pursuant to section 

2654(a)(2) (to the extent the property is 

not then includible in the gross estate of 

any person). 

(xiv) Any other property that is not 

described in paragraph (c)(1)(i) of this 

section or 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). 

(d) Definitions. The following 

definitions apply for purposes of this 

section— 

(1) Contested. The term contested 

means to put at issue the value of 

property in a written communication to 

the IRS that identifies the specific 

property, states that the executor does 

not accept as correct the value of that 

property as determined or specified by 

the IRS, and provides the executor’s 

claimed value for that property as 

determined in accordance with the 

requirements of section 2031, the 

corresponding regulations, and other 

applicable guidance. An issue cannot be 

contested by a general statement or 

written communication that does not 

include each of these specified 

elements. 

(2) Executor. The term executor 

includes any person described in 

section 2203, as expanded to include all 

persons required under section 6018(b) 

to file an estate tax return. 

(3) Estate tax liability. The term estate 

tax liability means the amount of tax 

imposed under chapter 11 of the Code 

(chapter 11). 

(4) Included property. The term 

included property means property the 

value of which is included in the value 

of the decedent’s gross estate as defined 

in section 2031 or 2103. Generally, this 

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) so that a final 

value is or will be determined for that 

property under chapter 11. However, 

solely for purposes of this section, 

included property does not refer to 

unreported 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. 

(5) Allowable credits. The term 

allowable credits includes any credit 

against the estate tax liability allowable 

by any section of the Code or by reason 

of any treaty obligation of the United 

States, provided the estate qualifies for 

and properly claims the credit by 

complying with all applicable rules for 

claiming the credit. For instance, the 

prorated unified credit under section 

2102(b)(3) is an allowable credit for 

qualifying estates if the estate files all 


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76378 Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 

necessary forms or statements required 

by the IRS to claim that credit. 

(6) United States dollars. 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 and coins typically do not have a 

value equal to their face value. 

(e) Examples. The following examples 

illustrate the application of this section. 

In each case, the decedent D was a 

citizen of the United States, the estate 

does not elect the alternate valuation 

method under section 2032, and an 

estate tax liability is payable after the 

application of all allowable credits. 

(1) Example 1—(i) Final value 

determined by value on estate tax 

return. At D’s death, D owned (among 

other assets) a private residence not 

subject to any debt. D’s sole beneficiary 

is D’s child C. The value of the 

residence is reported on the estate tax 

return at $300,000. The IRS accepts the 

return as filed and the period of 

limitations on assessment of estate tax 

expires. For purposes of the consistent 

basis requirement applicable to C, the 

final value of D’s residence is $300,000, 

and therefore, C’s initial basis in the 

residence is $300,000. See paragraphs 

(a)(2) and (b)(1)(i) of this section. 

(ii) Adjustment of initial basis 

pursuant to other Code provisions. 

Several years later, C adds a master suite 

to the private residence at a cost of 

$45,000. Pursuant to section 1016(a), C’s 

basis in the residence is increased by 

$45,000 to $345,000. Subsequently, C 

sells the residence to an unrelated third 

party for $450,000. C claims a basis in 

the residence of $345,000 and reports a 

gain of $105,000 ($450,000 less 

$345,000). C has complied with the 

consistent basis requirement, and C’s 

adjustment to C’s initial basis does not 

violate the consistent basis requirement. 

See paragraphs (a)(1) and (2) of this 

section. 

(2) Example 2—(i) Final value 

determined on examination. The facts 

are the same as in paragraph (e)(1)(i) of 

this section (Example 1) except that, on 

examination, the IRS adjusts the value 

of the residence to $290,000 and that 

value is not contested before the period 

of limitations on assessment of estate 

tax expires. For purposes of the 

consistent basis requirement applicable 

to C, the final value of the residence is 

$290,000, and therefore, C’s initial basis 

in the residence, before taking into 

account C’s subsequent renovations, is 

$290,000. See paragraphs (a)(2) and 

(b)(1)(ii) of this section. 

(ii) Reported value if no final value 

yet determined and reliance on 

Statement required under § 1.6035–1. 

