Specific Instructions

Checkbox for Amended Return

If this is an amended or supplemental return, check the box for an amended return. If the amended return is filed under Regulations section 301.9100-2, also write “FILED PURSUANT TO SECTION 301.9100-2” at the top of the return.

Checkbox for Revoking Section 1022 Election

If this Form 8939 revokes a previous Section 1022 Election made on an earlier Form 8939, check the box for revocation of an election.

Decedent's Name and Address

Enter the decedent's name and address.

Line 2. Decedent's Social Security Number

If the decedent was a nonresident or resident alien and did not have and was not eligible to get a social security number (SSN), the executor must apply for an individual taxpayer identification number (ITIN) on behalf of the decedent. For details on how to do so, see Form W-7 and its instructions. It takes 6 to 10 weeks to get an ITIN. If the decedent already had an ITIN, enter it wherever the decedent's SSN is requested on Form 8939.

Note.

An ITIN is for tax use only. It does not entitle the holder to social security benefits or change the holder's employment or immigration under U.S. law.

Line 6a. Executor's Name

If there is more than one executor, enter the name of the executor filing this Form 8939. List the other executors’ names, addresses, and SSNs (if applicable and if known) on an attached sheet.

Line 6c. Executor's Social Security Number

Only individual executors should complete this line. If there is more than one individual executor, all should list their SSNs on an attached sheet.

Line 9. Names of Recipients

Enter the name of each recipient, other than the decedent's surviving spouse, of property acquired from the decedent.

Line 10. Built-in Loss

Enter the aggregate amount of any losses that would have been allowable under section 165 if the property acquired from the decedent had been sold at FMV immediately before the decedent's death. In the case of a decedent who was a nonresident not a citizen of the United States, enter zero. For more information, see Unrealized Losses, earlier.

Line 11. Capital Loss Carryforward

Enter the aggregate amount of any capital loss carryforward under section 1212(b) that would (but for the decedent's death) have been carried from the decedent's last tax year to a later tax year of the decedent. In the case of a decedent who was a nonresident not a citizen of the United States, enter zero. For more information, see Carryforwards, earlier.

Line 12. Net Operating Loss Carryforward

Enter the aggregate amount of any NOL carryover under section 172 that would (but for the decedent's death) have been carried from the decedent's last tax year to a later tax year of the decedent. In the case of a decedent who was a nonresident not a citizen of the United States, enter zero. For more information, see Carryforwards, earlier.

You can use Schedule A of Form 1045, Application for Tentative Refund to figure the amount, if any, of the decedent's NOL.

Line 12a.

Add lines 10, 11, and 12. This line 12a is the amount of the Carryovers/Unrealized Losses Increase.

Line 12b.

For nonresident decedents who were not United States citizens, enter $60,000. For all others, enter $1,300,000.

Line 12c. General Basis Increase

Add lines 12a and 12b. This line 12c is the total General Basis Increase that is available to allocate to property acquired from and owned by the decedent.

Line 13.

Enter the sum of the totals from all Schedules A, line 4B, column (e)(i) on this line. This total may not exceed the amount listed on line 12c.

Line 14.

Enter the total from each Schedule A, line 4B, column (e)(ii) on this line. This total may not exceed $3,000,000.

Schedule A

Complete a separate Schedule A—Disclosure of Property Acquired From the Decedent (and Recipient Statement) for each recipient of property acquired from the decedent, including each of the following.

  • The decedent's estate.

  • The decedent's surviving spouse, if any.

  • Any QTIP or other trust.

  • Each other person who acquires property from the decedent by bequest, devise, inheritance, or otherwise by reason of the death of the decedent to the extent that such property passed without consideration.

Each property or interest in property required to be disclosed on Form 8939 must be reported on a Schedule A.

Multiple and partial interests in property.

For an undivided or fractional interest in property held by and received from the decedent by the recipient listed on line 2a, describe only the undivided or fractional interest. For a life estate or remainder interest in property, where the partial interest received by the recipient listed on line 2a was created by the bequest or devise made by the decedent, however, Basis Increase may be allocated only to the entire property owned by the decedent. Therefore, assuming the decedent’s adjusted basis in the entire property is less than the FMV of the property at the date of death, describe the undivided interest in property (including the decedent’s adjusted basis, the property’s FMV at the date of death, and the amount of Basis Increase allocated by the executor) on an attachment to Line 4 or in column (a) of Line 4. Also include in this description the applicable section 7520 rate, the life tenant’s age, and the recipient’s actuarial factor at the decedent’s date of death. Compute the recipient’s portion of adjusted basis, FMV, and basis increase allocation (allocated on an actuarial basis between the income and the remainder interests), and list the recipient’s share of each in columns (b) through (f) on line 4.

Note.

For property transferred in trust with an income and remainder interest, the trust is considered the sole recipient of the property.

