IRS Delays New Sec. 6035 Basis Reporting

Posted on by August 22, 2015

In Notice 2015-57, the IRS has announced that the due date for the first new tax basis reports that must be filed under new IRC section 6035 is postponed to February 29, 2016.

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (enacted 7/31/2015 as P.L. 114 – 41), created new sections 1014(f) and 6035, which require basis reporting for income tax purposes consistent with the values reported for federal estate tax purposes.  New section 6035 requires that that basis statements be filed with the IRS and affected beneficiaries within 30 days of the filing of an estate tax return (or the date the estate tax return is due), beginning with returns filed after the date of enactment, which means that statements could be due as early as August 30.  In order to allow the Treasury Department and IRS to issue guidance implementing the reporting requirements of section 6035, the due date for statements required before February 29, 2016, is delayed to February 29, 2016.

The Treasury Department and the IRS are inviting comments on possible regulations or other guidance, and comments can be submitted to:

CC:PA:LPD:PR (Notice 2015 – 57), Room 5203
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044.

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to

CC:PA:LPD:PR (Notice 2015 – 57)
Courier’s Desk
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20044

Comments may also be sent by email to Notice.comments@irscounsel.treas.gov with “Notice 2015-57” in the subject line.

The principal author of the notice is Theresa Melchiorre of the Office of the Associate Chief Counsel (Passthroughs & Special Industries), (202) 317-6859.

Same-Sex Common Law Marriage Recognized

Posted on by August 5, 2015

An Orphans’ Court judge has entered an order declaring to be valid a same-sex common law marriage entered into before common law marriages were abolished in Pennsylvania in 2005.

The case is Estate of Kimberly M. Underwood, No. 2014-E0681 (O.C. Bucks Co.), and the one-page order was entered by Judge C. Theodore Fritsch Jr. on 7/29/2015.

According to the docket, citations were issued to the Attorney General of Pennsylvania, the Pa. Department of Revenue, and several insurance companies, and the order states that no objections or oppositions were filed by any of the parties served.

The order does not cite any authority or provide any reasoning, but simply states that:

 This Court hereby declares that Sabrina L. Maurer and Kimberly M. Underwood entered into a valid and enforceable marriage, under Pennsylvania common law, on September 2, 2001 and remained married under the laws of the Commonwealth of Pennsylvania until the time of Kimberly M. Underwood’s death on November 20, 2013. Their marriage is valid and enforceable, and they are entitled to all rights and privileges of validly licensed, married spouses in all respects under the laws of the Commonwealth of Pennsylvania.

The case is somewhat unusual in that the parties were married in a public ceremony, in a church in New Jersey, which is not your typical common law marriage.

Executor Commissions for Legal Secretaries

Co-executors of the estate of a deceased lawyer, who had served as his secretaries and performed much of the legal work in the administration of the estate, were allowed as commissions the same percentage of the estate that the decedent had claimed in his own law practice for almost fifty years (5% of the first $100,000, 4% of the next $100,000, and 3% for balance), despite the objections of the Attorney General as parens patriae for the charitable beneficiaries of the estate.  Peters Estate, 5 Fid.Rep.3d 265 (O.C. Montour 10/2/2014) (opinion by James, J.), aff’d, No. 1359 MDA 2014 (Pa. Super. 6/17/2015) (non-precedential).

IRA Beneficiary Designation Unchanged by Will

Provisions of will were insufficient to change the beneficiary designation of an individual retirement account (IRA), there being no evidence that the decedent made reasonable efforts to comply with the terms of the account; objections to payments to claimant were overruled where payments by decedent for claimant were carefully documented and there was credible testimony that the payments were loans and not gifts.  Sipos Estate, 5 Fid.Rep.3d 256, No. 526 DE of 2013 (O.C. Phila. 3/4/2015) (opinion by Herron, J.).

Action for Divorce Deprived Spouse of Standing to Contest Probate

Surviving spouse lacked standing to appeal from probate of will when spouse had filed for divorce and grounds for divorce had been established, because the spouse was no longer an intestate heir under 20 Pa.C.S. § 2106(a).  This was true even though spouse was contesting whether the decedent had been domiciled in Pennsylvania.  Beal Estate, 5 Fid.Rep.3d 247, No. 119 AP 2014 (O.C. Phila. 5/4/2015) (opinion by Herron, J.).

Inheritance Tax Deductions for Medical Expenses

According to a recent notice from the Governor’s office (“Regulatory Agenda,” 45 Pa.B. 4063 (7/25/2015)), the Department of Revenue will be promulgating an amendment to remove 61 Pa.Code § 93.101, on the deductibility of medical expenses covered by insurance, because the regulation has been superseded by statute (i.e., 72 P. S. § 9129(k)).

The amendment is expected to be promulgated in October 2015, and the agency contact person is Douglas Berguson (717-346-4633).

Consistent Basis Reporting Required

Posted on by August 4, 2015

Consistent tax basis reporting by the executor of an estate on the federal estate tax return and the beneficiaries of the estate on their individual income tax returns will be required under section 2004 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, H.R. 3236, which has apparently passed both the House and the Senate.  [Updated:  The bill was signed into law by the President on 7/31, becoming P.L. 114-41..]

Previously, the values reported on the federal estate tax return were “deemed” to be the fair market values of the property passing from the decedent for the purpose of determining the income tax basis for the property under IRC section 1014 (see Treas. Reg. 1.1014-3(a)), but it was not an absolute requirement that the same values be used for federal estate tax and income tax purposes, and there were no specific reporting requirements or specific penalties for applying inconsistent values.  H.R. 3236 adds a new subsection 1014(f) which states that the basis of property acquired from a decedent cannot exceed the value finally determined for estate tax purposes, a new section 6035 requiring basis reporting by persons required to file estate tax returns, and adds inconsistent basis reporting to the list of actions for which a 20 percent accuracy-related penalty is imposed under IRC section 6662.

These new provisions apply to property for which an estate tax return is filed after the date of enactment.  [Update: Because the bill was signed into law on 7/31/2015, the new rules and reporting requirements apply to returns filed on or after 8/1/2015.  Watch this website for suggestions on how to comply with the new reporting requirements.]

Custody of Exhibits in Northampton County Orphans’ Court

Northampton County has published a new administrative order governing the custody of exhibits in its courts, including the Orphans’ Court.  The order provides for the confidentiality of exhibits in juvenile delinquency and dependency cases, and matters involving adoption, guardianship, minors, and incompetency, but confirms that estate and tax filings remain open to public inspection and copying.  Northampton County Administrative Order 2015-5, C5 Custody of Exhibits, C-48CV2015-004903 (6/3/2015), 45 Pa.B. 3826 (7/18/2015).

Attorney General Offices and Notices

Posted on by September 23, 2020

There are several circumstances under which notice must be given to the Attorney General of Pennsylvania: When a will has been probated that includes gifts to charities of more than $25,000, or which will not be be paid in full,…

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