Prior to the determination of final value, 

C sells the residence for $375,000. C 

reports a gain of $75,000 on C’s income 

tax return, relying on the reported value 

in a Statement required under § 1.6035– 

1 and claiming an initial basis of 

$300,000. C has complied with the 

consistent basis requirement because C 

did not claim an initial basis in the 

residence in excess of its reported value 

before the final value was determined. 

However, because C claimed an initial 

basis in the residence that exceeds the 

final value, C may have an income tax 

deficiency and underpayment for the 

year of the sale if the applicable period 

of limitations on assessment for C’s 

income tax return has not expired when 

the final value is determined. See 

paragraphs (b)(2)(i) and (ii) of this 

section. 

(3) Example 3—(i) Final value 

determined by agreement. At D’s death, 

D owned 50% of Partnership P, whose 

sole asset was a rental building with a 

fair market value of $10 million subject 

to non-recourse debt of $2 million. D’s 

sole beneficiary is D’s child C. The 

value of D’s interest in Partnership P is 

reported on the estate tax return at $4 

million (50% of ($10 million less $2 

million)). On examination, the IRS 

timely adjusts the value of the 

partnership interest to $5.25 million and 

the executor of D’s estate timely contests 

that value before the period of 

limitations on assessment of estate tax 

expires. Subsequently, the IRS and the 

executor of D’s estate enter into a 

settlement agreement that provides that 

the value of D’s interest in Partnership 

P for purposes of the estate tax is $4.5 

million. For purposes of the consistent 

basis requirement applicable to C, the 

final value of the partnership interest is 

$4.5 million, and therefore, C’s initial 

basis in the partnership interest is $4.5 

million. See paragraphs (a)(2) and 

(b)(1)(iii) of this section. 

(ii) Adjustment of initial basis 

pursuant to other Code provisions. C’s 

share of Partnership P’s liabilities at the 

date of D’s death is $1 million. Under 

section 742 of the Internal Revenue 

Code and § 1.742–1 of this part, C’s 

basis in the partnership interest is $5.5 

million ($4.5 million initial basis plus 

C’s $1 million share of Partnership P’s 

debt). C later sells the partnership 

interest for $5 million at a time when 

C’s basis has not changed and C’s share 

of the debt remains $1 million. Under 

section 752(d), C’s amount realized on 

the sale includes $1 million for the 

reduction in C’s share of partnership 

liabilities. Therefore, C’s total amount 

realized is $6 million. C reports taxable 

gain of $0.5 million ($6 million amount 

realized less $5.5 million basis). C has 

complied with the consistent basis 

requirement because C did not claim an 

initial basis in the partnership interest 

that exceeds the final value of the 

interest, as determined under paragraph 

(b)(1) of this section, and C’s adjustment 

of the initial basis in the partnership 

interest as reported does not violate the 

consistent basis requirement. See 

paragraphs (a)(1) and (2) of this section. 

(4) Example 4—(i) Final value 

determined by court decision. At D’s 

death, D owned (among other assets) a 

rental property. D’s sole beneficiary is 

D’s child C. The value of the rental 

property is reported on the estate tax 

return at $1 million. On examination, 

the IRS determines the value of the 

rental property to be $1.5 million. A 

court subsequently determines that the 

fair market value of the rental property 

for purposes of the estate tax is $1.3 

million and the court’s decision 

becomes final. For purposes of the 

consistent basis requirement, the final 

value of the rental property is $1.3 

million, and therefore, C’s initial basis 

is $1.3 million. See paragraphs (a)(2) 

and (b)(1)(iv) of this section. 

(ii) Reliance on Statement required 

under § 1.6035–1 and duration of 

consistent basis requirement. After the 

estate tax return is filed and before the 

final value is determined, C receives a 

Statement required under § 1.6035–1 

showing a reported value of $1 million 

for the rental property. C claims a 

depreciation deduction on the first 

income tax return C files after acquiring 

the property, relying on the reported 

value in the Statement required under 

§ 1.6035–1. C has complied with the 

consistent basis requirement on that 

return because C did not claim an initial 

basis in the rental property in excess of 

its reported value before the final value 

was determined. C may claim a credit or 

refund of income tax that may result 

from the increased depreciation 

deduction based on the final value of 

the rental property, but only if the 

period of limitations for a claim for a 

credit or refund of income tax for that 

year has not expired. C must use the 

final value of $1.3 million to determine 

C’s unadjusted basis in the rental 

property for all open taxable years. In 

this case and pursuant to section 

1016(a)(2), C’s adjusted basis is 

determined by reducing the rental 

property’s final value of $1.3 million by 

the greater of the depreciation 

deductions allowed or allowable based 

on the final value of $1.3 million for all 


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prior tax years (open and closed). See 

paragraphs (a)(3), (b)(2)(i) and (ii) of this 

section. 

