Release Notes for 6-in-1 Version 2016-027

6-in-1 Estate Administration Software, v2016-027 January 28, 2016

We’re delighted to announce first release of 6-in-1 Estate Administration Software for 2016.

6/20/2016

A) No Attachments to Schedule A: Draft 8971 instructions released by the IRS on 6/6/2016 make the point (three times) that *nothing* should be attached to Schedule A (at least the copy being filed with the IRS). This guidance is somewhat unexpected, because the understanding among many speakers around the country has been that one could attach EVP reports (see below) or basis adjustment information. Note that the official publication date is September 2016, so this new “no-adjustment” rule will not be binding until then.

B) Estate is All Cash, IRD, Tangibles Each Worth $3K or less, or All Sold: Based on informal guidance from the IRS, we now understand how to handle estates where there is no property to report on Schedule A (because it consists of only cash, IRD, household goods/personal effects worth $3K or less, and/or property that has been sold): DO NOT FILE FORM 8971.

C) Beneficiary Percentage: In last week’s update, we added the parenthetical “(of 1,000 shares)”, where a beneficiary percentage is displayed (because less than 100%) and “1,000 shares” represents the number of shares as reported on the 706. If some of the asset has been sold, the beneficiary percentage will still be based on the entire asset owned at death (before any sales). 

D) Duplicate Reporting: In last week’s update, we added the phrase “Duplicate Reporting” to the Beneficiary Percentage line in the description column on Schedule A, where there is uncertainty about which benys will receive what property. In that case, the IRS instructions and proposed regulations state that Schedule A should show 100% of this property going to each beny. Once actual distributions are made, there is no obligation to file a Supplemental Form 8971 or Schedules A.

E) Proposed Disclaimer: Consider attaching the following disclaimer (or some variation thereof) to each beny’s copy of Schedule A in the case of “duplicate reporting” (Courtesy of Martin M. Shenkman, Esq., Martin M. Shenkman, PC):

“The listing of assets on Form 8971 is a mere guesstimate based on current data as to which assets will be distributed and to whom. The personal representative has not made final determinations and the allocation may change, assets may be sold, and other changes may occur, and if so a supplemental filing may be made (but is not required). There is no intent that a designated beneficiary draw any conclusion that an asset listed will in fact be distributed to that beneficiary, except to the extent of any partial distribution heretofore. The indication of assets and their distribution is being made at this time to comply with the filing requirements of Form 8971 and not to confirm any legal decisions as to distributions by the personal representative. Therefore, no beneficiary should take any action based on the information disclosed in this filing.”

F) EVP Reports: Schedule A refers to the 706 item that, in turn, refers to an EVP attachment. Some options, subject to eventual guidance from the IRS:

(i) Single beny: single item on each Schedule A that refers to the single item on the 706.

(ii) Multiple benys, consistent proportions of each security: same as (i) above, but with each beny’s percentage interest noted.

(iii) Multiple benys with varying proportions of each security: probably need to enter each security on Schedule A.

In all cases above, could refer to 706 item number as “1-01”, “1-02” (etc.) with the “01” (etc.) referring to the item number on the attached EVP report.

G) Funded Revocable Living Trusts: Several customers have asked how to handle the scenario where there is a funded revocable living trust that is reported on Schedule G. The question was important because some of the accounts in the trust were managed accounts holding 600 or more securities each. Thus, every month after death there were numerous partial sales of assets before distributions. The issue is whether the “transfer” from estate to trust at the moment of death is the only transfer that needs to be reported. On this theory, distributions to life tenants or remainderman during the next decades or centuries would not trigger a duty to file Supplemental 8971s or Schedules A.

If so, the executor furnishes a single 8971 to the trustee of the trust (either by listing each security owned at death, or by entering a single item on Schedule A that refers to a 706 with a single item whose details are listed on an attached EVP report). Otherwise, the tracking of multiple such accounts just for 8971 purposes could cost thousands of dollars or more in preparation time.

