Practice Note

Unless Congress Acts, my view is that all estates should consider filing a Form 706 to elect to allocate basis under Section 1022 of the Internal Revenue Code (even for estates that are under the filing threshold (absent regulatory guidance to the contrary). This will allow you the opportunity to fix the basis forever. The other question is whether the repeal of Section 1014 and its replacement by Section 1022 repealed the Gallenstein rule for basis pre-2010. This could mean that the property of the first to die for a couple that owned property pre-1976 and in which one spouse died, were able to get the full step-up instead of a 50% step-up, but under Section 1022, for decedent’s dying in 2010, there is clearly no step-up in basis as to the husband’s half regardless of the Gallenstein rule without an allocation. There are ton’s of issues in Section 1022 and I am sure the Service is loathe to give much guidance because Congress could repeal the law any day now and try to make it retroactive. So, you will need to read the statute and follow its language to the letter.

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