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Abstract

The Internal Revenue Service, on August 7, 2011, issued Notice 2011-661 and Revenue Procedure 2011-41,2 both effective August 29, 2011, providing guidance in handling the income tax basis for property owned (and passing from) decedents dying in 2010.3 The executor of the estate can choose (for property acquired from or passing from and owned by the decedent) to – (1) apply the estate tax rate and applicable credit amount for 2011 with a new basis at death (stepped up or down, as the case may be) or (2) elect to apply the rules applicable to deaths in 2010 (no federal estate tax) and use the modified carryover basis rules applicable to deaths in 2010.4 With the latter alternative, the procedure is handled substantially as a gift of property is handled inasmuch as both procedures involve application of carryover basis rules.5 This article discusses the “safe harbor” for those making the Section 1022 basis election for deaths in 2010.

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