Instructions for Form 706-A

(Rev. August 2019)

United States Additional Estate Tax Return

(For use with Form 706-A (Rev. August 2019))

To report dispositions or cessations of qualified use under section 2032A of the Internal Revenue Code

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue 

Code unless otherwise noted.

Future Developments

For the latest information about 

developments related to Form 706-A 

and its instructions, such as legislation 

enacted after they were published, go to 

IRS.gov/Form706A.

What’s New

New mailing address. Effective 

January 1, 2019, Form 706-A will be 

filed in Kansas City, Missouri. See 

Where To File, later.

General Instructions

Purpose of Form

An heir must use Form 706-A to report 

the additional estate tax imposed by 

section 2032A(c) for an early disposition 

of specially valued property or for an 

early cessation of a qualified use of 

specially valued property.

The recapture tax is limited to the tax 

savings attributable to the property 

actually disposed of (or for which 

qualified use ceased) rather than to the 

tax savings attributable to all the 

specially valued property received by 

the heir.

Who Must File

The qualified heir must file Form 706-A 

if there was any taxable event (see 

Taxable Events, later) with respect to 

the specially valued property even if no 

tax is ultimately due. Further, the 

qualified heir must file Form 706-A if 

there was any involuntary conversion or 

exchange of the specially valued 

property even if the conversion or 

exchange is nontaxable.

When To File and Pay

File Form 706-A and pay any additional 

taxes due within 6 months after the 

taxable disposition or cessation of the 

qualified use unless an extension of 

time has been granted.

Use Form 4768, Application for 

Extension of Time To File a Return 

and/or Pay U.S. Estate (and 

Generation-Skipping Transfer) Taxes, to 

apply for an automatic extension of time 

to file. Check the “Form 706-A” box in 

Part II of Form 4768.

Make the check or money order 

payable to “United States Treasury” and 

write “Form 706-A” and the qualified 

heir's social security number on the 

check or money order.

If you are making an election to 

increase basis, see Basis, later, for 

information on paying interest.

Private delivery services (PDSs). 

You can use certain PDSs designated 

by the IRS to meet the "timely mailing as 

timely filing/paying" rule for tax returns 

and payments. Go to IRS.gov/PDS.

The PDS can tell you how to get 

written proof of the mailing date.

For the IRS mailing address to use if 

you're using a PDS, go to IRS.gov/

PDSStreetAddresses.

PDSs can't deliver items to P.O. 

boxes. You must use the U.S. 

Postal Service to mail any item 

to an IRS P.O. box address.

Where To File

Effective January 1, 2019, file Form 

706-A at the following address.

Department of the Treasury

Internal Revenue Service Center

Kansas City, MO 64999

If using a PDS, use this address.

Internal Revenue Submission 

Processing Center

333 W. Pershing Rd.

Kansas City, MO 64108

Statute of Limitations

The additional estate tax may be 

assessed until 3 years after the IRS 

receives notice that the qualified heir 

disposed of the specially valued 

property or ceased to use it for the 

qualified use.

However, if the property was 

disposed of in an involuntary conversion 

or in an exchange, the tax may be 

CAUTION

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assessed up to 3 years after the IRS 

receives notice that the property was 

replaced or will not be replaced. See 

section 2032A(f) for details.

Lien

If the estate elected special-use 

valuation, section 6324B establishes a 

special lien against the specially valued 

property equal to the adjusted tax 

difference attributable to the special-use 

valuation.

Penalties

Return preparer. Estate tax return 

preparers who prepare any return or 

claim for refund which reflects an 

understatement of tax liability due to an 

unreasonable position are subject to a 

penalty equal to the greater of $1,000 or 

50% of the income earned (or to be 

earned) for the preparation of each such 

return. Estate tax return preparers who 

prepare any return or claim for refund 

which reflects an understatement of tax 

liability due to willful or reckless conduct 

are subject to a penalty of $5,000 or 

75% of the income derived (or income 

to be derived), whichever is greater, for 

the preparation of each such return. See 

section 6694, the related regulations, 

and Ann. 2009-15, 2009-11 I.R.B. 687, 

available at Announcement 2009-15, for 

more information.

