Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent

2010

Department of the Treasury
Internal Revenue Service

Instructions for Form 8939

Allocation of Increase in Basis for Property Acquired From a Decedent
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
More information. For more information
about the latest developments on Form
8939 and its instructions, go to www.irs.
gov/form8939.

Purpose of Form
Form 8939 is an information return used
by the executor (defined below) of a
decedent who died in 2010:
1. To make the Section 1022 Election
(see Section 1022 Election, later);
2. To report information about
property acquired from a decedent; and
3. To allocate Basis Increase (see
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/pub/irs-irbs/irb11-35.pdf and
Notice 2011-76, 2011-40 I.R.B 479,
available at www.irs.gov/pub/irs-irbs/
irb11-40.pdf. For optional safe harbor
guidance under section 1022, see
Revenue Procedure 2011-41, 2011-35
I.R.B. 188, available at www.irs.gov/pub/
irs-irbs/irb11-35.pdf.

If there is an executor appointed,
qualified, and acting within the United
States, the IRS generally will accept Form
8939 only if filed by that executor. For
detailed information on multiple and
conflicting filings by executors who are
not appointed, qualified, and acting, see
Notice 2011-66, section I.A.

Effect of Election
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.
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.

Section 1022 Election
Irrevocable

Section 1022 Election
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.

How to Make the Section 1022
Election
The Section 1022 Election is made by
filing a timely Form 8939. Prior filings
purporting to make the Section 1022
Election must be replaced with a timely
filed Form 8939. For information on when
to file Form 8939, see When to File, later.
Oct 20, 2011

!

CAUTION

A Section 1022 Election can not
be revoked after the due date.
See When to File, later.

Generally, once the executor has
made the Section 1022 Election, the
election is irrevocable. However, the
executor can revoke a prior Section 1022
Election on a subsequent Form 8939 filed
before the due date. See When to File,
later. To revoke the Section 1022
Election, the executor must check the box
at the top of Form 8939 designated for
revocation. See Checkbox for Revoking
Section 1022 Election, later. For more
information, see Notice 2011-66.

Required Disclosure
Returns by Executors
Generally, if the executor (defined later)
makes the Section 1022 Election, the
executor must report all the information
required by Form 8939 and its
instructions about all property acquired
from the decedent (other than cash).
However, for the executor of a decedent
who is a nonresident not a citizen of the
United States, the executor must report
certain information about the property
Cat. No. 55218M

acquired from the decedent (other than
cash) that is one of the following.
1. Tangible property situated in the
United States.
2. Other property acquired from the
decedent by a United States person. A
United States person is any of the
following.
a. A citizen or resident of the United
States.
b. A domestic partnership.
c. A domestic corporation.
d. Any estate other than a foreign
estate. A foreign estate is an estate the
income of which, from sources outside
the United States that is not effectively
connected with the conduct of a trade or
business within the United States, is not
includible in gross income.
e. Any trust if a court within the United
States is able to exercise primary
supervision over the administration of the
trust and one or more United States
persons have the authority to control all
substantial decisions of the trust.
Executor. The executor is the executor,
personal representative, or administrator
of the decedent, or, if there is no executor
or administrator appointed, qualified, and
acting within the United States, then any
person in actual or constructive
possession of any property of the
decedent. For detailed information on
multiple or conflicting filings by executors
who are not appointed, qualified, and
acting, see Notice 2011-66, sections I.A.
and I.B.
Note. For the definition of property
acquired from a decedent, see Property
Acquired from a Decedent, later.
The executor’s disclosure on Form
8939 of property acquired from the
CAUTION decedent does not satisfy the
requirements, if applicable, to disclose
foreign financial assets on Form 8938,
Statement of Specified Foreign Financial
Assets, or to disclose a financial interest
in or signature authority over a foreign
financial account by filing Form TD F
90-22.1, Report of Foreign Bank and
Financial Accounts.

!

Returns by Trustees and
Beneficiaries
If the executor is unable to make a
complete return as to any property
acquired from the decedent, the executor
must include a description of such
property and the name of every person
holding a legal or beneficial interest in the
property. Upon notice from the IRS, such
person must file Form 8939 as to such

property. For details, see section
6018(b)(4).

Statement to Recipients
The executor filing Form 8939 must
furnish to each person whose name is
required to be set forth in such return
(other than the executor filing the return)
a written statement showing the
information required by section 6018(e)
with respect to property (other than cash)
acquired from the decedent to the person
required to receive the statement. The
executor must furnish this statement not
later than 30 days after the date Form
8939 is filed.
The statement must include
information about all property
CAUTION (other than cash) acquired from
the decedent by the recipient of the
statement, whether or not the executor
allocates any Basis Increase to that
property.
Use Schedule A to provide this
statement to each recipient of property
(other than cash) acquired from the
decedent, including the following persons.
• The decedent’s surviving spouse.
• The trustee of a qualified terminable
interest property (QTIP) trust.
• Any charitable remainder trust the sole
non-charitable beneficiary of which is the
decedent’s surviving spouse.
• Any other person (other than the
executor filing the return) who acquires
property (other than cash) from the
decedent.
Updated statements. The executor
must furnish an updated statement in the
following circumstances.
• The executor files an amended or
supplemental Form 8939. For details, see
Amended and supplemental returns, and
Notice 2011-66, section I.D.2.
• The IRS makes an adjustment to any
tax return that affects the amounts
properly reportable on Form 8939.
The executor must furnish updated
statements to each affected recipient of
property no later than 30 days after the
executor’s filing of the amended or
supplemental Form 8939 or receiving
notice of the adjustment from the IRS,
whichever is applicable. If the property is
subject to multiple interests (life estate
and remainder interest), the life tenant
and all holders of remainder interests are
affected recipients of the property.
If the executor files an amended Form
8939 that revokes a Section 1022
Election, the executor should write
“Section 1022 Election Revoked” at the
top of the updated statement and send a
copy to each affected recipient.

!

When to File
File Form 8939 by January 17, 2012. See
Notice 2011-76. For more information,
see www.irs.gov/form8939. Generally, the
IRS will not grant extensions of time to file
a Form 8939 and will not accept a Form
8939 or an amended Form 8939 filed
after the due date. However, see

Amended and supplemental returns and
Extension of time to file, later.
An executor is not permitted to file
both an estate tax return (Form
CAUTION 706 or Form 706-NA) and a
conditional Form 8939 that would take
effect only if an estate tax audit results in
an increase in the gross estate above the
applicable exclusion amount in section
2010(c).

!

