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Basis Issues for Trusts and Estates: Form 8971, Removing Assets From Trusts, Upstream Gifting, Substantiating Basis

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, February 24, 2021

Recorded event now available

or call 1-800-926-7926

This course will discuss common basis issues encountered by trust and estate advisers, including planning for volatile markets and the flux of estate taxation rules. Our veteran estate advisers will explain how to structure adaptable trusts, remove appreciated assets from trusts, determine and substantiate tax basis, and other basis conundrums commonly encountered by estate and trust advisers.


Basis--capital investment in property for tax purposes--is key to calculating gain or loss on property disposition. The changes in estate tax rules and exemption amounts, along with the vulnerability of the date of death step-up after the election, make planning difficult but still doable. For estate plans, flexibility is paramount; proper basis planning can drastically lower the tax liability of taxpayers and their beneficiaries.

The landscape of basis planning changed from lowering asset values (reducing estate tax) to increasing asset values and obtaining the Section 1014 step-up (reducing income tax) when the estate tax exemption was increased to $11.58 million ($23.16 for married taxpayers). Rather than removing assets from an estate, advisers are planning for estate inclusion.

There is a disparity in the treatment of basis for assets that are transferred by gift (donor's basis is retained) and at death (stepped-up to fair market value). Years after funding a trust, a taxpayer may decide that appreciated assets need to be removed to obtain the tax-saving step-up.

Usually, assets are transferred downstream to younger generations. Upstream gifting takes place when, for example, the property is gifted to a parent by a child. The older family member can return the same asset to the younger generation at death but with a substantially higher tax basis.

Tax advisers' recurring responsibility is to determine (or assist taxpayers in determining) tax basis in assets held or sold. Appraisals are ideal. On the other end of the spectrum, tax practitioners are familiar with Cohan v. Comr., 39 F.23 540, allowing estimates when records do not exist. Understanding how to substantiate basis is critical for estate tax practitioners.

Listen as our panel of trust and estate tax experts walks you through handling current and recurring basis issues. Our experts will explain how to structure estate plans to ensure flexibility and minimize transfer and income taxes for taxpayers and their heirs.



  1. Tax basis: an overview
  2. Planning for change under the new administration
  3. Trusts
    1. Structuring for flexibility
    2. Removing appreciate assets
  4. Upstream gifting
  5. Basis consistency rules and Form 8971
  6. Substantiating basis
  7. Basis discrepancies


The panel will cover these and other critical issues:

  • Under what circumstances should taxpayers consider moving assets out of a trust?
  • What methods are available for removing assets from a trust?
  • How is Form 8971 used to establish basis?
  • What are best practices for substantiating basis when records do not exist?
  • How can trusts be structured and utilized to allow for flexibility considering the flex of estate tax rules?


Bridgers, Griffin
Griffin H. Bridgers

Hutchins & Associates

Mr. Bridgers' practice encompasses all areas of private wealth and family business. In addition to estate...  |  Read More

Miller, Kelley
Kelley C. Miller

Reed Smith

Ms. Miller's practice areas include cloud computing, complex federal tax controversies, state and federal...  |  Read More

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