The penalty for failing to file an 8971 and related Schedules A would be a single $260 (for the combined IRS filing), plus $260 for each Schedule A not furnished to benys. Given the confusion surrounding the Supplemental Transfers issue, it may be practical to treat the 8971 furnished to the trustee as the end of 8971 reporting obligations for that trust One could then weigh the risk of incurring the penalties ($260 + $260 x # of eventual benys) vs. the cost of “over-complying” with ambiguous instructions and regulations. 

H) Portability-Only 706s: Note that the test for whether a return is “portability only” (and thus exempt from 8971 reporting) is whether the gross estate (Line 1) plus adjusted taxable gifts (Line 4) exceeds $5.45m (for 2016). Deductions are disregarded for this purpose.

I) 8971 Reporting of Marital/Charitable Property:The status of property as marital or charitable has nothing to do with whether it should be reported on Schedule A of the 8971. If the estate is large enough, ALL of this property must be reported on Schedule A, unless it meets one of the four exceptions (cash, IRD, tangibles worth $3K or less, or property that has been sold). The property’s marital or charitable status *does* affect the answer to the question on Schedule A of whether the property increases estate tax liability (always “N” for such property).

J) Decedents Dying Before 5/1/2014, Amended On/After 8/1/2015: No 8971 required. By regulation, a return may not be amended after the due date plus extensions (even though supplemental information may be provided). Reg. §20.6081-1(d). Because such supplemental information (submitted after the due date plus extensions) is not considered a “return”, it is not subject to 8971 reporting.

K) Zoom: Because monitor resolution is getting higher and higher, 6-in-1’s default zoom of 150% tends to display the program at too small a size. Therefore, we have changed the default zoom to 200%. If you find that this is too large, just click on the Zoom button (upper left corner of the 6-in-1 Main Menu) and change the setting back to 150%.

L) NY Inventory: Because the NY Inventory format was radically changed several months ago, different destination letters are now generated by 6-in-1 codes.

Solution for each estate (in the Transact file):

1) Search (button on lower left of Transact screen)

2) Inventory field: enter an asterisk

3) Perform Search

Lower right panel of Main screen (in Transact): Alt-Click on the “Reset Inventory Results” button (you might have to scroll down to see it).

3/24/2016

Quick Tips

• After an update is installed, click on the Zoom button (upper left corner of the 6-in-1 Main Menu) and choose 200 (top center of screen). Test whether this is the correct zoom level by clicking on the “mountain” buttons on the lower left corner of the screen.
• Shift-click on the 6-in-1 button in the top right corner of any screen to return instantly to the 6-in-1 Main Menu.
• 8971: 6-in-1 Main Menu, right panel: tiny blue block to left of estate name indicates an estate of a decedent dying on/after 5/1/2014 with an estate (gross plus adjusted taxable gifts) exceeding the basic exclusion amount for that year ($5.34m in 2014, $5.43m in 2015, and $5.45m in 2016). These estates would all have due dates (including extension if applicable) of 8/1/2015, and thus be subject to the new 8971 reporting requirements. The new due date for that form is now 6/30/2016.
• 8971: the only way to get information on to Schedule A of the 8971 is to allocate assets to beneficiaries. This must be done in the asset Distribution records (which may also be marked as going to specific beneficiaries) are disregarded. Also, Form 8971 will list only beneficiaries receiving some or all of at least one reportable asset. Thus, if no beneficiaries are receiving any reportable assets (i.e., the entire estate was cash or all assets were sold), then you must still file Form 8971, but would not attach any Schedules A.
• 706 extensions: you might consider filing a protective 706 extension in most or all estates. This will provide you with an extra six months (plus 30 days) within which to file Form 8971 (if applicable). It also reduces the risk of missing the deadline for electing portability. Once this deadline is missed, it can be difficult (if not impossible) to secure IRS relief.

e-file

• Missing PTIN: e-filing will now blocked if the PTIN is missing (General Information, Preparer section). This has been the most common cause of returns that are being rejected by the IRS.
• e-file Center: an apparent “record-locking” issue (“Another user…” error message when clicking on the e-file Center button the 6-in-1 Main Menu) has been resolved.
• e-filing statistics: we have now had nearly 1,400 returns e-filed since 1/8/2016. This represents a combination of 2014 and 2015 returns for the 1041, PA, NY, NJ, and OH (2015 only for OH).