For individuals serving in the Armed
Forces of the United States or serving in
support of the Armed Forces, the
deadline for filing Form 8939 can be
extended under section 7508. An
executor filing Form 8939 after the due
date under section 7508 should write
“Filed Pursuant to Section 7508” at the
top of the first page of the form. For
details, see section 7508 and Extension
of Deadlines in Publication 3, Armed
Forces’ Tax Guide.
For individuals living in a Presidentially
declared disaster area or affected by
terroristic or military action, the deadline
to file Form 8939 can be postponed under
section 7508A. An executor filing Form
8939 after the due date under section
7508A should write “Filed Pursuant to
Section 7508A” at the top of the first page
of the form. A Presidentially declared
disaster is a disaster that occurred in an
area declared by the President to be
eligible for federal assistance under the
Disaster Relief and Emergency
Assistance Act.
A list of the areas eligible for
TIP assistance under the Disaster
Relief and Emergency Assistance
Act is available at the Federal Emergency
Management Agency (FEMA) website at
www.fema.gov and at IRS.gov.
Private delivery services. You can use
certain private delivery services
designated by the IRS to meet the “timely
mailing as timely filing” rule for tax
returns. These private delivery services
include only the following:
• DHL Express (DHL): DHL Same Day
Service.
• Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, FedEx International
First.
• United Parcel Service (UPS): UPS Next
Day Air, UPS Next Day Air Saver, UPS
2nd Day Air, UPS 2nd Day Air A.M., UPS
Worldwide Express Plus, and UPS
Worldwide Express.
The private delivery service can tell
you how to get written proof of the mailing
date.

Extension of time to file
Generally, the IRS will not grant an
extension of time to file Form 8939.
However, see Notice 2011-66, section
I.D.2. for limited relief provisions.

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Amended and supplemental
returns
There are only a few limited
circumstances where the IRS will accept
an amended Form 8939. One of these
circumstances is described in Amended
Form 8939 to allocate Spousal Property
Basis Increase, below. For information on
other limited circumstances, see Notice
2011-66, section I.D.2. To amend or
supplement a previously filed Form 8939,
file an amended Form 8939 and check
the box at the top of page 1 designated
for amended returns. Attach a statement
that identifies the schedule, line number,
and item number of each amended item,
the corrected or amended amount or
treatment of the item, and an explanation
of the reasons for the change. If the
executor files an amended or
supplemental Form 8939, the executor
must provide updated statements to
affected recipients. See Updated
statements, earlier.
Amended Form 8939 to allocate
Spousal Property Basis Increase. The
executor can file an amended Form 8939
after the due date for the sole purpose of
allocating Spousal Property Basis
Increase to property eligible to receive an
allocation of that basis, provided that
each of the two following requirements is
satisfied.
• Form 8939 must have been timely filed
and must have been complete when filed
except for the allocation of the full amount
of the Spousal Property Basis Increase to
the eligible property reported on that
Form 8939.
• Each amended Form 8939 must be
filed no more than 90 days after the date
of the distribution of the qualified spousal
property to which Spousal Property Basis
Increase is allocated on that amended
Form 8939.
See Spousal Property Basis Increase,
later.

Who Must Sign
The executor who files the return must, in
every case, sign the declaration on page
1 of Form 8939 under penalties of perjury.

Where to File
Send this return to:
Internal Revenue Service
Estate & Gift Stop 824G
201 W. Rivercenter Blvd.
Covington, KY 41011
Do not file Form 8939 with the
decedent’s final income tax return.
CAUTION Do not send Form 8939 to the
same address you use for mailing the
decedent’s final income tax return.

!

Penalties
Section 6716 provides penalties for failing
to file this return on time and for failing to
provide the information required unless
there is reasonable cause for the failure.
Generally, the penalty is $10,000 for each
such failure. The penalty for failure to

provide the information required by
section 6018(b)(2) is $500 for each
failure. The penalty for failure to provide
recipients of property acquired from the
decedent the information required by
section 6018(e) is $50 for each such
failure. If any failure is due to intentional
disregard of the requirements of section
6018, the penalty is 5% of the FMV (as of
the date of death) of the property about
which the information is required.

Rounding Off to Whole
Dollars
Show the money items on the return and
accompanying schedules as whole-dollar
amounts. To do so, drop any amount less
than 50 cents and increase any amount
from 50 cents through 99 cents to the
next higher dollar.

Assembling the Return
Attach the following to the return.
• Decedent’s death certificate.
• If the decedent died testate, a certified
copy of the will. If you cannot obtain a
certified copy, attach a copy of the will
and an explanation of why it is not
certified.
• Copies of trust instruments for any
trust that is shown on the return as a
recipient of property acquired from the
decedent.
• If the executor is appointed, a certified
copy of the letters testamentary, letters of
administration, or other similar evidence
of the executor’s authority to act.
• Appraisals used to value certain
property as required under section 2031
and Rev. Proc. 2011-41, section 4.04(1).

Property Acquired from
the Decedent
Generally, section 1022 determines a
recipient’s basis in property, but only if the
property is “acquired from the decedent.”
Generally, property acquired from the
decedent includes the following.
1. Property acquired by bequest,
devise, or inheritance, or by the
decedent’s estate from the decedent.
2. Property transferred by the
decedent during the decedent’s lifetime
to:
a. A qualified revocable trust (as
defined in section 645(b)(1)), or
b. Any other trust with respect to
which the decedent reserved the right to
make any change in the enjoyment
thereof through the exercise of a power to
alter, amend, or terminate the trust.
3. Any other property passing from
the decedent by reason of death to the
extent that such property passed without
consideration.
Note. Section 1022 does not apply to a
decedent’s interest in a QTIP trust or
similar arrangement funded for the benefit
of the decedent by the decedent’s
predeceased spouse. A recipient’s basis
in this property will not be determined
under section 1022.

Income in Respect of a
Decedent

whether property was owned by the
decedent at the time of death.

Section 1022 does not apply to property
that constitutes a right to receive an item
of income in respect of a decedent (IRD)
under section 691. The executor is not
required to list property that constitutes a
right to receive an item of IRD on Form
8939. Generally, IRD is income that the
decedent would have received had death
not occurred and that was not properly
includible on the decedent’s final income
tax return. IRD includes the following.
• An installment obligation, reportable by
the decedent on the installment method,
that remains uncollected by the decedent.
• Accrued but unpaid interest on a note,
certificate of deposit, or other obligation.
• Dividends declared on a share of stock
before the decedent’s death but payable
to shareholders of record on a date after
the decedent’s death.
The right to receive an amount of IRD
must be treated in the hands of the
estate, or by the person entitled to receive
that amount by bequest, devise, or
inheritance from the decedent, or by
reason of the decedent’s death, as if it
had been acquired in the same
transaction as the decedent acquired that
right, and must be considered as having
the same character it would have had if
the decedent had lived and received that
amount. For more information, see
Regulations section 1.691(a)-3.
Example: Installment Obligation.
Decedent Tammy died in 2010 and her
executor, Vince, timely makes the Section
1022 Election. Whitney, an heir of
Tammy’s estate, is entitled to collect an
installment obligation, reported by Tammy
on the installment method, that has a face
value of $100, FMV of $80, and a basis in
Tammy’s hands on the date of her death
of $60. Section 1022 does not apply to
the installment obligation and does not
determine the estate’s basis or Whitney’s
basis in the installment obligation.

