Form 8971
Basis Reporting to the IRS & Beneficiaries

The §6035 requirement

Any executor who files (or is required to file) a Form 706 (estate tax return) must also file Form 8971 with the IRS and furnish a Schedule A to each beneficiary who receives property from the estate. This requirement was added by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 and applies to estate tax returns filed after July 31, 2015.

Form 8971 is an information return filed with the IRS that lists each beneficiary and the assets they received. Schedule A is the beneficiary-specific statement showing each asset, its description, and its final estate tax value, which becomes the beneficiary’s basis.

The requirement applies to all property reported on the 706 that is acquired from the decedent, including:

• Assets passing through the probate estate
• Assets passing through a revocable trust reported on the 706
• Jointly held property to the extent included in the gross estate
• Life insurance proceeds includible under §2042
• Property subject to a general power of appointment under §2041

The basis consistency rule

Under §1014(f), a beneficiary’s basis in property acquired from a decedent cannot exceed the final value of that property as determined for estate tax purposes (i.e., the value reported on the 706). This is the “basis consistency” rule.

Under §1014(f)(1), if a beneficiary claims a basis higher than the reported value, the basis is capped at the final estate tax value; the IRS disallows any amount above what was reported on the 706. Separately, under §1014(f)(2), if no Schedule A was furnished to the beneficiary at all, the basis is treated as zero for purposes of determining gain until proper reporting is made. The distinction matters: an overstated basis is corrected down to the reported value, while a missing statement triggers the harsher zero-basis rule.

The basis consistency requirement applies until the statute of limitations expires on the estate tax return. If the 706 is under examination, the basis remains locked until the examination is resolved.

Exception: Property that qualifies for the marital or charitable deduction is generally exempt from the basis consistency requirement, because its estate tax value does not affect the tax liability.

The 30-day deadline

Form 8971 and all Schedules A are due the earlier of:

• 30 days after the due date of the Form 706 (including extensions), or
• 30 days after the date the Form 706 is actually filed

This deadline is independent of the 706 due date. Filing the 706 on extension does not automatically extend the 8971 deadline if the 706 is filed before the extended due date. The 30-day clock starts from whichever event occurs first.

Penalty: Failure to file carries the §6721/§6722 information return penalties: $340 per return/statement for filings due in 2026, up to $4,098,500 per year for filers with gross receipts over $5 million (amounts indexed annually for inflation). Intentional disregard increases the penalty to at least $680 per return with no cap.

Filings due in 2026

Late Form 8971 penalties

When filed	Per statement	Yearly cap, receipts over $5M	Yearly cap, $5M or less
Within 30 days after the due date	$60	$683,000	$239,000
After 30 days, by August 1	$130	$2,049,000	$683,000
After August 1, or never filed	$340	$4,098,500	$1,366,000
Intentional disregard	At least $680 per statement, with no yearly cap

Supplemental reporting

A supplemental Form 8971 (and updated Schedules A) must be filed whenever:

• The estate tax value of an asset changes, due to audit adjustment, amended 706, or settlement with the IRS
• Assets are discovered after the original filing
• The allocation of assets among beneficiaries changes
• Any other event requires a correction to the original reporting

The supplemental return is due 30 days after the event triggering the change. There is no limit on the number of supplemental filings.

Coordination with the Form 706

The values on Form 8971 must match the 706 exactly. This includes:

• Values as finally determined (not just as originally reported; if the 706 is amended or adjusted on audit, the 8971 must be updated)
• Alternate valuation date values if the §2032 election was made
• Special use valuation under §2032A (the 8971 reports the special use value, not FMV)
• Discounted values for fractional interests, lack of marketability, etc.

The 8971 is not a separate valuation exercise; it is a reporting mechanism that transmits the 706 values to the IRS and beneficiaries.

Common pitfalls

• Missing the 30-day window: the deadline is shorter than most practitioners expect
• Failing to file supplementals after audit adjustments
• Inconsistent values between 706 and 8971 (especially when values are adjusted during examination)
• Not filing for assets passing through a revocable trust that are reported on the 706
• Overlooking the requirement entirely on portability-only 706 filings (the requirement still applies)

What we need to open a matter

• Completed Form 706 (or draft if still in preparation)
• Asset inventory with final estate tax values
• Beneficiary information: names, SSNs, addresses, and which assets each beneficiary received
• Trust instruments and will (to confirm distribution provisions)
• Any post-filing changes: audit adjustments, amended values, discovered assets

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