(5) Example 5—Final value for 

property subject to debt. At D’s death, 

D’s gross estate includes a yacht valued 

at $750,000, subject to $150,000 nonrecourse debt. D’s sole beneficiary is D’s 

child C. Pursuant to the rule in 

§ 20.2053–7 of this chapter, the executor 

of D’s estate reports the $600,000 net 

value of the yacht on the estate tax 

return ($750,000 less $150,000 debt) and 

claims no other deduction for the debt. 

The IRS accepts the return as filed and 

the period of limitations on assessment 

of estate tax expires. For purposes of the 

consistent basis requirement applicable 

to C, the final value of the yacht is 

$750,000, and therefore, C’s initial basis 

in the yacht is $750,000. See paragraph 

(b)(3) of this section. 

(6) Example 6—Included property 

subject to the consistent basis 

requirement. After exercising due 

diligence to discover estate assets, the 

executor of D’s estate reports the value 

of all known property includible in D’s 

gross estate on a timely filed estate tax 

return and pays the estate tax liability. 

During examination of the return, the 

IRS becomes aware of a piece of artwork 

in the possession of D’s child C, the 

value of which is includible in D’s gross 

estate but is not reported on the estate 

tax return. The value of the artwork for 

Federal estate tax purposes is $500,000. 

Pursuant to the examination, the IRS 

includes the value of the artwork in the 

value of D’s gross estate, which causes 

an increase in D’s estate tax liability. 

Neither the inclusion of the artwork in 

D’s gross estate nor the value at which 

the artwork is included in D’s estate is 

contested by the executor of D’s estate 

before the period of limitation on 

assessment of estate tax expires. The 

artwork is subject to the consistent basis 

requirement and the final value of the 

artwork is $500,000. Therefore, C’s 

initial basis in the artwork is $500,000. 

See paragraphs (a)(2) and (c)(1)(i) of this 

section. 

(7) Example 7—(i) Partially deductible 

property subject to the consistent basis 

requirement. Pursuant to a bequest in 

D’s will, Trust is established and funded 

with certain property, the value of 

which is includible in the gross estate 

under section 2031. Trust is a charitable 

remainder annuity trust described in 

section 664(d)(1). Trust provides that, in 

each taxable year during the lifetime of 

D’s surviving child C, the trustee must 

pay to C an annuity of 5% of the initial 

net fair market value of all property 

passing to Trust as finally determined 

for Federal estate tax purposes. Upon 

the death of C, the trustee must 

distribute all of the then principal and 

income of Trust to organizations 

described in sections 170(c), 2055(a), 

and 2522(a) of the Code as the trustee 

selects, in the trustee’s sole discretion. 

Although the executor of D’s estate 

properly claims an estate tax charitable 

deduction under section 2055(e)(2)(A) 

for the value of the remainder interest 

in Trust, D’s estate has an estate tax 

liability after application of all 

allowable credits. The property passing 

to Trust is subject to the consistent basis 

requirement because the value of the 

property is included in D’s gross estate, 

an estate tax liability is payable after the 

application of all allowable credits, and 

the property is not described in 

paragraph (c)(2) of this section (in 

particular, the property is not wholly 

deductible property within the meaning 

of paragraph (c)(2)(xi) of this section). 

(ii) Wholly deductible property not 

subject to the consistent basis 

requirement. The facts are the same as 

in paragraph (e)(7)(i) of this section 

(Example 7), except that the sole 

annuity beneficiary of Trust is D’s 

surviving spouse S, and the executor of 

D’s estate properly claims a deduction 

under section 2056(b)(8) for the value of 

S’s annuity interest. Because the value 

of D’s entire interest in the property 

passing to Trust qualified for either a 

charitable deduction under section 

2055(e)(2) or a marital deduction under 

section 2056(b)(8), none of the property 

passing to Trust will be subject to the 

consistent basis requirement. See 

paragraph (c)(2)(xi) of this section. 

