Estate Executors Must Decide 2010 Tax by Nov. 15, IRS Says

The Internal Revenue Service is giving executors of estates of people who died in 2010 until Nov. 15 to opt out of the estate tax.

The federal estate tax was not in effect for most of 2010. When Congress extended the tax retroactively in December, it gave executors of estates of people who died that year a choice. They could decide to skip the estate tax or pay the tax with a $5 million per-person exemption and a 35 percent top rate, the same as in 2011.

Some estates may fare better by paying the estate tax because the assets, such as stocks, will pass to heirs with stepped-up basis, which means they carry the value they had at the time of death.

Those whose executors don’t pay the estate tax pass on assets under a version of carryover basis, which is effectively the initial price paid for the asset by the person who died. If the heirs sell assets, they would owe capital gains taxes, currently 15 percent on most assets, on the difference between the sale price and the basis.

Before today’s announcement, estate lawyers weren’t sure when they would need to file the returns.

“We thought they’d give us the form and then we’d have 90 days to fill it out,” said John Olivieri, a partner in the private clients group in the New York office of White & Case LLP. “Now, they’re giving us the due date without giving us the form.”

In the statement released today in Washington, the IRS said it would make the forms and instructions for 2010 returns available “early this fall.”

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net Alexis Leondis in New York at aleondis@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net