Example.

Donald died on October 10, 2010, owning real property. Donald originally acquired the property on December 10, 2007. As of Donald's date of death, the property has an FMV of $967,000 and an adjusted basis of $425,000. Donald devised the property to Larry for life, with remainder to Rachel. At the time of Donald's death, Larry is 48 years old. The section 7520 rate for October 2010 is 2.0 percent. Donald's executor, Edward, makes the Section 1022 Election by timely filing Form 8939. Edward allocates $542,000 of General Basis Increase to the property. See Attachment to Larry's Schedule A, on the next page and Attachment to Rachel's Schedule A, later.

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Line 1a—Executor's Name

Enter the name of the executor shown on line 6a of Form 8939.

Line 2a—Name and Address of Recipient

Enter the name and address of the recipient of the property acquired from the decedent reported on this Schedule A.

Line 2b—Recipient's Taxpayer Identification Number

If the person named in line 2a is an individual, enter the SSN or ITIN, as applicable, of that individual. If the person named in line 2a is a corporation, partnership, trust, estate, or other entity, enter the entity's employer identification number (EIN).

Line 3—Property Acquired from the Decedent with Adjusted Basis Greater Than or Equal to FMV

List each item of property (other than cash) acquired from the decedent by the person listed on line 2a the basis of which at the time of death is greater than or equal to its FMV at the date of death. Number each item of property in the left-hand column.

Column (a). Description of the Property.   For each item of property acquired from the decedent, accurately describe the property received by the person named on line 2a. The following guidelines can be used in describing the property.
  • Real property. Describe the real estate in enough detail so that the property could be easily located.

    1. For each parcel of real estate, report the area.

    2. For city or town property, report the street and number, ward, subdivision, block and lot, etc.

    3. For rural property, report the township, range, landmarks, etc.

  • Stocks. For stocks, list:

    1. The number of shares;

    2. The exact name of corporation; and

    3. The principal exchange upon which sold, if listed on an exchange.

  • Bonds. For bonds, list:

    1. The quantity and denomination;

    2. The name of obligor;

    3. Date of maturity;

    4. Interest rate;

    5. Interest due date; and

    6. The principal exchange, if listed on an exchange.

  • Tangible personal property. Accurately describe any tangible personal property (for example, works of art, jewelry, furs, silverware, books, statuary, vases, oriental rugs, coin or stamp collections) received by the person listed on line 2a in enough detail so that such property could be easily identified by its description.

Column (b). Date Decedent Acquired the Property.   For each item of property, enter the date the decedent acquired the property. If the actual date of acquisition is not known, and cannot be determined after reasonable inquiry, enter the approximate date of acquisition and write “approximate” after the date.

Column (c). Adjusted Basis at Death.   For each item of property, enter the adjusted basis of the property as of the date of the decedent's death. See Decedent's Adjusted Basis, earlier, for more details.

Column (d). FMV at Death.   For each item of property, enter the FMV of the property as of the date of the decedent's death. See Fair Market Value (FMV), earlier, for more information.

Column (e). Ordinary Gain.   For each item of property, enter the maximum amount of gain, if any, that would be ordinary. Attach a statement detailing how you figured the amount of gain that would be ordinary.

Line 4—Property Acquired From the Decedent With Adjusted Basis Less Than FMV

List each item of property (other than cash) acquired from the decedent by the person listed on line 2a the basis of which at the time of death is less than its FMV at the date of death.

Number each item of property in the left-hand column. Four categories of property can be reported here.

  1. Property that receives an allocation of both General Basis Increase in column (e)(i) and also Spousal Property Basis Increase in column (e)(ii).

  2. Property that receives only an allocation of Spousal Property Basis Increase in column (e)(ii).

  3. Property that receives only an allocation of General Basis Increase in column (e)(i).

  4. Property that receives no allocation of increase to basis.

Do not include in column (e)(i) or (e)(ii) of line 4 any adjustments to basis other than adjustments to basis under section 1022(b) or (c). For example, do not include in column (e)(i) or (e)(ii) any adjustments to basis required or permitted under sections 469, 1016, or 2654.

Column (a). Description of the property.   For each item of property acquired from the decedent, accurately describe the property received by the person listed on line 2a. Use the guidelines discussed under the instructions to line 3, column (a), earlier.

  If the property is property in which the surviving spouse acquires a qualified terminable interest, include a description of the spouse's interest in the property and include the designation “QTIP” in the description of the property.

  If the property is any of the kinds of property listed under Property Not Eligible for Increase to Basis earlier, include sufficient information to identify the kind of ineligible property and the designation “Ineligible Property” in the description of the property. Attach a statement that lists the item number from Schedule A, Line 4 and an explanation as to why the property is ineligible for a basis increase.

  If the item of property acquired from the decedent is treated as not having been owned by the decedent at the time of death, so state. If the item of property acquired from the decedent is treated as having been owned by the decedent at the time of death to the extent provided in rule 2 or rule 3 under Jointly held property, earlier, attach a statement and show how the extent of the decedent's ownership is figured.

Column (b). Date decedent acquired the property.   For each item of property, enter the date the decedent acquired the property. If the actual date of acquisition is not known, and cannot be determined after reasonable inquiry, enter the approximate date of acquisition and write “approximate” after the date.

Column (c). Adjusted basis at death.   For each item of property, enter the adjusted basis of the property as of the date of the decedent's death. See Decedent's Adjusted Basis, earlier, for more details.

Column (d). FMV at death.   For each item of property, enter the FMV of the property as of the date of the decedent's death. See Fair Market Value (FMV), earlier, for more information.

Column (e)(i). Basis Increase allocated to property.   List the amount of General Basis Increase (as defined in Rev. Proc. 2011-41, section 4.02(2)) allocated to the property described in column (a).

   Do not include in column (e)(i) any adjustments to basis other than those provided for in section 1022(b).

Column (e)(ii). Spousal Property Basis Increase allocated to property.   List the amount of Spousal Property Basis Increase (as defined in Rev. Proc. 2011-41, section 4.02(2)) allocated to the property described in column (a).

  Do not include any adjustments to basis other than those provided for in section 1022(c) or in Rev. Proc. 2011-41, section 4.02(3).

  
Spousal Property Basis Increase may be allocated only to qualified spousal property, except as otherwise provided in Rev. Proc. 2011-41, section 4.02(3).

  If column (e)(ii) includes an allocation of Spousal Property Basis Increase to property that is sold (regardless of whether the allocation of Spousal Property Basis Increase is made before or after such sale) instead of being distributed to or for the surviving spouse, check the box in column (e)(ii). Attach a statement identifying the property by item number and showing how the allocation of Spousal Property Basis Increase complies with the rules of Rev. Proc. 2011-41, section 4.02(3).

  Attach this statement to the Schedule(s) A that show the property to which Spousal Property Basis Increase is allocated. Also, attach to such schedules each document providing a bequest or devise to the surviving spouse.

Column (f). Ordinary gain.   Enter in column (f) the maximum amount of gain, if any, that would be treated as ordinary income. Attach a statement including the item number from line 4, showing how you figured the amount of gain that would be ordinary and providing sufficient information to figure this amount on any subsequent sale, exchange, or other disposition.

Line 4B—Total Allocation of Basis Increase

Add column (e)(i) and (e)(ii) and place the sum on line 4B. The sum of line 4B, column (e)(i) of all Schedules A may not exceed the amount on line 12c, General Basis Increase, on page 1. Enter the sum of line 4B, column (e)(i) from all Schedules A on line 13 of page 1. Enter the sum of line 4B, column (e)(ii), from all Schedules A on line 14, of page 1.

Schedules R and R-1—GST Exemption

Introduction and Overview

Schedule R is used to allocate the generation-skipping (GST) exemption. Schedule R-1 is used to inform the trustee of certain trusts of the amount of GST exemption allocated to such trusts. Because the GST tax rate for 2010 is zero, these schedules are not used to compute the GST tax. For certain definitions and general rules that may be applicable, see the instructions to Schedule R in the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.

How To Complete Schedules R and R-1

Valuation.   Enter on Schedules R and R-1 the FMV of the property interests subject to the GST tax.

How To Complete Schedule R

Part 1. GST Exemption Reconciliation

Part 1, line 8, Part 2, line 4, and line 4 of Schedule R-1 are used to allocate the decedent's GST exemption. This allocation is made by filing Form 8939 and attaching a completed Schedule R and/or R-1. Once made, the allocation is irrevocable. You are not required to allocate all of the decedent's GST exemption. However, the portion of the exemption that you do not allocate will be allocated by the IRS under the deemed allocation at death rules of section 2632(e).

For transfers made through 1998, the GST exemption was $1,000,000. Beginning in 2010, the GST exemption is $5,000,000; however, the tax rate on generation-skipping transfers made in 2010 is 0%. The exemption amounts for 1999 through 2009 are as follows:

Year of transfer GST exemption
1999 1,010,000
2000 1,030,000
2001 1,060,000
2002 1,100,000
2003 1,120,000
2004 and 2005 1,500,000
2006, 2007, and 2008 2,000,000
2009 3,500,000

The amount of each increase can only be allocated to transfers made (or appreciation that occurred) during or after the year of the increase. The following example shows the application of this rule:

Example.