(iii) Property not wholly deductible 

property if the sum of marital and 

charitable deductions allowed for that 

property is less than the value of the 

decedent’s entire interest in the 

property. At the time of D’s death, D 

owned 80 shares of voting stock in a 

closely-held corporation that has 100 

shares of voting stock outstanding. D’s 

will directed the executor of D’s estate 

to distribute 40 shares of D’s stock to a 

marital trust and 40 shares of D’s stock 

to a charitable trust. D’s executor 

included the value of D’s 80 shares of 

stock in D’s gross estate at $8,000,000 

for purposes of the estate tax. Because 

of discounts applicable in valuing each 

of the two blocks of only 40 shares of 

the stock, D’s executor correctly claimed 

a charitable deduction under section 

2055(e)(2) of only $3,000,000, and 

correctly claimed a marital deduction 

under section 2056(b)(7) of only 

$3,000,000. D’s executor determined 

that an estate tax was due on D’s estate 

after the application of all allowable 

credits. The IRS accepted the return as 

filed and the period of limitations on 

assessment of estate tax expired. The 40 

shares of stock owned by charitable 

trust and the 40 shares of stock owned 

by marital trust are not wholly 

deductible property within the meaning 

of paragraph (c)(2)(xi) of this section 

and are subject to the consistent basis 

requirement. 

(f) Applicability date. This section 

applies to property described in 

paragraph (c)(1) of this section that is 

acquired from a decedent or by reason 

of the death of a decedent if the 

decedent’s Federal estate tax return is 

filed after September 17, 2024. 

■ Par. 6. Add § 1.6035–0 to read as 

follows: 

§ 1.6035–0 Table of contents. 

This section lists the captions 

contained in §§ 1.6035–1 and 1.6035–2. 

§ 1.6035–1 Basis information to persons 

acquiring property from decedent. 

(a) Overview. 

(b) Applicability of section 6035 reporting 

requirements. 

(1) In general. 

(2) Executor(s) subject to section 6035 

reporting requirements. 

(3) Examples. 

(c) Required Information Return and 

Statement(s). 

(1) Required Information Return. 

(2) Required Statement(s). 

(3) Due dates. 

(4) Acquiring an interest in property. 

(5) Option to furnish Statement(s) prior to 

the acquisition of property by a beneficiary. 

(6) Example. 

(d) Duty to supplement. 

(1) Duty to supplement to report changes 

to the information reported on the 

Information Return or Statement(s). 

(2) Changes requiring supplemental 

reporting. 

(3) Exceptions; no duty to supplement 

despite certain changes. 

(4) Due date of supplemental reporting. 

(5) Duration of duty to supplement. 

(6) Examples. 

(e) Property for which reporting is 

required. 

(1) In general. 

(2) Examples. 

(f) Excepted property requiring only 

limited reporting. 

(1) Excepted property. 

(2) List of excepted property. 

(3) United States dollars defined. 

(4) Examples. 

(g) Beneficiaries. 

(1) In general. 

(2) Required Statement to beneficiary trust. 

(3) Required Statement to the holder of a 

split interest in property, not in trust. 

(4) Reporting for a missing beneficiary. 

(h) Reporting requirements applicable to 

trustees. 

(1) Circumstances under which trustees of 

beneficiary trusts and other trusts are subject 

to reporting. 

(2) Required reporting. 

(3) Example. 

(i) Penalties. 


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(j) Applicability date. 

§ 1.6035–2 Transitional relief. 

(a) Statements due before June 30, 2016. 

(b) Applicability date. 

■ Par. 7. Revise § 1.6305–1 to read as 

follows: 

§ 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 generationskipping 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 


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§ 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 


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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 


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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) 


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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 


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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 


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76386 Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 

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. 

■ Par. 8. Section 1.6662–9 is added to 

read as follows: 

§ 1.6662–9 Inconsistent estate basis 

reporting. 

(a) In general. Section 6662(a) and 

(b)(8) impose an accuracy-related 

penalty on the portion of any 

underpayment of tax required to be 

shown on an income tax return that is 

attributable to an inconsistent estate 

basis. 

