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Leslie Bonacum

New CCH Resource Provides Expert Guidance on Carryover Basis

(RIVERWOODS, ILL., January 10, 2011) – Complying with the complex federal estate tax rules can be a daunting task in any given year, but getting a firm grasp of the modified carryover basis rules that apply only to property acquired from a decedent who died in 2010 can be especially challenging. CCH, a Wolters Kluwer business and a leading provider of tax, accounting and audit information, software and services (, now offers CCH Carryover Basis Answers, the most comprehensive resource for guiding tax professionals and estate practitioners through the complexities of carryover basis.

CCH Carryover Basis Answers is the only user-friendly resource designed to simplify compliance with the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Under the Act, estates can elect to apply carryover basis rather than the re-instated estate tax. It’s also a key guidance tool for the election to apply the modified carryover basis rules for the estates of decedents dying in 2010. This powerful new reference is authored by several renowned industry experts:

  • Ronald Aucutt, Charles “Skip” Fox IV, and E. Graham McGoogan Jr. (from McGuireWoods LLP); and
  • Robert Keebler, Peter Melcher and Michelle Ward (from Keebler & Associates, LLP).

It’s a practice-oriented explanation of the carryover basis rules applicable to property acquired from decedents who died in 2010. The product provides insightful guidance in a question-and-answer format, a webinar by the authors and valuable practice tools for making sure affected estates comply with specific 2010 law changes. More than 70,000 estates may be impacted by the carryover basis rules that apply to property acquired from a decedent who passed away in 2010.

Background on Carryover Basis

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) phased-in the reduction of the federal estate tax culminating in a one-year repeal starting January 1, 2010. Since Congress took no actions to prevent the repeal from happening, the temporary, one-year repeal of the estate tax went into effect. With repeal, the “stepped-up” basis rule (under which the basis of property passing from a decedent’s estate is generally the fair market value at the date of death) was replaced with a modified carryover basis regime. In other words, anyone inheriting assets from someone who died in 2010 must apply the decedent’s carryover tax basis instead of the prior law rule, which allowed inheritors to use the stepped-up basis of the inherited assets.

Under stepped-up basis, the income tax basis of property acquired from a decedent is stepped-up (or down) to equal its value as of the date of the property owner’s death. For example, if you inherit a house that originally cost the owner $50,000, but was worth $100,000 at the time of the owner’s death, then the income tax basis of the house is “stepped-up” to the higher amount – or value at the time of the owner’s death. This would limit the amount of gain the heir would have to recognize upon the sale of the asset.

Under carryover basis, the same house received from someone who died in 2010 will have a basis equal to the lesser of the decedent’s adjusted basis or the asset’s fair market value at the time of the owner’s death. Also, the decedent’s adjusted basis can be increased by as much as $1.3 million, plus an additional $3 million in the case of property passing to a spouse ($4.3million total). The “carryover” basis an heir receives on property acquired from someone who died in 2010 will affect the amount of capital gain recognized on the subsequent sale of the asset.

Now that estates can elect to apply either the estate tax rules or those for governing carryover basis, practitioners require the proper guidance to determine the best plan for their clients. Whatever approach is used, executors must be able to document how they applied the tax approach. CCH Carryover Basis Answers enables practitioners to easily identify what would be best for their clients and easily show why.

Risks of Noncompliance

The penalties can be costly for failure to comply with the carryover basis rules. A penalty of up to $10,000 may be imposed on an estate executor who fails to file the required carryover basis information return on time. Additionally, if the executor does not prepare written statements to beneficiaries informing them of the carried over basis, a $50 penalty can be imposed for each such failure to notify.

“Executors and estate managers are facing a rocky and uncharted road when it comes to applying the principles of carryover basis,” said Bruno Graziano, CCH Senior Estate & Gift Tax Analyst. “For estates affected by the 2010 carryover basis rules, you must determine the adjusted basis of the property. That can be difficult when property records are hard to trace and with limited resources available to help guide people through the process. In addition, exactly how to allocate the available basis increase to various assets could be a complicated process for executor"

One Source for Finding Answers Fast

In addition to concise explanations, it also provides web links to the Internal Revenue Code, regulations and other guidance to help clarify the applicable rules. The statutory review is in a question-and-answer format and covers special carryover basis issues such as:

  • Depreciable property;
  • Alternative valuation date elections; and
  • Gifts within three years of death.

Explanatory material includes:

  • Statutory Review in a question-and-answer format, including special carryover basis issues and situations such as:
    • Depreciable property;
    • Negative partnership basis (Sub-K concept);                     
    • Code Sec. 754 Elections;
    • Alternative valuation date elections;                                     
    • QTIP Trust inclusion under Code Sec. 2044;
    • Inclusion under Code Sec. 2036 and Code Sec. 2038;
    • Power of Appointment inclusion under Code Sec. 2041;                  
    • Gifts within three years of death;                   
    • Spousal gifts within three years of death; and
    • Legal, probate and settlement issues.

Practice Aids include:

  • Engagement Letters;
  • Letter from Practitioner to Executor;
  • Letter from Executor to Beneficiary;
  • Checklist;
  • Carryover Basis Allocation Workbook, including an Excel® Spreadsheet to make basis allocation – a key tool for assisting customers;
  • Election comparison tool to analyze what would be best for clients – estate tax or carryover basis; and
  • IRS Forms (when available).

For More Information

For more information on CCH Carryover Basis Answers, please visit or contact CCH at 1-888-CCH-REPS (1-888-224-7377).

About CCH, a Wolters Kluwer business

CCH, a Wolters Kluwer business ( is the leading global provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. Among its market-leading solutions are The ProSystem fx® Suite, CorpSystem®, CCH® IntelliConnect®, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill. Wolters Kluwer ( is a market-leading global information services company. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.

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