Legal Blog

The Weekly Scenario: Cost Basis Adjustment of Assets

Question: I am a beneficiary of my mother’s estate, but my brother is the executor. My mother died in December 2015. I understand there is a cost basis adjustment to many inherited assets passing through my mother’s estate. Does my executor have to provide me with the new cost basis of the assets I inherit? Answer: A new federal statute provides that most estates that are required to file a federal estate tax return after July 15, 2015 requires executors to provide the IRS and estate beneficiaries with the value of the estate assets as determined and reported on federal estate tax returns filed after July 31, 2015. Estate beneficiaries must use those asset values as the cost basis of the assets inherited from the decedent. Comment: The new statute is intended to close the perceived “loophole” by denying beneficiaries the opportunity to (for example) establish a higher basis than that reported on the decedent’s federal estate tax return (resulting in a potentially lower gain on the sale of the asset). The change in law results in penalties for failure to file the information statements by the due date of the return and if required, the executor must provide a detailed valuation to both the beneficiaries of the estate and the IRS. There will likely need to be future clarification on this law change, but the statute appears to apply to a broad class of estate beneficiaries, including trust beneficiaries in the case of property held in a revocable living trust and distributed to beneficiaries after the decedent’s death.


Steve Shane Head Shot for webSteve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can also connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn.