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Form 8939

Carlsbad, CA |

I have an elderly friend whose husband passed away last year. Her tax gal is putting her tax filing on extension and having her file Form 8939 or she would be fined $15,000. But my friend's attorney said the Form 8939 is not necessary because she has a trust. Additionally, she would not need to file taxes for her trust or itemize for the IRS everything she has in the trust so that itemization could cause potential tax liabilities later. Who is correct?

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Attorney answers 2


The answer is that Form 8939 may be necessary. Under the new tax law, for Decedent's dying in 2010 you can (1) elect to either be treated under the old law, which had an unlimited estate tax deduction in 2010 but limited the step-up in tax basis (which is why you need Form 8939--to allocate the limited tax basis allowed), or (2) elect to be treated under the new law which has a $5 million estate tax exclusion, but unlimited step-up in basis (this could require the filing of an estate tax return for estates near or over $5 million in value).

The Trust should not matter as to the step-up in basis, unless the Trust, or some portion of theTrust, is irrevocable (in which case that irrevocable portion may not qualify for a step-up in basis).

As far as "filing taxes for her trust" that is a tricky question because there are a number of different kinds of taxes at play here, such as income tax and estate tax. I would need more information to respond to that portion of your question.

Sounds like it wouldn't hurt to get a second opinion.


On March 31, 2011 the Treasury Department and the Internal Revenue Service (IRS) announced that Form 8939 is not due on April 18, 2011, and should not be filed with the final Form 1040 of persons who died in 2010.
A trust, (I am assuming you mean revocable living trust) would not the taxation. In the end, whether she needs to allocate basis or not will rely on the value of the estate, who is inheriting and how the accountant will handle the estate for estate tax purposes.

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