(b) Inconsistent estate basis—(1) In 

general. There is an inconsistent estate 

basis in property under section 6662(k) 

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) that exceeds the property’s final 

value as determined under § 1.1014– 

10(b)(1). The property to which this 

section applies is the property described 

in § 1.1014–10(c)(1). 

(2) Example. The following example 

illustrates the provisions of paragraph 

(b)(1) of this section. In year 1, taxpayer 

(T), a citizen of the United States, 

inherited a house, property described in 

§ 1.1014–10(c)(1) and not described in 

§ 1.1014–10(c)(2). The final value and 

thus initial basis of the house as 

determined under § 1.1014–10(b) was 

$300,000. In year 5, T spent $85,000 on 

an addition to the house, which is 

added to T’s initial basis in the house 

under section 1016(a). In year 11, T sold 

the house to an unrelated third party for 

$650,000. On T’s return, T claims an 

initial basis of $400,000 and the $85,000 

spent on the addition to the house, for 

a total claimed basis of $485,000. T’s 

claimed initial basis exceeds the 

allowable basis by $100,000. Because 

this amount is due to T claiming an 

initial basis as defined in § 1.1014– 

10(a)(2) that exceeds the property’s final 

value as determined under § 1.1014– 

10(b), T is liable for the 20% accuracyrelated penalty for the portion of any 

underpayment that is attributable to the 

reporting of an inconsistent basis. 

(c) Applicability date. This section 

applies to property described in 

§ 1.1014–10(c)(1) that is reported on an 

estate tax return required under section 

6018 that is filed after September 17, 

2024. 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Par. 9. The authority citation for part 

301 continues to read in part as follows: 

Authority: 26 U.S.C. 7805. 

■ Par. 10. Section 301.6721–1 is 

amended by revising paragraph 

(h)(2)(xii) and paragraph (j) to read as 

follows: 

§ 301.6721–1 Failure to file correct 

information returns. 

* * * * * 

(h) * * * 

(2) * * * 

(xii) Section 6035 (relating to basis 

information with respect to property 

acquired from a decedent, generally 

Form 8971, Information Regarding 

Beneficiaries Acquiring Property from a 

Decedent), whether an initial or 

supplemental information return. 

* * * * * 

(j) Applicability dates—(1) In general. 

Except as provided in paragraph (j)(2) of 

this section, this section applies with 

respect to information returns required 

to be filed on or after January 1, 2024. 

See 26 CFR 301.6721–1, as revised April 

1, 2023, for rules applicable prior to 

January 1, 2024. 

(2) Exception. Paragraph (h)(2)(xii) of 

this section applies with respect to 

information returns required to be filed 

after September 17, 2024. 

■ Par. 11. Section 301.6722–1 is 

amended by revising paragraph 

(e)(2)(xxxv) and paragraph (g) to read as 

follows: 


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Federal Register / Vol. 89, No. 180 / Tuesday, September 17, 2024 / Rules and Regulations 76387 

§ 301.6722–1 Failure to furnish correct 

payee statements. 

* * * * * 

(e) * * * 

(2) * * * 

(xxxv) Section 6035 (relating to basis 

information with respect to property 

acquired from a decedent, generally 

Schedule A of Form 8971, Information 

Regarding Beneficiaries Acquiring 

Property from a Decedent), other than 

an information return described in 

section 6724(d)(1)(D), whether an initial 

or supplemental payee statement; 

* * * * * 

(g) Applicability dates—(1) In general. 

Except as provided in paragraph (g)(2) 

of this section, this section applies with 

respect to payee statements required to 

be furnished on or after January 1, 2024. 

See 26 CFR 301.6722–1, as revised April 

1, 2023, for rules applicable prior to 

January 1, 2024. 

(2) Exception. Paragraph (e)(2)(xxxv) 

of this section applies with respect to 

payee statements required to be 

furnished after September 17, 2024. 

Douglas W. O’Donnell, 

Deputy Commissioner. 

Approved: August 16, 2024. 

Aviva R. Aron-Dine, 

Acting Assistant Secretary of the Treasury 

(Tax Policy). 

[FR Doc. 2024–20429 Filed 9–16–24; 8:45 am] 

BILLING CODE 4830–01–P 


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