Jointly held property. If property
was owned by the decedent and one or
more other persons (either as joint
tenants with right of survivorship or
tenants by the entirety), the following
rules apply.

Property Eligible for
Increase to Basis
Generally, the executor can allocate
additional basis under section 1022 (up to
the FMV of the property) to property
acquired from the decedent that was
owned by the decedent at the time of
death. Property the basis of which can be
increased is eligible property.

!

CAUTION

Not all property acquired from the
decedent is considered owned by
decedent at the time of death.

Property Owned by the
Decedent at the Time of Death
The basis of property acquired from the
decedent can be increased by an
allocation of Basis Increase (defined in
Basis Increase, later) only if and to the
extent the property was owned by the
decedent at the time of death.
Rules relating to ownership. The
following rules apply in determining

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1. If the only other person with whom
the decedent owned the property is the
decedent’s surviving spouse, the
decedent is treated as owning 50% of the
property.
2. If any other person with whom the
decedent owned the property is not the
decedent’s surviving spouse and if the
decedent furnished consideration for the
acquisition of the property, the decedent
is treated as the owner to the extent of
the portion of the property that is
proportionate to the consideration
furnished by the decedent.
3. If any other person with whom the
decedent owned the property is not the
decedent’s surviving spouse and if the
property was acquired by gift, bequest,
devise or inheritance by the decedent and
the other person as joint tenants with right
of survivorship and their interests are not
otherwise specified or fixed by law, the
decedent is treated as owning a fractional
part of the property. The fractional part of
the property that the decedent is treated
as owning is determined by dividing the
value of the property by the number of
joint tenants with right of survivorship.
Revocable trusts. The decedent is
treated as the owner of any property that
the decedent transferred to a qualified
revocable trust (QRT) during his or her
lifetime.
A QRT is any trust (or part of a trust)
that, on the day the decedent died, was
treated as owned by the decedent under
section 676 by reason of a power to
revoke that was exercisable by the
decedent (determined without regard to
section 672(e)). For this purpose, a QRT
includes a trust that was treated as
owned by the decedent under section 676
by reason of a power to revoke that was
exercisable by the decedent with the
consent or approval of a nonadverse
party or the decedent’s spouse. However,
a QRT does not include a trust that was
treated as owned by the decedent under
section 676 by reason of a power to
revoke that was exercisable solely by a
nonadverse party or the decedent’s
spouse and not by the decedent. For
more information, see sections 645(b)
and 676 and the instructions for Form
8885, Election To Treat a Qualified
Revocable Trust as Part of an Estate.
Election not required. No election is
required for a trust to be a QRT.
Powers of appointment. The
decedent is not treated as the owner of
any property by virtue of holding a power
of appointment with respect to such
property.

Community property. Property that
represents the decedent’s surviving
spouse’s one-half share of the community
property held by the decedent and his or
her surviving spouse will be treated as
owned by (and acquired from) the
decedent if at least one-half of the whole
of the community interest in such property
is treated as owned by (and acquired
from) the decedent under the community
property laws of the state (or possession
of the United States or any foreign
country) that apply to the decedent.

Property Not Eligible for
Increase to Basis
Only property owned by and acquired
from the decedent is eligible for allocation
of Basis Increase. See Rules relating to
ownership, earlier.
The executor cannot allocate Basis
Increase to cash, whether acquired from
the decedent, in exchange for property
acquired from the decedent, or otherwise.
The executor cannot allocate any
Basis Increase to property or proceeds
acquired after the decedent’s death in
exchange for property acquired from the
decedent. The basis of this property is
determined under other applicable rules
for determining basis.
Even if property acquired from the
decedent was owned by the decedent at
the time of death, the basis of the types of
property acquired from the decedent
discussed below, under Property
Acquired by the Decedent by Gift Within 3
Years of Death and under Stock or
Securities of Certain Entities, generally
cannot be increased under section 1022.
This property is ineligible property.

Property Acquired by the
Decedent by Gift Within 3 Years
of Death
Generally, property that the decedent
acquired by gift or lifetime transfer for less
than adequate and full consideration in
money or money’s worth during the
3-year period ending on the date of the
decedent’s death is not eligible for a basis
increase. However, property acquired by
the decedent from the decedent’s spouse
during such 3-year period will generally
be eligible for a basis increase, unless,
during the 3-year period, the decedent’s
spouse acquired the property in whole or
in part by gift or lifetime transfer for less
than adequate and full consideration in
money or money’s worth.

Stock or Securities of Certain
Entities
The decedent’s interest in the following
types of property is not eligible for an
increase in basis.
• Stock or securities of a foreign personal
holding company.
• Stock of a domestic international sales
corporation (DISC) or former DISC.
• Stock of a foreign investment company.
• Stock of a passive foreign investment
company unless such company is a

qualified electing fund (as defined in
section 1295) with respect to the
decedent.

Amount of Increase to
Basis
The executor can allocate General Basis
Increase (defined in General Basis
Increase, later), and/or Spousal Property
Basis Increase (defined in Spousal
Property Basis Increase, later) to eligible
property (defined earlier) but not in
excess of the amount needed to increase
the decedent’s adjusted basis to the
property’s FMV as of the date of the
decedent’s death. The result is that, for
each property, the sum of the decedent’s
adjusted basis in that property and the
Basis Increase allocated to that property
can not exceed the FMV of that property
on the decedent’s date of death.
The executor can allocate Basis
Increase (defined in Basis Increase, later)
to property owned by and acquired from
the decedent on a property-by-property
basis. For example, the executor can
allocate Basis Increase to one or more
shares of stock or to a particular block of
stock rather than to the decedent’s entire
holding of that stock.
Basis Increase may not be allocated
separately to a life estate and remainder
interest in the same property.

Decedent’s Adjusted Basis
Generally, the adjusted basis of the
property in the hands of the decedent as
of the date of the decedent’s death is the
decedent’s cost or other basis, adjusted
as required by sections 1016, 1017, and
1018 or as otherwise specifically provided
for under applicable provisions of Internal
Revenue laws.

Basis Increase
Basis Increase is the sum of the General
Basis Increase (defined later) and the
Spousal Property Basis Increase (defined
later).

