Introduction:  The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) (“EGTRRA”) made changes to the federal estate tax.  It provided for the elimination of the federal estate tax for the estates of decedents dying in 2010 and the reestablishment of the federal estate tax system as provided for in the law that existed prior to the enactment of EGTRRA for the estates of decedents dying in 2011 or thereafter.  EGTRRA also made changes to the basis of property acquired from decedents.  For decedents who died in 2010, the property generally would have a “carryover” basis, as increased by the amounts discussed below, and for decedents who died in 2011 or thereafter, the property would have a “stepped-up” basis which is the method of basis determination for property received from decedents who died prior to the “carryover” system established by EGTRRA for 2010 only.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) (“TRUIRJCA”) retroactively reinstated the federal estate tax, applicable to the estates of decedents who died in 2010 and thereafter, with provisions that are different from the EGTRRA law and reinstituted “stepped-up” basis for property acquired from decedents who died in 2010.  TRUIRJCA permits the executor[1] of the estate of a decedent who died in 2010 to elect out of the federal estate tax and the “stepped-up” basis treatment for 2010 and instead use the “carryover” basis provided for by EGTRRA in the Internal Revenue Code (“Code”) under § 1022(a) and the allowable basis increases of § 1022(b) and (c). 

If the executor elects “carryover” basis, the basis can be increased by an aggregate amount, applicable to any estate, of up to $1,300,000.  A further basis increase of up to $3,000,000 is available for qualified spousal property. The qualified spousal property increase of up to $3,000,000 is in addition to the increase of up to $1,300,000 that is applicable to any estate.  For property acquired from decedents who die in 2011 or thereafter, the federal basis is “stepped-up”.

As discussed below, the January 1, 2005 Internal Revenue Code is applicable for Massachusetts income tax purposes for 2010 and 2011. The changes made by EGTRRA were part of the January 1, 2005 Code and are used to determine Massachusetts basis.  TRUIRJCA was enacted in 2010 and was not part of the Code on January 1, 2005.[2]

Issue 1:  What is the Massachusetts basis of property acquired from decedents who died in 2010?

Directive 1:  The Massachusetts basis of property acquired from decedents who died in 2010 is the basis computed using I.R.C. § 1022 which is “carryover” basis.  Unlike federal law, “carryover” basis is mandatory in Massachusetts and is not an election made by the executor of a decedent’s estate.  The carryover basis can be increased by an aggregate amount of up to $1,300,000, applicable to any estate, and an additional basis increase of up to $3,000,000 for qualified spousal property.[3]

Issue 2:  What is the Massachusetts basis of property acquired from decedents who die in 2011 or thereafter?

Directive 2:  The Massachusetts basis of property acquired from decedents who die in 2011 or thereafter is the basis computed using I.R.C. § 1014 which is “stepped-up” basis.

Discussion of Law:  G.L. c. 62, § 1(c) provides that, for the taxation of incomes for tax years ending on or after January 1, 2005, the term “Code” means, with certain exceptions not relevant here, the Internal Revenue Code of the United States, as amended on January 1, 2005 and in effect for the taxable year.  St. 2009, c. 27, s. 151.  EGTRRA was enacted in 2001 and was part of the January 1, 2005 Code.  Historically, the basis of property acquired from a decedent was determined by G.L. c. 62, § 6F(b)(2)(C) that provides, in part, “in the case of property acquired from a decedent within the meaning of section one thousand and fourteen (b) of the Code, the initial basis of such property shall be determined under section one thousand and fourteen of the Code, without reference to section one thousand and fourteen (d) of the Code.”  The § 1014(a) basis of property acquired from a decedent is frequently referred to as the “stepped-up” basis and is applicable to 2009 and before and to 2011 and thereafter.[4]

Property Acquired From Decedents Who Died in 2010:  EGTRRA added Code § 1014(f) that repealed the “stepped-up” basis provisions of § 1014 only with respect to property acquired from decedents who died in 2010.  Code § 1022, which was also added by EGTRRA and is applicable for Massachusetts purposes, governs property acquired from a decedent who died in 2010.  P.L. 107-16, § 542(a).  Section 1022(a) provides that property acquired from a decedent who died in 2010 is treated as a gift and will have “carryover” basis.

For property acquired from a decedent who died in 2010, section 1022(b) provides for an aggregate basis increase, applicable to any estate, of up to $1,300,000.  A further basis increase of up to $3,000,000 for qualified spousal property is provided for in § 1022(c).  The aggregate qualified spousal property increase of up to $3,000,000 is in addition to the increase of up to $1,300,000 that is available to any estate.[5]

For federal purposes, the executors of estates of decedents who died in 2010 electing “carryover” basis must file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, with the Internal Revenue Service on or before January 17, 2012.[6]  There is no similar requirement for filing with the Department of Revenue.[7]

Property Acquired From Decedents Who Die in 2011 or Thereafter:  The basis of property acquired from decedents who die in 2011 or thereafter is “stepped-up” basis.


/s/Amy Pitter
Amy Pitter
Commissioner of Revenue


AP:MTF:sg

January 12, 2012

DD 11-7


[1] The term “executor” is defined in I.R.C. § 2203.
[2] Massachusetts legislation has been proposed that would make the Massachusetts basis of property acquired from a decedent who died in 2010 the same as the federal basis of property acquired from a decedent who died in 2010.  See, e.g., H.B. 2559: An Act to continue tax basis rules for property acquired from decedents.  Practitioners may contact the Legislature to monitor the progress of any proposed legislation on this subject matter.  If any relevant legislation is enacted, the Department will provide further guidance to taxpayers.  
[3] See Administrative Procedure 605: Amending Tax Returns for information about amending a Massachusetts income tax return that must be amended to report basis consistent with this Directive.    
[4] For both Massachusetts and federal income tax purposes, the basis of property is “stepped-down’’ if the estate value is less than the decedent’s basis.   
[5] For Massachusetts estate tax purposes, the usual valuation rules, e.g., date of death value, the alternate valuation date value, apply to property acquired from decedents who died in 2010.
[6] For additional information about Form 8939 and the allocation of increase in basis for property acquired from a decedent who died in 2010, see I.R.S. Notice 2011-66, 2011-35 IRB 184 and Revenue Procedure 2011-41, 2011-35 IRB 188.
[7] If the executor of an estate of a decedent who died in 2010 is not required to file Form 8939 with the Internal Revenue Service, the executor is not required to file Form 8939 with the Internal Revenue Service or the Department of Revenue to allocate basis for Massachusetts income tax purposes.  The executor of the estate of a decedent who died in 2010 shall furnish recipients of property the written statement described in I.R.C. § 6018(e).