A form is required for this year (2010) due to the law that phased out the estate-tax (which law “sunsets” on 12/31/10) to get a “step-up” in basis on a portion of the assets of an estate that might otherwise have been subject to the estate-tax. The need for this form was created in 2001 when the law was passed. But nobody (especially the IRS) expected the law to reach 2010 unchanged. Surprise! It did!

So, did the IRS figure out how to deal with this in late 2009? No.

Did the IRS figure out how to deal with this in early 2010? No.

Have they figured it out yet for sure? No.

How many days left in 2010? (15 as I write this).

So, a lawyer friend of mine got his hands on an advance copy of the form (already a previous advance version had been released and withdrawn) and posted it on his blog. [see the link below]

You can read his write-up on the law and go to the link to see the form. But, really, why bother, the IRS will probably change things again. You have until the deadline for filing the 2010 income-tax return (April 15th – in case you forgot) to file this form. You don’t have to worry if the person had an estate smaller than $1 million or if nobody died in your family this year. But, why hurry? Who cares about deadlines, certainly not the IRS … or then again, maybe they do (at least when it’s your deadline, not theirs!)

Internal Revenue Service Releases 12/16/2010 Advance Proof Copy of Form 8939 Required for Step-up in Basis for 2010 Deaths « Massachusetts Estate Planning, Probate & Elder Law

Addition after Congress approved the new tax bill. Maybe the IRS really does know what it’s doing. The new tax bill contains a provision that allows the Executor of a person who died in 2010 to elect either the no-estate-tax rule of 2010 or the new estate-tax rule. With the new rule, an estate of up to $5 million gets a full step-up in basis and pays no tax. Those with estates larger than that would probably prefer no step-up (or at least the $1.3 million limit of step-up) and no estate-tax. So, perhaps some people will still need the form that the IRS hasn’t finished yet. But, most people will probably elect under the new rule and the form won’t be needed. Maybe the IRS lawyers were up on Capitol Hill pushing this part of the new law to Congressional staffers.