In 2003, G made a direct skip of $1,120,000 and applied her full $1,120,000 of GST exemption to the transfer. G made a $450,000 taxable direct skip in 2004 and another of $90,000 in 2006. For 2004, G can only apply $380,000 of exemption ($380,000 inflation adjustment from 2004) to the $450,000 transfer in 2004. For 2006, G can apply $90,000 of exemption to the 2006 transfer, but nothing to the transfer made in 2004. At the end of 2006, G would have $410,000 of unused exemption that she can apply to future transfers (or appreciation) starting in 2007.

Line 2.   These allocations will have been made either on Forms 709 filed by the decedent or on Notices of Allocation made by the decedent for inter vivos transfers that were not direct skips but to which the decedent allocated the GST exemption. These allocations by the decedent are irrevocable.

  Also include on this line allocations deemed to have been made by the decedent under the rules of section 2632. Unless the decedent elected out of the deemed allocation rules, allocations are deemed to have been made in the following order:
  1. To inter vivos direct skips and

  2. Beginning with transfers made after December 31, 2000, to lifetime transfers to certain trusts, by the decedent, that constituted indirect skips that were subject to the gift tax.

  For more information, see section 2632.

Line 3.   Make an entry on this line if you are filing Form(s) 709 for the decedent and wish to allocate any exemption. See Notice 2011-66, section II.B. for special rules regarding inter vivos direct skips occurring during 2010.

Lines 4 and 5.   These lines represent your allocation of the GST exemption to direct skips made by reason of the decedent's death. Complete Part 2 and Schedule R-1 before completing these lines.

Line 8.   Line 8 is used to allocate the remaining unused GST exemption (from line 7) and to help you compute the trust's inclusion ratio. Line 8 is a Notice of Allocation for allocating the GST exemption to trusts as to which the decedent is the transferor and from which a generation-skipping transfer could occur after the decedent's death.

  If line 8 is not completed, the deemed allocation at death rules will apply to allocate the decedent's remaining unused GST exemption, first to property that is the subject of a direct skip occurring at the decedent's death, and then to trusts as to which the decedent is the transferor. If you wish to avoid the application of the deemed allocation rules, you should enter on line 8 every trust (except certain trusts entered on Schedule R-1, as described below) to which you wish to allocate any part of the decedent's GST exemption. Unless you enter a trust on line 8, the unused GST exemption will be allocated to it under the deemed allocation rules.

  If a trust is entered on Schedule R-1, the amount you entered on line 4 of Schedule R-1 serves as a Notice of Allocation and you need not enter the trust on line 8 unless you wish to allocate more than the Schedule R-1, line 4 amount to the trust. However, you must enter the trust on line 8 if you wish to allocate any of the unused GST exemption amount to it. Such an additional allocation would not ordinarily be appropriate in the case of a trust entered on Schedule R-1 when the trust property passes outright (rather than to another trust) at the decedent's death.

  
To avoid application of the deemed allocation rules, Schedule R should be filed to allocate the exemption to trusts that may later have taxable terminations or distributions under section 2612 even if the form is not required to be filed to report GST tax.

Line 8, column C.

Enter the GST exemption included on lines 2 through 5 of Part 1 of Schedule R, and discussed above, that was allocated to the trust.

Line 8, column D.

Allocate the amount on line 7 of Part 1 of Schedule R in line 8, column D. Value the trust as of the date of death. You should inform the trustee of each trust listed on line 8 of the total GST exemption you allocated to the trust. The trustee will need this information to compute the GST tax on future distributions and terminations.

Line 8, column E. Trust's inclusion ratio.

The trustee must know the trust's inclusion ratio to figure the trust's GST tax for future distributions and terminations. You are not required to inform the trustee of the inclusion ratio and may not have enough information to compute it. Therefore, you are not required to make an entry in column E. However, column E and the worksheet below are provided to assist you in computing the inclusion ratio for the trustee if you wish to do so.

You should inform the trustee of the amount of the GST exemption you allocated to the trust. Line 8, columns C and D may be used to compute this amount for each trust.

Note.

This worksheet will compute an accurate inclusion ratio only if the decedent was the only settlor of the trust. You should use a separate worksheet for each trust (or separate share of a trust that is treated as a separate trust).

WORKSHEET (inclusion ratio):

1 Total FMV of all of the property interests that passed to the trust  
2 State death taxes and other charges actually recovered from the trust  
3 Subtract line 2 from line 1  
4 Add columns C and D of line 8  
5 Divide line 4 by line 3  
6 Trust's inclusion ratio. Subtract line 5 from 1.000  

How To Complete Schedule R-1

Line 4.   Do not enter more than the amount on line 3. If you wish to allocate an additional GST exemption, you must use Schedule R, Part 1. Making an entry on line 4 constitutes a Notice of Allocation of the decedent's GST exemption to the trust.

Filing Schedule R-1.   Attach to Form 8939 one copy of each Schedule R-1 that you prepare. Send two copies of each Schedule R-1 to the fiduciary.


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