1041

• Grantor Advice Letter: the short-term and long-term gain/loss lines should have been including gains/losses from the new 8939 transactions marked with boxes A-F. This issue has been resolved.
• Schedule G, Line 2a (foreign tax credit): the override field for this line has been removed. For e-file purposes, this value must come from a related Form 1116, Line 30. Otherwise, the e-filed return will be bounced by the IRS.

Auxiliary 1041 Forms and Schedules

• Multiple copies of C, E, F, and 1116: note new buttons on the right panel that allow you to create as many as five (5) additional copies for each estate or trust.
• Depreciation from 4562 => C, E, F: note a new button on each of these schedules that lets you bring in the depreciation amount from the 4562. Note that this feature will let you bring in the amount only from the first 4562. A future release will allow you to connect a 4562 with a particular C, E, or F.
• 1041-ES: on the vouchers, the year now displays “2016” rather than “2015”.
• 5227 Worksheets: the ANII column has been activated on Line 1 for 2014 and 2015.

Edit Beneficiaries (accessed from the K-1 Master screen)

• the tab key will now move the cursor from the Last name field to the First name field (and no longer jumps to the Middle name field).

PA-41

• Schedules A and B use the “Other reduction adjustments” line to report IRD (that is not taxable on the PA-41). This reduction draws from the “IRD Portion” amounts on the bottom of the Numbers screen in the 1041. Those fields, in turn, were getting their values only from the first transaction marked as IRD. A “sum” function has been added so that the fields will reflect the sum of all IRD transactions.
• Schedule A, Line 11: this amount was being included in the subtotal, but was not printing. It is now printing. It was being used in the e-file process at all times.
• Schedules C, E, F: a new button at the top allows you to import the values from the corresponding 1040 schedules.
• Schedule B, Lines 3: in one scenario (when Line 2 was empty), Line 3 was accumulating its amount, rather than recalculating from a baseline of zero. This issue has been resolved.

IN IT-41

• We have added the new IN K-1 so that you can provide these schedules to beneficiaries without further delay. We are still working on obtaining IN Department approval for the IN IT-41 and K-1 for filing purposes. Indiana was extremely late in accepting these forms for testing (not before 1/26/2016). By that time, we had moved on from the fiduciary income tax returns to the challenging 8971.

OH IT-1041

• e-file: a few users received an error message regarding “OH Taxable Income”. This occurred only if Schedule C was reporting zero income on Line 49. Although zero was the correct amount, this is a required field and must be included (with a zero value) on the e-filed OH return. This issue has been resolved.

Transact

• 706 Screen: note new button to “Find All 706 Asset Records”. This can be useful when you’re working with transactions relevant to Form 8971.
• Code 116.35 (amortization of bond premium): we now prompt you for a Bank In name.
• Code 116.9 (Farm expense): now defaults to the income deduction schedule for accounting purposes.
• Input Statements (in 1041, PA-41, etc.). In connection with our 8971 work, an issue arose where clicking on New Transaction would appear not to create a new transaction. In fact, it was creating a new transaction that was blank and not connected to the line/schedule you’re in. This issue (which arose only if you left the Name field empty on the previous New Transaction) has been resolved.

706

• portability transactions: amounts to spouse (Schedule E-1) will not include only 50% of the gross amount (not 100%) on Page 3, Lines 10 and 23. The previous use of 100% made no tax difference (because portability amounts are a wash on assets and deductions), but we have concluded that reporting at 50% is probably the right result.

PA-1500

• Schedule O (2-16): the PA Department revised this form in minor ways, and posted this new version with a 2-16 revision date. The revisions included (a) the revision date (as expected), replacement of “insert” with “use” (at the bottom), and addition of “paper of” (also at the bottom). In fact, we did change the revision date in the bottom right, but did not change it in the upper left (still displays “2-14”). This will be changed in the next update.

NY ET-706

• Taxable Gifts made within three years of death: the NY tax attributable to these gifts may not be included in the state death tax deduction that appears on Line 3b of the 706 (because these gifts are not included in the federal gross estate). This calculation has been modified accordingly. Note the amount that appears on the lower right panel of Page 1 of the NY ET-706 (“NY Tax w/o Taxable Gifts”).
• Schedule E, Columns B & C: these columns were being used in the calculations, but were not printing. This issue has been resolved.

3/3/2016

Form 8971: Summary of Proposed Regulations (published at 4:15 pm on 3/2/2016)

8971 Summary

8971 Proposed Regulations

A quick review of the proposed regulations yields the following new or clarifying information:

1) Information Return:  Form 8971

2) Statement:  Schedule A of Form 8971

3) Portability.  Form 8971 does not apply to portability-only 706 returns

4) Property Not Reportable.  The following property is exempt from the reporting requirements:

    (a) cash (other than coins or paper bills with numismatic value)

    (b) income in respect of a decedent

    (c) tangible personal property for which an appraisal is not required under 20.2031-6(b) (i.e., less than $3,000)

    (d) property that is sold or otherwise disposed of by the estate (and therefore not distributed to a beneficiary) in a transaction in which capital gain or loss is recognized.

5) Property Reportable.  Includes property the basis of which is determined in whole or in part by reference to the basis of the property acquired from the estate or as a result of the death of the decedent.  This includes property that results from a like-kind exchange or involuntary conversion.

6) Recipients Not Yet Determined.  If, by the due date of the 8971, it is not certain which beneficiaries will receive what property, Schedule A for each beneficiary must list all property that *could* be use to satisfy that beneficiary’s interest.  This will result in the duplicative reporting of these assets on multiple Schedules A.  When actual distributions are made, the executor may (but is not required to) file and furnish a supplemental 8971 and Schedule A.

7) Subsequent Transfers.  If all or any portion of property reported/reportable on Form 8971 and Schedule A is distributed (by gift of otherwise) by the recipient in a transaction in which a *related* transferee determines its basis, in whole or in part, by reference to the recipient/transferor’s baas, the recipient/transferor must file a Schedule A with the IRS and furnish a copy to the transferee. If such a transfer occurs before a final value is determined for the property, then the transferor must provide a copy of Schedule A to the Executor, who in turn must provide a supplemental Schedule A to the transferee instead of to the transferor.  [It’s not clear whether this “daisy-chaining” requirement applies to a transferee who, in turn, distributes this property to another *related* transferee, etc., ad infinitum].

8) Beneficiary Cannot Be Located.  The executor must report this fact on the 8971, and explain the efforts to locate the beneficiary.

9) Basis Adjustments.  This information (based on change in final value, new information, or the filing of a supplemental 706) “must be shown separately from the final value required to be reported on the beneficiary’s Schedule A.”  [Presumably, this information can be included in the description of the property reported on Schedule A].

10) Post-death Basis Adjustments.  The general rule is that a basis exceeding the final value for Federal estate tax purposes constitutes an impermissible “inconsistent basis”.  The proposed regulations clarify that this rule does not prohibit adjustments to the basis of property as a result of post-death events that are allowed under other sections of the Code.  The proposed regulations require only that the beneficiary’s *initial* basis of the inherited property may not exceed the initial value of the property for Federal estate tax purposes. Post-death events (such as depreciation or amortization, or a sale, exchange, or disposition of the property) will not cause the taxpayer’s basis in the property (on the date of a later taxable event) to be treated as exceeding the final value of the property. [Although not explicitly stated in the proposed regulations, it would appear that such post-death basis adjustments would include an election by the estate under IRC 643(e)(3) to recognize gain or loss on all distributions of property to beneficiaries during a given fiduciary income tax year].

There are additional scenarios, and a number of useful examples, contained in the proposed regulations, so you will want to review all 45 pages carefully.

Also, we can expect some “shakeout” once these proposed regulations are digested by practitioners during the next 29 days and beyond!

2/22/2016

Below is a sample report that we built into 6-in-1 this past weekend, to help you reconcile your 8971s against your 706s.  Please send us any thoughts on changes that you might suggest.

Sample 8971 Report

We are expecting proposed regulations for the 8971 any day now, and will be posting another update to incorporate any relevant further guidance that these regulations may contain.

2/19/2016

Version 2016-049 includes updates to the items listed below. If necessary, refresh or reload your browser window so that you get this latest release (not 008, 028, 035, 046, 047, or 048).

Zoom: It appears that many users are not aware that they can control the 6-in-1 “zoom” level (up to 400%). By default, 6-in-1 ships with a zoom level of 150%.   On monitors with high resolution, this level can cause 6-in-1 to display at a small size. To set the zoom to a comfortable level after any upgrade, take the following simple steps:

• At the 6-in-1 Main Menu, click on the “Zoom” button in the upper left corner.
• In the top/center of the screen, choose an appropriate zoom level. You can experiment with various zoom levels by clicking on the “mountain” icons in the lower left corner of your screen, to the immediate left of the word “Browse”.

e-file:

1) 2014 and 2015 returns. These returns for the same estate or trust are now clearly separated. Click on the 2014 or 2015 button at the top of the screen to display returns for each year.

2) 2014 with new schema 2014v5. As reported in our 1/28/2016 notes, the IRS requires this new schema for all 2014 returns filed on or after 1/9/2016. Thus, be sure that you are running 2016 software when e-filing 2014 returns.

3) Form 8879-F fiduciary signature date. Be sure to enter a 2016 date. Returns e-filed in 2016 must bear a signature date that matches the year of filing.

PA-1500: New dates on Page 1 and various schedules. These pages were not changed, but the PA Department of Revenue chose to assign new dates in connection with updates made to some of the instructions.

PA-41, Schedule B, Line 12: Under some circumstances, this total was double counting Line 7. This was related to a change in which the 2014 Line 7 was split into 2015 Lines 7 and 8. This issue has been resolved and backwards compatibility with 2014 returns has been preserved.

IN IT-41, Schedule IN K-1.  This schedule is new for 2015.  Because Indiana announced back in August 2015 that it would not be accepting IT-41 returns for testing until 1/26/2016, we moved the existing IT-41 (unchanged from 2014) and the new Schedule IN K-1 to the “back burner”.  With the release of 6-in-1 2016-049, we will now turn back to that form for submission, approval, and inclusion in the next update.

Estate Tax Returns (calculations through 2015) (6-in-1 and DecoupleCruncher):

DE 900-R
MD MET-1
MN M706
RI-100A

Form 8971: This software has gone through several iterations in the hands of users who installed the “early-bird” release (2016-008) or any of the interim releases (2016-035, 2016-046, 2016-047, or 2016-048).  We thank those users who installed any of these versions and gave us feedback on the new Form 8971.

The IRS announced in Notice 2016-19 (2/11/2016) that it was extending the deadline for filing Form 8971 (for 706 returns filed on or after 8/1/2015) from 2/29/2016 to 3/31/2016.   Bob Wolf, attorney at Tener, Van Kirk, Wolf & Moore in Pittsburgh, calls this a “stay of execution”.

This extension provides the IRS with more time to release proposed regulations that should provide guidance to supplement what is contained in the form and instructions themselves.

Note the following software enhancements/corrections to Form 8971 and Schedule A:

• The appropriate Executor TIN will appear in block 6, depending on whether you specify that the executor is an Individual or a Firm/Bank.
• The alternate valuation date will appear on Line 9 only if alternate valuation is elected.
• The 706 item numbers will now carry forward from upgrade to upgrade. This was not necessary before because they were automatically generated during preview and print. Also, you can refresh all such item numbers for display on Schedule A by clicking on the button on the right side of Form 8971.
• Schedule A will display a Y or N in Column C (“Did this asset increase estate tax liability?”) according to the following rules:
  1. Zero-tax 706: “N” for all assets
  2. Taxable 706: “Y” for all assets, except those for which a marital or charitable deduction is claimed.
• Schedule A description for beneficiary interests of less than 100%. The language “Beneficiary Interest: nn%” will now appear automatically at the end of the description for each such asset reported on Schedule A.
• Beny allocation overrides (on “Allocations” screen in Transact, right side):
  1. An asset can require a “Y” for a portion (i.e., credit shelter trust) and an “N” for a portion (i.e., marital trust). Select “Y” for the credit shelter portion as an override on the right side.
  2. Alternate valuation: a single asset can theoretically be distributed to various beneficiaries on various dates and at various values within the six-month alternate valuation period. Enter Date and Basis overrides for each beneficiary on the right side.
  3. 643(e)(3) election: if the estate makes this election on the 1041, then the value to be reported Schedule A will not be available on the 706, because the value at the time of distribution will serve as the new basis (in lieu of the date-of-death value or the alternate valuation value). Enter this new basis in the Basis Overrides fields on the right side.
• Schedule A Description Override. Many 706 descriptions will contain language (such as “See attached appraisal”) that is unnecessary or inappropriate for the 8971. On the 706 screen in Transact, and description that you enter into the 8971 “Schedule A Override” field (scroll down) will be used in place of the 706 description. Rather than retype the relevant part of the 706 description, just click on the “Set to 706 Description” button (left side), then delete the language that you do not want.
• Supplemental 8971. Because of the ongoing duty to report changes to information contained on prior 8971s, you must track which assets have changes. Do this by checking the “Changed” box (above the Beneficiaries field on the main Transact screen), then entering new information in the 8971 Schedule A Override field. When you check the “supplemental filing” box in the upper left of Form 8971, the form will display only those beneficiaries who have received one asset with changes, and Schedule A will list only those assets with changes.
• EVP valuations. Some users have prepared Form 706 by attaching an EVP report to Schedule B, etc. This approach may not be sufficient for Form 8971 purposes. If you can get the *.evp file from the broker who provided you with that report, then you can import that data into 6-in-1. You will now have the asset details available for automatic use on Form 8971.
• Assets assign to more than 10 beneficiaries. Follow the same procedure as before in the Allocations screen. If necessary, consult the help screen by clicking on the question mark in the lower left of the Allocations screen, to the left of the “A” on the “A B   C” line.

It is still not known whether Form 8971 applies in the following scenarios or to the following property types:

• Portability-only 706s? A literal reading of the statutes and regulations could lead to this conclusion, but we think that the IRS will clarify that Form 8971 does not apply. The Office of Assistant Chief Counsel, Department of the Treasury, told us the following in a phone call on 2/9/2016:  “For 706s filed solely for portability reasons, practitioners should spend NO TIME OR EFFORT on preparing Form 8971 or Schedule A until the IRS releases further guidance, even if that guidance is not released until 2/29/2016.”

• Cash assets? Currently, any asset listed on the 706 and showing a Bank Deposit name will automatically be marked “Cash” (checkbox above Beneficiaries field in Transact). For non-probate assets that are also cash, you should check this box. By default, 6-in-1 will not include cash on Schedule A of Form 8971 (pending IRS release of proposed regulations). If you want to report them, just check the box in the upper right of Form 8971.
• IRD? By default, 6-in-1 will not include IRD on Schedule A of Form 8971 (pending IRS release of proposed regulations). If you want to report, just check the box in the upper right of Form 8971.
• Assets sold by the estate?
• Section 643(e)(3) election? Asset distributed to beneficiaries, but deemed to be sold by the estate under a Section 643(e)(3) election.

Headers: You may wish to have the display on Schedule A of Form 8971 mirror the display on Form 706. We have made sure that the sort sequence on both forms is identical. To include headers on Schedule A of Form 8971, check the box in the upper right of Form 8971.

Future updates to Form 8971:

• Residue exhausted. This issue came up yesterday, and is a bit of an outlier. Twelve (12) beneficiaries received varying percentages of the residue. For all but three, however, the federal estate tax consumed their entire shares. We have modified the logic in the master copy of 6-in-1 to test for the post-tax distributed to each beneficiary.
• Section 645 elections. If your 706 is generated from an estate and one or more trusts, we need to generate Form 8971 in the same way. Please contact us if you have that scenario. The next upgrade will incorporate this feature.

As you can see, there seems to be no end to the variations that new Form 8971 presents. We will be releasing further versions of the software based on proposed regulations expected imminently from the IRS, as well as on continued user experience working with the software and ongoing discussions occurring in various forums including the ABA Estate Planner’s and Administrator’s list.

