Individual Supplements Comments on Estate Basis Regs

A comparative reading of Prop. Regs. 1.1014-10(b) and 1.1014-10(c)(3)(ii) points that the consistent basis requirement does not apply to any property that is includible in the decedent's gross estate from which no tax arises regardless whether the filing requirement under IRC Sec 6018 with respect to the decedent's estate has been met. In the case of a noncitizen nonresident decedent's estate, the estate is subject to the IRC Sec 6018 filing requirement if such part of the gross estate as is situated in the US exceeds $60,000. However, it could nevertheless not owe any US estate tax provided the decedent was a resident of one of the few countries whose death tax treaty with the US provides the prorated unified credit as referenced in IRC Sec 2012(b)(3)(A), the prorated unified credit completely offsets the decedent's gross estate tax, and the treaty-based position is disclosed on a Form 8833 attached to the decedent's estate tax return (Form 706-NA) per Reg. 301.6114-1(a)(1)(i).

Since claiming the prorated unified credit under a treaty is predicated on the treaty-based position disclosure, I would like to suggest that the final regulation specify that a noncitizen nonresident decedent's estate meeting the IRC Sec 6018 filing requirement needs to file a US estate tax return with a proper treaty-based position disclosure in order to avoid being subject to the consistent basis requirement even if the prorated unified credit would completely offset its gross estate tax.