Definitions

Specially valued property. The term 

“specially valued property” means farm 

or closely held business property that 

the executor elected to value at actual 

use rather than fair market value (FMV) 

(defined on page 3). The executor 

makes the election on Form 706, United 

States Estate (and Generation-Skipping 

Transfer) Tax Return, filed for the 

decedent. Specially valued property 

refers to the qualified real property 

described in section 2032A and 

includes qualified real property owned 

indirectly, such as interests in certain 

partnerships, corporations, and trusts as 

described in section 2032A.

If special valuation was elected on 

Form 706, each qualified heir consented 

in writing to his or her personal liability 

August 27, 2019 Cat. No. 10142D
for the additional estate tax attributable 

to his or her interest in the specially 

valued property.

Qualified heir. The term “qualified 

heir” means, for any property, a member 

of the decedent's family who acquired 

the property (or to whom the property 

passes) from the decedent. If a qualified 

heir disposes of any interest in qualified 

real property to any member of his or 

her family, that member shall thereafter 

be treated as the qualified heir for the 

interest.

Taxable Events

The qualified heir causes a taxable 

event by disposing of any interest in the 

specially valued property or ceasing to 

use the specially valued property for its 

qualified use if:

• The disposition or cessation of 

qualified use was before the death of 

the qualified heir, and

• The disposition or cessation was 

within 10 years after the decedent's 

death. (But see Two-Year Grace 

Period—Commencement Date, later.)

Only one additional estate tax will be 

imposed with respect to any one part of 

specially valued property. For example, 

if additional estate tax is imposed for 

early cessation of a qualified use, a 

second additional estate tax will not be 

imposed for a subsequent early 

disposition of the same part of the 

specially valued property.

Disposition to family member. A 

disposition of an interest in property to a 

family member of the qualified heir is a 

taxable event that must be reported on 

Form 706-A. If the transferee enters into 

an agreement to be personally liable for 

any additional tax under section 

2032A(c), the disposition is nontaxable 

and you should enter it on Schedule C.

If the family member does not enter 

into the agreement, the disposition is 

taxable and you should enter it on 

Schedule A.

Disposition of timber. If the executor 

made a qualified woodlands election 

(section 2032A(e)(13)(A)), the 

disposition or severing of timber from 

the woodland is a disposition of a 

portion of the interest in the property. 

The disposition of a right to sever is 

treated as a disposition of the standing 

timber.

The additional estate tax on this 

disposition is the amount equal to the 

lesser of:

• The amount realized on the 

disposition (or, if other than a sale or 

exchange at arm's length, the FMV of 

the interest disposed of); or

• The amount of additional estate tax 

that would have been imposed if the 

entire interest of the qualified heir in the 

qualified woodland had been disposed 

of, minus any additional estate tax 

imposed on all earlier transactions 

involving the woodland.

Cessation of qualified use. The 

specially valued real property must be 

used as a farm for farming purposes, or 

used in a trade or business other than 

the trade or business of farming. For 

more details, see the Instructions for 

Form 706.

The qualified use ceases if the 

specially valued real property is not 

used for the qualified use described 

earlier. Use of the property as a farm or 

other business is also considered to 

cease if, during any 8-year period that 

ends after the decedent's death, there 

were periods totaling more than 3 years 

during which:

1. Neither the decedent nor any 

member of the decedent's family 

materially participated in the operation 

of the farm or other business (while the 

decedent held the property), and

2. Neither the qualified heir nor any 

member of the qualified heir's family 

materially participated in the operation 

of the farm or other business (while the 

heir held the property).