General Basis Increase
General Basis Increase is the sum of the
aggregate basis increase and the
carryovers/unrealized losses increase.
However, for a decedent who was neither
a resident nor citizen of the United States,
the General Basis Increase is limited to
the Aggregate Basis Increase (limited as
described below).

Aggregate Basis Increase
Aggregate Basis Increase is $1,300,000.
However, for a decedent who was neither
a resident nor citizen of the United States,
the Aggregate Basis Increase is $60,000.

Carryovers/Unrealized Losses
Increase
Carryovers/Unrealized Losses Increase is
the sum of the following three items.
1. The amount of any capital loss
carryovers under section 1212(b) that
would (but for the decedent’s death) be
carried from the decedent’s last taxable
year to a later tax year. See
Carryforwards, below.
2. The amount of any net operating
loss (NOL) carryovers under section 172
that would (but for the decedent’s death)
be carried from the decedent’s last
taxable year to a later tax year. See
Carryforwards, below.
3. The amount of any losses that
would be allowable under section 165 if
the property acquired from the decedent
had been sold at FMV immediately before
the decedent’s death (“unrealized
losses”). See Unrealized Losses, later.

Property acquired by gift. If the
decedent acquired property by gift, the
decedent’s adjusted basis at death is the
decedent’s basis determined under
section 1015, adjusted as required by
sections 1016, 1017, and 1018 or as
otherwise specifically provided for under
applicable provisions of Internal Revenue
laws. The decedent’s original basis under
section 1015 is the same as it would be in
the hands of the donor or the last
preceding owner by whom it was not
acquired by gift, except that if such basis
(adjusted for the period before the date of
the gift as provided in section 1016) is
greater than the FMV of the property at
the time of the gift, then for the purpose of
determining loss the basis shall be such
FMV.

Note. The amount of any losses that
would be allowable under section 165 is
determined based on a hypothetical sale
and does not require an actual sale of
property.

Fair Market Value (FMV)

Capital loss. The capital loss
carryforward included in the Carryovers/
Unrealized Losses Increase is the amount
of any capital loss carryforward that would
(but for the decedent’s death) be carried
to a tax year of the decedent after the
decedent’s last tax year. Generally, you
can figure the decedent’s capital loss
carryforward using the Capital Loss

Generally, for purposes of section 1022,
the FMV of property is the price at which
the property would change hands
between a willing buyer and a willing
seller, neither being under any
compulsion to buy or sell and both having
reasonable knowledge of the relevant
facts.

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For any decedent who was neither
a citizen nor resident of the United
CAUTION States the amount of the
Carryovers/Unrealized Losses Increase is
zero.

!

Carryforwards
The Carryovers/Unrealized Losses
Increase includes any capital loss
carryovers under section 1212(b) and the
NOL carryovers under section 172 that
would (but for the decedent’s death) be
carried forward to tax years after the
decedent’s last tax year.

Carryover Worksheet in the Instructions
to Schedule D (Form 1040).

sections 4.05 and 4.06(4) of Rev. Proc.
2011-41.

Existing income tax rules will apply to
determine the decedent’s share of a
capital loss carryforward under section
1212(b) if the decedent’s final Form 1040
is filed jointly with the decedent’s
surviving spouse. For rules about a
capital loss carryforward arising from
community property, see sections 4.05
and 4.06(4) of Rev. Proc. 2011-41.
Net operating loss (NOL). The NOL
carryovers under section 172 included in
Carryovers/Unrealized Losses Increase
are the losses that would (but for the
decedent’s death) carry forward to tax
years after the decedent’s last tax year.

Spousal Property Basis
Increase

An NOL arising in the decedent’s
final tax year must be carried back
CAUTION and used in the applicable 2-year,
3-year, 5-year, or 10-year carryback
period unless the carryback period is
waived on the decedent’s final income tax
return by attaching a statement showing
that the carryback period is waived. See
Waiving the Carryback Period in
Publication 536.

Outright transfer property. For
purposes of the Spousal Property Basis
Increase, outright transfer property means
any interest in property acquired from the
decedent by the decedent’s surviving
spouse. Outright transfer property does
not include an interest passing to the
surviving spouse that, on the lapse of
time, on the occurrence of an event or
contingency, or on the failure of an event
or contingency to occur, will terminate or
fail:
1. If both:
a. An interest in such property passes
or has passed (for less than adequate
and full consideration in money or
money’s worth) from the decedent to any
person other than such surviving spouse
(or the estate of such spouse); and
b. By reason of such passing such
person (or his heirs or assigns) may
possess or enjoy any part of such
property after such termination or failure
of the interest so passing to the surviving
spouse; or
2. If such interest is to be acquired for
the surviving spouse, pursuant to
directions of the decedent, by his
executor or by the trustee of a trust.

!

Existing income tax rules will apply to
determine the decedent’s share of the
NOL carryovers under section 172 if the
decedent’s final Form 1040 is filed jointly
with the decedent’s surviving spouse. For
rules about NOL carryovers arising from
community property, see sections 4.05
and 4.06(4) of Rev. Proc. 2011-41.

Unrealized Losses
The amount of unrealized losses included
in the Carryovers/Unrealized Losses
Increase is the amount that would have
been allowable as a deduction under
section 165 if the property acquired from
the decedent had been sold at FMV
immediately before the death of the
decedent. The amount of losses that
would have been allowable as a
deduction under section 165 is limited to
losses incurred in a trade or business and
losses incurred in any transaction entered
into for profit, though not connected with a
trade or business.
Certain limitations on the allowance of
losses may apply. For example, no
deduction is allowable for a loss
sustained on any registration-required
obligation not in registered form. For more
information, see section 165(j) and
Regulations section 1.165-12.
Figure the unrealized losses that can
be included in the General Basis Increase
without regard to the limitation in section
165(f) on the allowance of losses from the
sale or exchange of capital assets. The
amount of any loss that would have been
allowable under section 165 if the
property acquired from the decedent had
been sold at FMV immediately before the
decedent’s death is determined without
the dollar limitations on capital losses
under section 1211.
For rules about unrealized losses
arising from community property, see

Spousal Property Basis Increase is
$3,000,000.
Generally, the executor can allocate
Spousal Property Basis Increase only to
qualified spousal property that was both
acquired from and owned by the
decedent.
Qualified spousal property. Qualified
spousal property means:
• Outright transfer property; and
• Qualified terminable interest property.

For purposes of the exception described
in the preceding sentence, an interest
shall not be considered as an interest
which will terminate or fail merely
because it is the ownership of a bond,
note, or similar contractual obligation, the
discharge of which would not have the
effect of an annuity for life or for a term.
For purposes of whether property is
outright transfer property, an interest
passing to the surviving spouse shall not
be considered as an interest which will
terminate or fail on the death of such
spouse if both of the following two
conditions are met.
• The spouse’s death will cause a
termination or failure of such interest only
if it occurs within a period not exceeding 6
months after the decedent’s death, or
only if it occurs as a result of a common
disaster resulting in the death of the
decedent and the surviving spouse, or
only if it occurs in the case of either such
event.
• Such termination or failure does not in
fact occur.

