IRS Gives 2010 Estates More Time to Pay Taxes

The Internal Revenue Service (IRS) is offering beneficiaries of people with large estates who died in 2010 more time to adjust to mid-year tax-law changes.

The IRS has announced the estate tax penalty relief in IRS Notice 2011-76.

The notice will affect estates left by individual taxpayers with more than $5 million in assets.

The notice will give executors of affected estates until Jan. 17, 2012, to tell the IRS whether an estate will choose to opt out of paying estate taxes or choose to pay estate taxes and make use of a special property basis valuation rule. The original deadline was Nov. 15, 2011.

An executor need not file any special form to make use of the new filing deadline, officials say.

The IRS has issued the notice in an effort to help the executors cope with a shift between the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA), an act signed into law in July 2010.

One section of EGTRRA phased the federal estate tax out between 2001 and 2009, eliminated the tax in 2010, then called for the tax to return to 2001 levels in 2011.

Section 1022 of EGTRRA let an heir who received property choose to set the basis for the property at the fair market value on the date of the dead taxpayer’s death, if the fair market value of the property was less than the dead taxpayer’s own adjusted basis.

Section 301(a) of TRUIRJCA the brought the estate tax back for 2010 with a $5 million personal estate tax exemption.