1/28/16: Version 2016-027 includes the items listed below.  There will be at least one more update this tax season while we wait for IN IT-41 approval and release of the final US 8971 form and instructions (the “basis consistency” form).

As always, please contact technical support if you find anything in the software that requires our attention.

Approved fiduciary income tax e-file (including dates of approval):

1041* 01/12/2016
NJ      12/15/2016
NY      01/19/2016
OH     01/26/2016
PA      01/21/2016

Approved paper filing:

8971: New “basis consistency” form, posted as a second draft on 1/26/2016**.
709
1041

State Fiduciary Income Tax:  CT, DE, IL, MA, NC, NJ, NY***, OH****, PA, VA, WI

NY ET-706 (for decedents dying on/after 4/1/2015)

MD MET-1 (2015)

*     1041:  Returns e-filed between 12/28/2015 and 1/8/2016 were not processed right away by the IRS, which disabled e-filing while it prepared its systems  for the new tax year.  When it did process them on 1/8/2015, it rejected them all for one of the following reasons:

2014:  As of 1/8/2016, these returns needed “XML schema” v5.0.

2015:  Short-year 2015 returns now need to use the 2015 schema rather than the 2014 schema.

With the 2016-027 update, you should resubmit all of these returns through e-file.  The software will automatically use the schema appropriate for the tax year.

Note:  you must change the “Signature Date:  Fid” (upper right of e-file Center) to a 2016 date.  We don’t believe that this requires another Form 8879-F to be signed by the fiduciary.  The “Signature Date:   ERO” doesn’t matter.  No harm in changing it as well.

** 8971:  This new form (not yet released in final) will be required for all estates where 706 Line 1 plus Line 4 exceeds the basic  exclusion amount ($5.43m in 2014, $5.45m in 2015) for returns filed on/after 8/1/2015.   This form is normally due within 30 days after the date that the 706 is filed, and a Schedule A also has to be provided to each beneficiary within the same time period for property acquired from the estate.  The reporting requirement does not apply to cash or IRD (which could be cash or non-cash).

For returns already filed on/after 8/1/2015, this date has been extended to 2/29/2016.

6-in-1 will automatically generate this form based on existing  data, with one exception.  Currently, 6-in-1 calls for the allocation of pre-residuary transfers (bequests, joint property, and transfers) to beneficiaries, in order populate the beneficiary “grid”.

The extra step that you must now take is to allocate residuary property that is being distributed to beneficiaries.   You will do this in the same way as you do with pre-residuary property.  The extra step involves checking a box entitled “Beny Residue” that appears above the right side of the Beneficiary(ies) field on the main Transact screen.  You must then refresh the allocations by navigating to the Beny Allocations screen (via the yellow button directly above the Beneficiary(ies) field in the main Transact screen, then click on the red “Refresh Beny Share of Assets” button on the right panel.

Also be sure to consult the help screen to the left of that checkbox.  There is a special procedure for Supplemental Filings of Form 8971, wherein you are asked to report only information that has changed.

We are still waiting for the final Form 8971 and draft or final instructions.  Unofficial draft instructions dated 11/20/2015 were found recently by a practitioner at the following link:

www.reginfo.gov/public/do/DownloadDocument?objectID=60262200

Vince Lackner recently recorded a Podcast with Bob Keebler on the 8971, and this should be available on the Leimberg Services website in the near future.  Also, he is writing an article for the Leimberg Newsletter that will be published once the form and instructions are released in final form.

If no changes are made from second draft to final 8971, we will provide you with a code that removes the watermark.

*** NY IT-205:  Note the somewhat bizarre calculation at the $500K taxable income level.  The first dollar over $500K generates a tax of $133, a marginal rate of $13,300%!  We have confirmed this with the NY Department.

****  OH IT-1041:  We are waiting for test results on the 11 test scenarios that we submitted.  If no changes are required to the version contained in update 2016-027, we will provide you with a code that removes the watermark.

IN IT-41:  IN announced last summer that it would not start testing IN fiduciary income tax returns until 01/26/2016.  We will be submitting our four pages of test returns (two pages for the IT-41 itself, and two pages for the new IT-41 K-1) next week.