New York State - Marriage Equality Act - 2010 Tax Relief Act on the NYS Estate Tax

New York State has issued additional guidance regarding the impact of New York's Marriage Equality Act and the federal 2010 Tax Relief Act on the NYS Estate Tax. See the attached copies of TSB-M-11(8) & TSB-M-11(9) attached.

With respect to New York's Marriage Equality Act, TSB-M-11(8) provides that for decedents dying after 7/24/2011, their NYS Estate Tax return can claim a marital deduction (including QTIP' trusts) for bequests to same-sex spouses & need include only one-half the value of "qualified-jointly owned” property of the same-sex couple. Also, gift-splitting by the same-sex couple is permitted by NYS, but since there is no NYS gift tax & the feds do not permit it on a federal filing, this basically will be elected on "pro-forma” gift tax returns attached to the ET-706.

With respect to the federal 2010 Tax Relief Act, TSB-M-11(9) provides that:

1. for decedents dying in 2010, the ET-706 is still due within 9 months of the date of death (disregarding extensions), but only interest will be charged (penalties will be abated) if the return is filed/tax paid by the federal due date (with exdtensions);

2. for 2010 thru 2012:

a. if a federal return is filed, any elections are binding for NYS purposes. Otherwise, a pro-forma federal 706 must be attached to the NYS ET-706 with any elections made there;

b. amendments made by the federal 2010 Tax Relief Act are generally disregarded for NYS purposes, including portability (spouse use of decedent's Unified Credit), valuation (must use Date-of-Death or Alternate Valuation only), and disclaimers (must be filed within 9 months of death); and

c. MOST IMPORTANTLY, if a 2010 Decedent's estate elects for the "modified carry-over basis” regime for federal purposes, the estate must still file the ET-706 as required, BUT WILL NOT RECEIVE A STEP-UP BASIS FOR NYS INCOME TAX PURPOSES (the NYS Income Tax follows federal income tax reporting rules).

If you have any questions, please do not hesirtate to contact James O'Connor, Esq., at (631) 434-9500