-5-

Qualified terminable interest
property (QTIP). For purposes of the
Spousal Property Basis Increase, QTIP is
property that passes from the decedent
and in which the surviving spouse has a
qualifying income interest for life. The
surviving spouse has a qualifying income
interest for life if both of the two following
conditions are met.
1. The surviving spouse is entitled to
all the income from the property, payable
annually or at more frequent intervals, or
has a usufruct interest for life in the
property.
2. No person has a power to appoint
any part of the property to any person
other than the surviving spouse.
Item 2, above, shall not apply to a power
exercisable only at or after the death of
the surviving spouse. To the extent
provided in regulations, an annuity shall
be treated in a manner similar to an
income interest in property (regardless of
whether the property from which the
annuity is payable can be separately
identified).
Special Rules. For purposes of the
Spousal Property Basis Increase, the
following rules apply.
• The term “property” includes an interest
in property.
• A specific portion of property is treated
as separate property. For this purpose,
“specific portion” only includes a portion
determined on a fractional or percentage
basis.
The executor also can allocate
Spousal Property Basis Increase to the
following.
1. Property held by a testamentary
charitable remainder trust (CRT) as
defined in section 664 (subject to the
limitation of section 1022(d)), if the
surviving spouse is the sole
non-charitable beneficiary of the CRT and
the CRT would have qualified for the
marital deduction under section
2056(b)(8) if the decedent’s executor had
not made the Section 1022 Election.
2. Property that is sold before being
distributed. However, this allocation can
be made only to the extent that the
executor:
a. Certifies on Form 8939 that the net
proceeds from the sale of that property
will be distributed to or for the benefit of
the decedent’s surviving spouse in a
manner that would qualify property as
qualified spousal property, and
b. Attaches to Form 8939 each
document providing a bequest or devise
to the surviving spouse.
For more information, see Rev. Proc.
2011-41, section 4.02(3).
For detailed information on how to
report the property described in item 2,
see the specific instructions for Schedule
A, line 4, column (e)(i) and (e)(ii).

Specific Instructions
Checkbox for Amended
Return
If this is an amended or supplemental
return, check the box for an amended
return. If the amended return is filed
under Regulations section 301.9100-2,
also write “FILED PURSUANT TO
SECTION 301.9100-2” at the top of the
return.

Checkbox for Revoking
Section 1022 Election
If this Form 8939 revokes a previous
Section 1022 Election made on an earlier
Form 8939, check the box for revocation
of an election.

Decedent’s Name and
Address
Enter the decedent’s name and address.

Line 2. Decedent’s Social
Security Number
If the decedent was a nonresident or
resident alien and did not have and was
not eligible to get a social security number
(SSN), the executor must apply for an
individual taxpayer identification number
(ITIN) on behalf of the decedent. For
details on how to do so, see Form W-7
and its instructions. It takes 6 to 10 weeks
to get an ITIN. If the decedent already
had an ITIN, enter it wherever the
decedent’s SSN is requested on Form
8939.
Note. An ITIN is for tax use only. It does
not entitle the holder to social security
benefits or change the holder’s
employment or immigration under U.S.
law.

Line 6a. Executor’s Name
If there is more than one executor, enter
the name of the executor filing this Form
8939. List the other executors’ names,
addresses, and SSNs (if applicable and if
known) on an attached sheet.

Line 6c. Executor’s Social
Security Number
Only individual executors should
complete this line. If there is more than
one individual executor, all should list
their SSNs on an attached sheet.

Line 9. Names of
Recipients
Enter the name of each recipient, other
than the decedent’s surviving spouse, of
property acquired from the decedent.

Line 10. Built-in Loss
Enter the aggregate amount of any losses
that would have been allowable under
section 165 if the property acquired from

the decedent had been sold at FMV
immediately before the decedent’s death.
In the case of a decedent who was a
nonresident not a citizen of the United
States, enter zero. For more information,
see Unrealized Losses, earlier.

Line 11. Capital Loss
Carryforward
Enter the aggregate amount of any capital
loss carryforward under section 1212(b)
that would (but for the decedent’s death)
have been carried from the decedent’s
last tax year to a later tax year of the
decedent. In the case of a decedent who
was a nonresident not a citizen of the
United States, enter zero. For more
information, see Carryforwards, earlier.

Line 12. Net Operating
Loss Carryforward
Enter the aggregate amount of any NOL
carryover under section 172 that would
(but for the decedent’s death) have been
carried from the decedent’s last tax year
to a later tax year of the decedent. In the
case of a decedent who was a
nonresident not a citizen of the United
States, enter zero. For more information,
see Carryforwards, earlier.
You can use Schedule A of Form
1045, Application for Tentative Refund to
figure the amount, if any, of the
decedent’s NOL.

Line 12a.
Add lines 10, 11, and 12. This line 12a is
the amount of the Carryovers/Unrealized
Losses Increase.

Line 12b.
For nonresident decedents who were not
United States citizens, enter $60,000. For
all others, enter $1,300,000.

Line 12c. General Basis
Increase
Add lines 12a and 12b. This line 12c is
the total General Basis Increase that is
available to allocate to property acquired
from and owned by the decedent.

Line 13.
Enter the sum of the totals from all
Schedules A, line 4B, column (e)(i) on this
line. This total may not exceed the
amount listed on line 12c.

Line 14.
Enter the total from each Schedule A, line
4B, column (e)(ii) on this line. This total
may not exceed $3,000,000.

Schedule A
Complete a separate Schedule
A — Disclosure of Property Acquired From
the Decedent (and Recipient Statement)
for each recipient of property acquired
from the decedent, including each of the
following.