If the decedent was retired or 

disabled before death, there are special 

rules for applying the 8-year period to 

paragraph (1) above. See section 

2032A(b)(4) and the Instructions for 

Form 706.

Member of family. The term “member 

of the family” includes only:

• An ancestor (parent, grandparent, 

etc.) of the individual (where individual 

refers to either the decedent or a 

qualified heir);

• The spouse of the individual;

• A lineal descendant (child, stepchild, 

grandchild, etc.) of the individual, the 

individual's spouse, or a parent of the 

individual; or

• The spouse, widow, or widower of 

any lineal descendant described above.

A legally adopted child of an 

individual is treated as a child of that 

individual by blood.

Period of material participation. 

To determine whether the material 

participation requirement is satisfied, 

include periods during which the 

decedent's estate held the property.

If a qualified heir dies before the 

required period has passed, any 

material participation requirement ends 

for that heir's portion of the property, 

provided the heir received a separate or 

other undivided interest from the 

decedent.

If qualified heirs receive successive 

interests in specially valued property 

(for example, a life estate and 

remainder interests), the material 

participation requirement does not end 

for any part of the property until the later 

of the expiration of the recapture period 

or the death of the last qualified heir.

In determining whether the required 

participation has occurred, disregard 

brief periods (30 days or less) during 

which there was no material 

participation. But you may disregard 

these periods only if they were both 

preceded and followed by substantial 

periods (more than 120 days) in which 

there was uninterrupted material 

participation.

Required activities for material participation. See the Instructions for 

Form 706.

Basis

See section 1014(a) for the basis of 

property acquired from a decedent.

Election to increase basis. A 

qualified heir may elect to increase the 

basis of specially valued property when 

a taxable event (as defined earlier) 

occurs. If this election is made, the 

basis of the property shall increase to 

the excess of the FMV amount on the 

decedent's date of death (or alternate 

valuation date, if applicable) over the 

value amount determined under section 

2032A. Once the election is made, it is 

irrevocable.

To make the election, the qualified 

heir must:

• Check the box on line 7 of Part I;

• Enter on line 20 of Part II the amount 

of interest being paid on the additional 

estate tax due; and

• File with Form 706-A, a statement 

that:

a. Contains the name, address, and 

taxpayer identification number of the 

qualified heir and of the estate;

b. Identifies the election as the 

election under section 1016(c); and

c. Specifies the property with 

respect to which the election is 

made.

A qualified heir who makes this 

election must pay interest on the 

additional estate tax calculated from the 

date that is 9 months after the date of 

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the decedent's death to the date of the 

payment of the additional estate tax.

Two-Year Grace 

Period—Commencement 

Date

For the 2 years immediately following 

the date of the decedent's death, the 

failure by the qualified heir to begin 

using the property in a qualified use will 

not be considered a cessation of 

qualified use and therefore will not 

trigger the additional estate tax. The 

date on which the qualified heir begins 

to use the property in a qualified use is 

the commencement date.

The 10-year recapture period is 

extended by the period after the 

decedent's death and before the 

commencement date.

For example, if the decedent died 

February 28, 2019, and the 

commencement date is August 1, 2020, 

the recapture period would begin 

August 1, 2020, and end July 31, 2030.

How To Complete Form 

706-A

You may file Form 706-A for only one 

qualified heir. If a disposition, cessation, 

involuntary conversion, or exchange 

involves more than one qualified heir, 

each heir must file a separate Form 

706-A.

Complete Form 706-A in this order.

1. Part I.

2. Schedules A and B.

3. Part II.

4. Schedule C.

Note. The qualified heir must sign the 

return.

Specific Instructions

Valuation

When computing the amounts to enter 

on Form 706-A, use the same values 

and estate tax that the executor 

reported on the Form 706 filed for the 

decedent. However, if the IRS has 

completed the audit of the estate tax 

return, use the agreed values and tax 

rather than the reported values and tax.

