Carryover Basis Simplification Act of 1979

Carryover Basis Simplification Act of 1979 - Amends the Internal Revenue Code to revise the estate tax rules for determining the basis of carryover basis property in the hands of an individual acquiring such property from a decedent. Defines "carryover basis property" as any property which is acquired from or passed from a decedent who died after December 31, 1979, and which is not specifically excluded from the category of carryover basis property under the provisions of this Act.

Provides that the basis of carryover basis property acquired from a decedent shall be its adjusted basis for purposes of determining gain immediately before the death of the decedent (initial basis), increased by the sum of the minimum basis adjustment and the death tax adjustment for such property (as defined by this Act). Requires the allocation of such adjustments among the carryover basis properties for purposes of the estate tax.

Exempts from classification as carryover basis property: (1) assets of an estate which have a fair market value of $175,000 or less (the estate tax exemption amount); (2) property which was acquired from a decedent and sold before the decedent's death; (3) income in respect of a decedent; and (4) life insurance proceeds. Permits the executor of an estate to elect to exclude from carryover basis property classification, tangible personal property which the decedent held as a capital asset and which has a fair market value of $25,000 or less and any interest in a closely held business as family farm which has a fair market value of $1,000,000 or less.

Provides for a "fresh start adjustment" for marketable securities to increase the adjusted basis of such securities to their fair market value on December 31, 1976. Provides for a similar adjustment to all other types of property. Permits only one fresh start adjustment for carryover basis property. Treats preferred stock which was issued and outstanding on December 31, 1976, as marketable securities for purposes of the adjustment. Sets the fair market value of such preferred stock at its stated redemption price on such date excluding any dividends in arrears. Permits the holding period, bases, and fair market values of various types of property to be determined on a class basis rather than on an individual item basis.

Provides that the value of improvements to a decedent's principal residence with the decedent held for a period beginning after December 31, 1976, shall be deemed to be not less than $250.

Sets the decedent's basis in carryover basis property at fair market value as of the date such property was acquired by the decedent where facts necessary to determine the decedent's basis immediately before death are unavailable.

Sets forth procedures for a binding determination of the initial basis of carryover basis property. Permits an executor of an estate to request from the Secretary of the Treasury an audit of the initial basis of any carryover basis property shown on an estate tax return. Provides for judicial review of the Secretary's determination in Tax Court unless the Secretary and the executor have entered into an agreement as to the initial basis of any carryover basis property. Provides penalties for negligent or fraudulent overstatement of the initial basis of carryover basis property.

Provides for carryover basis treatment of property received by a beneficiary in a distribution from an estate or trust, with adjustments for gain or loss recognized to the estate or trust on the distribution.

Revises the method for computing the estate tax deduction from amounts includible in gross income as income in respect of a decedent.

Provides for an adjustment to the basis of gifts made after December 31, 1976, based upon the net appreciation in value of all appreciated taxable gifts made by a donor during a particular calendar quarter after such date. Exempts gifts which are includible in the gross estate of the donor or which have been disposed of prior to the donor's death from such gift tax adjustment. Revises basis adjustment rules for generation-skipping transfers after June 11, 1976.

Permits the application of capital loss deductions which are carried over from the decedent's last taxable year to the gross estate of such decedent.

Restores capital gain tax treatment to the sale of inherited artwork.

Revises rules for the extension of time for payment of estate tax where an estate consists largely of interests in a closely held business.

Provides that a taxpayer shall have met the material participation requirements for purposes of the estate tax valuation rules for family farm and business property if the decedent, or a spouse of the decedent, evidences material participation in the operation of the farm or business during periods aggregating 15 year or more.