-6-

• The decedent’s estate.
• The decedent’s surviving spouse, if

any.
• Any QTIP or other trust.
• Each other person who acquires
property from the decedent by bequest,
devise, inheritance, or otherwise by
reason of the death of the decedent to the
extent that such property passed without
consideration.
Each property or interest in property
required to be disclosed on Form 8939
must be reported on a Schedule A.
Multiple and partial interests in
property. For an undivided or fractional
interest in property held by and received
from the decedent by the recipient listed
on line 2a, describe only the undivided or
fractional interest. For a life estate or
remainder interest in property, where the
partial interest received by the recipient
listed on line 2a was created by the
bequest or devise made by the decedent,
however, Basis Increase may be
allocated only to the entire property
owned by the decedent. Therefore,
assuming the decedent’s adjusted basis
in the entire property is less than the FMV
of the property at the date of death,
describe the undivided interest in property
(including the decedent’s adjusted basis,
the property’s FMV at the date of death,
and the amount of Basis Increase
allocated by the executor) on an
attachment to Line 4 or in column (a) of
Line 4. Also include in this description the
applicable section 7520 rate, the life
tenant’s age, and the recipient’s actuarial
factor at the decedent’s date of death.
Compute the recipient’s portion of
adjusted basis, FMV, and basis increase
allocation (allocated on an actuarial basis
between the income and the remainder
interests), and list the recipient’s share of
each in columns (b) through (f) on line 4.
Note. For property transferred in trust
with an income and remainder interest,
the trust is considered the sole recipient
of the property.
Example. Donald died on October
10, 2010, owning real property. Donald
originally acquired the property on
December 10, 2007. As of Donald’s date
of death, the property has an FMV of
$967,000 and an adjusted basis of
$425,000. Donald devised the property to
Larry for life, with remainder to Rachel. At
the time of Donald’s death, Larry is 48
years old. The section 7520 rate for
October 2010 is 2.0 percent. Donald’s
executor, Edward, makes the Section
1022 Election by timely filing Form 8939.
Edward allocates $542,000 of General
Basis Increase to the property. See
Attachment to Larry’s Schedule A, on the
next page and Attachment to Rachel’s
Schedule A, later.

Line 1a—Executor’s Name
Enter the name of the executor shown on
line 6a of Form 8939.

EPS Filename: 55218y01

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ATTACHMENT TO LARRY'S SCHEDULE A:
Description: Real Property located at 1234 South Avenue, City, State.
Date Decedent Acquired Property:

12/10/2007

Adjusted basis at decedent's death:
FMV at decedent's death:
General Basis Increase allocated by executor:
Spousal Property Basis Increase allocated by executor:

$425,000
$967,000
$542,000
$0

Section 7520 Rate for October 2010:
Life Tenant's (Larry) Age:
Life Estate Factor (from Table S of §20.2031-7(d)):

2.0%
48
0.45045

Computation of Actuarial Interest
Adjusted Basis:
FMV:
General Basis Increase:
Spousal Property Basis Increase:

$425,000 X 0.45045 =
$967,000 X 0.45045 =
$542,000 X 0.45045 =
$0 X 0.45045 =

$191,441
$435,585
$244,144
$0

LARRY'S SCHEDULE A: Line 4
(a)
Description
of property

Item
No.

1

(b)
(c)
(d)
Date decedent Adjusted basis FMV at death
acquired
at death
property

Life interest in real property located at 1234 South Avenue,

12/10/2007

$191,441

$435,585

(e)*
Allocation of basis increase
(i)
General basis
increase

$244,144

(ii)
Spousal property
basis increase

$0

(f)
Amount of gain
that would be
ordinary income

$0

City, State

Line 2a—Name and Address of
Recipient
Enter the name and address of the
recipient of the property acquired from the
decedent reported on this Schedule A.

Line 2b—Recipient’s Taxpayer
Identification Number
If the person named in line 2a is an
individual, enter the SSN or ITIN, as
applicable, of that individual. If the person
named in line 2a is a corporation,
partnership, trust, estate, or other entity,
enter the entity’s employer identification
number (EIN).

Line 3—Property Acquired
from the Decedent with
Adjusted Basis Greater Than or
Equal to FMV
List each item of property (other than
cash) acquired from the decedent by the
person listed on line 2a the basis of which
at the time of death is greater than or
equal to its FMV at the date of death.
Number each item of property in the
left-hand column.
Column (a). Description of the
Property. For each item of property
acquired from the decedent, accurately
describe the property received by the

person named on line 2a. The following
guidelines can be used in describing the
property.
• Real property. Describe the real estate
in enough detail so that the property could
be easily located.
1. For each parcel of real estate,
report the area.
2. For city or town property, report the
street and number, ward, subdivision,
block and lot, etc.
3. For rural property, report the
township, range, landmarks, etc.
• Stocks. For stocks, list:
1. The number of shares;
2. The exact name of corporation; and
3. The principal exchange upon which
sold, if listed on an exchange.
• Bonds. For bonds, list:
1. The quantity and denomination;
2. The name of obligor;
3. Date of maturity;
4. Interest rate;
5. Interest due date; and
6. The principal exchange, if listed on
an exchange.
• Tangible personal property. Accurately
describe any tangible personal property
(for example, works of art, jewelry, furs,
silverware, books, statuary, vases,

-7-

oriental rugs, coin or stamp collections)
received by the person listed on line 2a in
enough detail so that such property could
be easily identified by its description.
Column (b). Date Decedent Acquired
the Property. For each item of property,
enter the date the decedent acquired the
property. If the actual date of acquisition
is not known, and cannot be determined
after reasonable inquiry, enter the
approximate date of acquisition and write
“approximate” after the date.
Column (c). Adjusted Basis at Death.
For each item of property, enter the
adjusted basis of the property as of the
date of the decedent’s death. See
Decedent’s Adjusted Basis, earlier, for
more details.
Column (d). FMV at Death. For each
item of property, enter the FMV of the
property as of the date of the decedent’s
death. See Fair Market Value (FMV),
earlier, for more information.
Column (e). Ordinary Gain. For each
item of property, enter the maximum
amount of gain, if any, that would be
ordinary. Attach a statement detailing how
you figured the amount of gain that would
be ordinary.

EPS Filename: 55218y02

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ATTACHMENT TO RACHEL'S SCHEDULE A:
Description: Real Property located at 1234 South Avenue, City, State.
Date Decedent Acquired Property:

12/10/2007

Adjusted basis at decedent's death:
FMV at decedent's death:
General Basis Increase allocated by executor:
Spousal Property Basis Increase allocated by executor:

$425,000
$967,000
$542,000
$0

Section 7520 Rate for October 2010:
Life Tenant's (Larry) Age:
Life Estate Factor (from Table S of §20.2031-7(d)):

2.0%
48
0.54955

Computation of Actuarial Interest
Adjusted Basis:
FMV:
General Basis Increase:
Spousal Property Basis Increase:

$425,000 X 0.54955 =
$967,000 X 0.54955 =
$542,000 X 0.54955 =
$0 X 0.54955 =

$233,559
$531,415
$297,856
$0

RACHEL'S SCHEDULE A: Line 4
(a)
Description
of property

Item
No.

