Throughout this publication, section references are to the Internal Revenue Code unless otherwise noted.

This publication is designed to help executors and individuals who acquired property from a decedent dying in 2010, for which the Section 1022 Election has been made, determine the tax treatment of the property acquired. See Property Acquired From the Decedent, later.

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The executor of an estate of a decedent who died in 2010 can elect to apply modified carryover basis treatment to property acquired from the decedent under section 301(c) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA). If the election is made, the estate will not be subject to federal estate tax and does not need to file a Form 706 even if the value of the estate is $5,000,000 or more. As a result, section 1014 generally does not apply to determine the recipient’s basis in property acquired from the decedent. Instead, section 1022 applies to determine the recipient’s basis in most (but not all) property acquired from the decedent. This election is referred to as the Section 1022 Election.

Form 8939 is an information return used by the executor of a decedent who died in 2010:

1. To make the Section 1022 Election;
2. To report information about property acquired from a decedent (defined in Property Acquired From the Decedent, later); and
3. To allocate Basis Increase (defined in Basis Increase, later) to certain property acquired from a decedent.

For detailed information about the Section 1022 Election, see Notice 2011-66, 2011-35 I.R.B. 184, available at www.irs.gov/irb/2011-35_IRB/ar09.html and Notice 2011-76, 2011-40 I.R.B 479, available at www.irs.gov/irb/2011-40_IRB/ar13.html. For optional safe harbor guidance under section 1022, see Revenue Procedure 2011-41, 2011-35 I.R.B. 188, available at www.irs.gov/irb/2011-35_IRB/ar10/html.

The Section 1022 Election is made when the executor timely files Form 8939. The due date for Form 8939 is January 17, 2012. For more information on the filing due date, see When to File in the Instructions for Form 8939.

If the executor makes the Section 1022 Election, special rules apply. These rules include the following.

• There is no estate tax.
• The basis of property acquired from a decedent generally is determined under the modified carryover basis rules of section 1022 and not under section 1014. Generally, the recipient's basis is the lesser of the decedent's adjusted basis or the fair market value (FMV) at the date of the decedent's death, increased by any allocation of Basis Increase, and as further adjusted as required by sections 1016, 1017, and 1018, or as otherwise specifically provided for under applicable provisions of Internal Revenue laws.

If the executor makes the Section 1022 Election and follows the provisions of section 4 of Revenue Procedure 2011-41, and takes no return position contrary to any provisions of section 4, the IRS will not challenge the taxpayer’s ability to rely on the provisions of section 4 on either Form 8939 or any other return of tax.

Once made, the Section 1022 Election cannot be revoked after the due date for filing Form 8939.

For information on how property acquired from the decedent for which a Section 1022 Election has been made is treated with respect to certain income tax provisions (including holding period, tax character, and depreciation) see Rev. Proc. 2011-41, section 4.06.