Yesterday, the IRS announced certain extension and penalty relief provisions applicable to the estates of persons dying in 2010 and the beneficiaries of those estates.

Here’s what the IRS has done:  

  • If a large 2010 estate is going to “opt out” of the estate tax, the new deadline for filing Form 8939 (the special carryover basis form) is now Tuesday, January 17, 2012.  (The previous deadline was November 15, 2011).  No form needs to be filed to take advantage of this new due date.
  • If a 2010 estate is not opting out but planning to file Form 706 (the estate tax return), the estate may obtain an automatic extension of time to file the return (by filing Form 4768) until 15 months after the later of (i) the date of enactment of the 2010 tax act or (ii) the date of death.  This means that 2010 estates requesting the extension will have until at least Monday, March 19, 2012, to file the return and pay any estate tax due.  Normally, Form 4768 results in an automatic six-month extension of the filing deadline, but not the payment deadline.  But in this case, filing the extension request will result in an automatic waiver of late-payment penalties (but not interest from the original due date).
  • Since Form 8939 may affect the capital gains reportable by beneficiaries inheriting property from a 2010 decedent who then sell the property in 2010, special penalty relief is provided in the event they improperly report gain or loss because they did not know whether the estate made the carryover basis election.

Further details can be found in Notice 2011-76.  You can find it on the IRS website here.