1

(b)
(c)
(d)
Date decedent Adjusted basis FMV at death
acquired
at death
property

Remainder interest in real property located at 1234 South Avenue,

12/10/2007

$233,559

$531,415

(e)*
Allocation of basis increase
(i)
General basis
increase

$297,856

(ii)
Spousal property
basis increase

$0

(f)
Amount of gain
that would be
ordinary income

$0

City, State

Line 4—Property Acquired
From the Decedent With
Adjusted Basis Less Than FMV
List each item of property (other than
cash) acquired from the decedent by the
person listed on line 2a the basis of which
at the time of death is less than its FMV at
the date of death.
Number each item of property in the
left-hand column. Four categories of
property can be reported here.
1. Property that receives an allocation
of both General Basis Increase in column
(e)(i) and also Spousal Property Basis
Increase in column (e)(ii).
2. Property that receives only an
allocation of Spousal Property Basis
Increase in column (e)(ii).
3. Property that receives only an
allocation of General Basis Increase in
column (e)(i).
4. Property that receives no allocation
of increase to basis.
Do not include in column (e)(i) or (e)(ii)
of line 4 any adjustments to basis other
than adjustments to basis under section
1022(b) or (c). For example, do not
include in column (e)(i) or (e)(ii) any
adjustments to basis required or

permitted under sections 469, 1016, or
2654.
Column (a). Description of the
property. For each item of property
acquired from the decedent, accurately
describe the property received by the
person listed on line 2a. Use the
guidelines discussed under the
instructions to line 3, column (a), earlier.
If the property is property in which the
surviving spouse acquires a qualified
terminable interest, include a description
of the spouse’s interest in the property
and include the designation “QTIP” in the
description of the property.
If the property is any of the kinds of
property listed under Property Not Eligible
for Increase to Basis earlier, include
sufficient information to identify the kind of
ineligible property and the designation
“Ineligible Property” in the description of
the property. Attach a statement that lists
the item number from Schedule A, Line 4
and an explanation as to why the property
is ineligible for a basis increase.
If the item of property acquired from
the decedent is treated as not having
been owned by the decedent at the time
of death, so state. If the item of property
acquired from the decedent is treated as

-8-

having been owned by the decedent at
the time of death to the extent provided in
rule 2 or rule 3 under Jointly held
property, earlier, attach a statement and
show how the extent of the decedent’s
ownership is figured.
Column (b). Date decedent acquired
the property. For each item of property,
enter the date the decedent acquired the
property. If the actual date of acquisition
is not known, and cannot be determined
after reasonable inquiry, enter the
approximate date of acquisition and write
“approximate” after the date.
Column (c). Adjusted basis at death.
For each item of property, enter the
adjusted basis of the property as of the
date of the decedent’s death. See
Decedent’s Adjusted Basis, earlier, for
more details.
Column (d). FMV at death. For each
item of property, enter the FMV of the
property as of the date of the decedent’s
death. See Fair Market Value (FMV),
earlier, for more information.
Column (e)(i). Basis Increase allocated
to property. List the amount of General
Basis Increase (as defined in Rev. Proc.
2011-41, section 4.02(2)) allocated to the
property described in column (a).

Do not include in column (e)(i) any
adjustments to basis other than those
provided for in section 1022(b).
Column (e)(ii). Spousal Property Basis
Increase allocated to property. List the
amount of Spousal Property Basis
Increase (as defined in Rev. Proc.
2011-41, section 4.02(2)) allocated to the
property described in column (a).
Do not include any adjustments to
basis other than those provided for in
section 1022(c) or in Rev. Proc. 2011-41,
section 4.02(3).

definitions and general rules that may be
applicable, see the instructions to
Schedule R in the instructions to Form
706, United States Estate (and
Generation-Skipping Transfer) Tax
Return.

Spousal Property Basis Increase
may be allocated only to qualified
CAUTION spousal property, except as
otherwise provided in Rev. Proc. 2011-41,
section 4.02(3).
If column (e)(ii) includes an allocation
of Spousal Property Basis Increase to
property that is sold (regardless of
whether the allocation of Spousal
Property Basis Increase is made before
or after such sale) instead of being
distributed to or for the surviving spouse,
check the box in column (e)(ii). Attach a
statement identifying the property by item
number and showing how the allocation
of Spousal Property Basis Increase
complies with the rules of Rev. Proc.
2011-41, section 4.02(3).
Attach this statement to the
Schedule(s) A that show the property to
which Spousal Property Basis Increase is
allocated. Also, attach to such schedules
each document providing a bequest or
devise to the surviving spouse.
Column (f). Ordinary gain. Enter in
column (f) the maximum amount of gain,
if any, that would be treated as ordinary
income. Attach a statement including the
item number from line 4, showing how
you figured the amount of gain that would
be ordinary and providing sufficient
information to figure this amount on any
subsequent sale, exchange, or other
disposition.

Part 1. GST Exemption
Reconciliation

!

Line 4B—Total Allocation of
Basis Increase
Add column (e)(i) and (e)(ii) and place the
sum on line 4B. The sum of line 4B,
column (e)(i) of all Schedules A may not
exceed the amount on line 12c, General
Basis Increase, on page 1. Enter the sum
of line 4B, column (e)(i) from all
Schedules A on line 13 of page 1. Enter
the sum of line 4B, column (e)(ii), from all
Schedules A on line 14, of page 1.

Schedules R and
R-1—GST Exemption
Introduction and Overview
Schedule R is used to allocate the
generation-skipping (GST) exemption.
Schedule R-1 is used to inform the
trustee of certain trusts of the amount of
GST exemption allocated to such trusts.
Because the GST tax rate for 2010 is
zero, these schedules are not used to
compute the GST tax. For certain

How To Complete Schedules R
and R-1
Valuation. Enter on Schedules R and
R-1 the FMV of the property interests
subject to the GST tax.

How To Complete Schedule R

Part 1, line 8, Part 2, line 4, and line 4 of
Schedule R-1 are used to allocate the
decedent’s GST exemption. This
allocation is made by filing Form 8939
and attaching a completed Schedule R
and/or R-1. Once made, the allocation is
irrevocable. You are not required to
allocate all of the decedent’s GST
exemption. However, the portion of the
exemption that you do not allocate will be
allocated by the IRS under the deemed
allocation at death rules of section
2632(e).
For transfers made through 1998, the
GST exemption was $1,000,000.
Beginning in 2010, the GST exemption is
$5,000,000; however, the tax rate on
generation-skipping transfers made in
2010 is 0%. The exemption amounts for
1999 through 2009 are as follows:
Year of transfer
GST exemption
1999
1,010,000
2000
1,030,000
2001
1,060,000
2002
1,100,000
2003
1,120,000
2004 and 2005
1,500,000
2006, 2007, and 2008
2,000,000
2009
3,500,000
The amount of each increase can only
be allocated to transfers made (or
appreciation that occurred) during or after
the year of the increase. The following
example shows the application of this
rule:
Example. In 2003, G made a direct
skip of $1,120,000 and applied her full
$1,120,000 of GST exemption to the
transfer. G made a $450,000 taxable
direct skip in 2004 and another of
$90,000 in 2006. For 2004, G can only
apply $380,000 of exemption ($380,000
inflation adjustment from 2004) to the
$450,000 transfer in 2004. For 2006, G
can apply $90,000 of exemption to the
2006 transfer, but nothing to the transfer
made in 2004. At the end of 2006, G
would have $410,000 of unused
exemption that she can apply to future
transfers (or appreciation) starting in
2007.
Line 2. These allocations will have been
made either on Forms 709 filed by the
decedent or on Notices of Allocation
made by the decedent for inter vivos

