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Advanced Issues in Probate for the Paralegal

Prepared by J. Randolph Robida, Attorney at Law
© December, 2000
J. Randolph Robida all rights reserved.

The following materials were presented at a seminar held in Denver, Colorado, on July 26, 2000, sponsored by Institute for Paralegal Education, a division of National Business Institute ("NBI"). The program, "Advanced Issues in Probate for the Paralegal" was presented by attorneys, Randolph Robida and Robert L. Sagrillo, of Sagrillo, Hammond & Dineen, LLC. The materials contained in this page are from the portion of the program delivered by Randy Robida. If you would like additional information about the issues discussed herein, related legal issues, or other seminars presented by Randy Robida or NBI, please contact our office, or NBI.

Please Note: These materials should not be used as a substitute for professional advice where questions of interpretation should be addressed by a professional advisor. Please read the DISCLAIMER before continuing on this page.

Advanced Issues in Probate for the Paralegal


Examining the Guidelines of Fiduciary Responsibilities and Liabilities



Under these circumstances, without the restrictions listed above, the Personal Representative could choose the alternate valuation date to get an increased income tax basis in the investment portfolio without incurring any estate taxes as a result

The IRS is authorized to allow an election after the time specified above and generally will do so if it determined that the failure to file an election was reasonable and in good faith and that allowing a subsequent election would not adversely affect the government's interest.

When an individual owns 100% of a corporation, any transfer of stock back to the corporation still leaves the shareholder with 100% ownership and, consequently, results in dividend as opposed to sale or exchange treatment. As a result, under the regular rules, it would be impossible for the estate of a decedent who owned 100% of stock in a corporation to redeem a portion of the stock to pay the estate tax on the value of the corporation. Section 303 of the Internal Revenue Code was adopted to make it easier for the owners of small corporations to use corporate assets to pay estate taxes and administrative expenses.

If there is a reorganization of a closely held corporation following the death of a shareholder, the new stock created by the reorganization will qualify for Section 303 treatment if its basis is determined by reference to the basis of the old stock, the old stock was included in the gross estate of the taxpayer, and the old stock would have qualified for Section 303 treatment.

Adjustment of the partnership's inside basis is not required; however, failure to equalize outside and inside basis can have adverse tax consequences and generally complicates partnership tax accounting to such an extent that it is beneficial to make the election in most instances.

If a Section 754 election is in place, a Section 743 basis adjustment is made when a partner dies. The rules regarding Section 743 basis adjustments are extremely complex and were revised on December 15, 1999. In short, they provide that the new partners' (the beneficiaries of the partner who passed away) inside basis in partnership assets will adjusted to reflect the stepped-up outside basis in the partnership interest.

The personal representative may elect to make the first installment up to five years after the date on which the estate tax would normally be due, resulting in a total of 15 years of deferral. Payments of interest are generally required during any years preceding the payment of the first installment.

With respect to estates, which often have expenses in excess of income, it is important to note that the same deferral would apply to any expense deduction passed through from the estate to the beneficiary. It should also be noted that generally excess deductions from an estate cannot be passed through to its beneficiaries until the final tax year of the estate.


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