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transfers that were not direct skips but to
which the decedent allocated the GST
exemption. These allocations by the
decedent are irrevocable.
Also include on this line allocations
deemed to have been made by the
decedent under the rules of section 2632.
Unless the decedent elected out of the
deemed allocation rules, allocations are
deemed to have been made in the
following order:
1. To inter vivos direct skips and
2. Beginning with transfers made after
December 31, 2000, to lifetime transfers
to certain trusts, by the decedent, that
constituted indirect skips that were
subject to the gift tax.
For more information, see section
2632.
Line 3. Make an entry on this line if you
are filing Form(s) 709 for the decedent
and wish to allocate any exemption. See
Notice 2011-66, section II.B. for special
rules regarding inter vivos direct skips
occurring during 2010.
Lines 4 and 5. These lines represent
your allocation of the GST exemption to
direct skips made by reason of the
decedent’s death. Complete Part 2 and
Schedule R-1 before completing these
lines.
Line 8. Line 8 is used to allocate the
remaining unused GST exemption (from
line 7) and to help you compute the trust’s
inclusion ratio. Line 8 is a Notice of
Allocation for allocating the GST
exemption to trusts as to which the
decedent is the transferor and from which
a generation-skipping transfer could occur
after the decedent’s death.
If line 8 is not completed, the deemed
allocation at death rules will apply to
allocate the decedent’s remaining unused
GST exemption, first to property that is
the subject of a direct skip occurring at
the decedent’s death, and then to trusts
as to which the decedent is the transferor.
If you wish to avoid the application of the
deemed allocation rules, you should enter
on line 8 every trust (except certain trusts
entered on Schedule R-1, as described
below) to which you wish to allocate any
part of the decedent’s GST exemption.
Unless you enter a trust on line 8, the
unused GST exemption will be allocated
to it under the deemed allocation rules.
If a trust is entered on Schedule R-1,
the amount you entered on line 4 of
Schedule R-1 serves as a Notice of
Allocation and you need not enter the
trust on line 8 unless you wish to allocate
more than the Schedule R-1, line 4
amount to the trust. However, you must
enter the trust on line 8 if you wish to
allocate any of the unused GST
exemption amount to it. Such an
additional allocation would not ordinarily
be appropriate in the case of a trust
entered on Schedule R-1 when the trust
property passes outright (rather than to
another trust) at the decedent’s death.

To avoid application of the
deemed allocation rules, Schedule
CAUTION R should be filed to allocate the
exemption to trusts that may later have
taxable terminations or distributions under
section 2612 even if the form is not
required to be filed to report GST tax.
Line 8, column C. Enter the GST
exemption included on lines 2 through 5
of Part 1 of Schedule R, and discussed
above, that was allocated to the trust.
Line 8, column D. Allocate the
amount on line 7 of Part 1 of Schedule R
in line 8, column D. Value the trust as of
the date of death. You should inform the
trustee of each trust listed on line 8 of the
total GST exemption you allocated to the
trust. The trustee will need this
information to compute the GST tax on
future distributions and terminations.
Line 8, column E. Trust’s inclusion
ratio. The trustee must know the trust’s
inclusion ratio to figure the trust’s GST tax
for future distributions and terminations.
You are not required to inform the trustee
of the inclusion ratio and may not have
enough information to compute it.
Therefore, you are not required to make
an entry in column E. However, column E
and the worksheet below are provided to
assist you in computing the inclusion ratio
for the trustee if you wish to do so.
You should inform the trustee of the
amount of the GST exemption you
allocated to the trust. Line 8, columns C
and D may be used to compute this
amount for each trust.

!

Note. This worksheet will compute an
accurate inclusion ratio only if the
decedent was the only settlor of the trust.
You should use a separate worksheet for
each trust (or separate share of a trust
that is treated as a separate trust).

How To Complete Schedule R-1
Line 4. Do not enter more than the
amount on line 3. If you wish to allocate
an additional GST exemption, you must
use Schedule R, Part 1. Making an entry
on line 4 constitutes a Notice of Allocation
of the decedent’s GST exemption to the
trust.
Filing Schedule R-1. Attach to Form
8939 one copy of each Schedule R-1 that
you prepare. Send two copies of each
Schedule R-1 to the fiduciary.
Privacy Act and Paperwork Reduction
Act Notice. We ask for the information
on this form to carry out the Internal
Revenue laws of the United States. You
are required to give us the information.
We need it to ensure that you are
complying with these laws and to allow us
to figure and collect the right amount of
tax. Subtitle A and section 6109, and the
regulations require you to provide this
information.
You are not required to provide the
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unless the form displays a valid OMB
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are
confidential as required by section 6103.
However, section 6103 allows or requires
the Internal Revenue Service to disclose
information from this form in certain
circumstances. For example, we may
disclose information to the Department of

WORKSHEET (inclusion ratio):
1 Total FMV of all of the property
interests that passed to the trust
2 State death taxes and other
charges actually recovered from
the trust . . . . . . . . . . . . . . . .
3 Subtract line 2 from line 1 . . . .
4 Add columns C and D of line 8 .
5 Divide line 4 by line 3 . . . . . . .
6 Trust’s inclusion ratio. Subtract
line 5 from 1.000 . . . . . . . . . .

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nontax criminal laws, or to federal law
enforcement and intelligence agencies to
combat terrorism. Failure to provide this
information, or providing false information,
may subject you to penalties.
The time needed to complete and file
this form and related schedules will vary
depending on individual circumstances.
The estimated average times are:
Recordkeeping . . . . . . . 20 hrs., 34
min.
Learning about the law
8 hrs., 37
or the form . . . . . . . . . . min.
Preparing the form . . . . 19 hrs., 34
min.
Copying, assembling,
and sending the form to 2 hrs., 57
the IRS . . . . . . . . . . . . . min.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. You
can write to the Internal Revenue Service,
Tax Products Coordinating Committee,
SE:W:CAR:MP:T:M:S, 1111 Constitution
Ave. NW, IR-6526, Washington, DC
20224. Do not send the tax form to this
address. Instead, see Where To File.