Schedule A. Disposition of 

Specially Valued Property 

or Cessation of Qualified 

Use

On Schedule A, list every specially 

valued property interest that the 

qualified heir disposed of or 

discontinued use of since the date of the 

decedent's death and for which a Form 

706-A has not been previously filed. Do 

not list any interests that have already 

been reported on Schedule A or B of a 

previously filed Form 706-A. In general, 

do not list property interests disposed of 

to family members of the qualified heir. 

These interests should be listed on 

Schedule C.

Column A. Number and list the 

property interests in chronological order 

of disposition or cessation.

Column B. Use the same description in 

column B that the executor used for the 

specially valued property on the Form 

706 filed for the decedent. Please 

include in column B the schedule and 

item number where the specially valued 

property was reported on the Form 706 

filed for the decedent's estate.

Column C. Report in column C the 

date that the qualified heir disposed of 

the specially valued property or 

discontinued the qualified use.

Column D. If the qualified heir 

disposed of the specially valued 

property in an arm's length transaction, 

report in column D the amount realized.

Arm's length transaction. An arm's 

length transaction is a transaction where 

there is no bargain or gift element for 

affection or other reasons.

Amount realized. The amount 

realized is the sum of the money 

received plus the FMV of property (other 

than money) received. For the real 

property taxes that must be taken into 

account, see section 1001(b).

If the qualified heir owned only a part 

of the specially valued property, report 

in column D the pro rata share of the 

amount realized that is allocable to the 

part owned by the qualified heir.

If the specially valued property is 

disposed of by the qualified heir in other 

than an arm's length transaction, or if 

the qualified use is discontinued by the 

qualified heir, report in column D the 

FMV of the specially valued property as 

of the date of disposition or cessation of 

qualified use.

FMV. FMV is the price at which the 

property would change hands between 

a willing buyer and a willing seller, 

neither being under any compulsion to 

buy or to sell and both having 

reasonable knowledge of relevant facts.

For additional information and 

examples, see Regulations section 

20.2031-1(b). If the qualified heir owned 

only a part of the specially valued 

property, report in column D the pro rata 

share of the FMV allocable to the part 

owned by the qualified heir.

Column E. Report in column E the 

special-use value at the date of the 

decedent's death (or alternate valuation 

date) of the specially valued property 

that passed from the decedent to the 

qualified heir who disposed of the 

property or discontinued the qualified 

use. Use the same special-use value 

that the executor reported on the Form 

706 filed for the decedent's estate. If the 

IRS has completed the audit of the 

estate tax return, use the agreed value 

rather than the reported value. If the 

qualified heir owned only a part of the 

specially valued property, report in 

column E the pro rata share of the 

special-use value allocable to the part 

owned by the qualified heir.

Schedule B. Involuntary 

Conversions or 

Exchanges

Involuntary conversions of qualified real 

property (under the rules of section 

1033) and exchanges of qualified real 

property (under the rules of section 

1031) are treated similarly when figuring 

the additional estate tax on Form 706-A.

The rules later apply to all qualified 

heirs, whether or not they made an 

election, for involuntary conversions and 

exchanges occurring after 1981.

If you are reporting an involuntary 

conversion or exchange, you may not 

use the same Form 706-A to report any 

cessations or other dispositions that are 

not involuntary conversions or 

exchanges. Use a separate Form 706-A 

for the cessations or other dispositions.

You may report conversions and 

exchanges together on the same return.

Nontaxable Involuntary 

Conversions or Exchanges

If the qualified heir reinvests all of the 

involuntary conversion proceeds in 

qualified replacement property or if the 

qualified heir exchanges qualified real 

property solely for qualified exchange 

property, then there is no additional 

estate tax.

You should complete Form 706-A, 

even though there is no tax, to notify the 

IRS that the involuntary conversion or 

exchange took place. However, you 

must complete only Part I, Schedule B, 

and Schedule A. Write “nontaxable” on 

line 19 of Part II.

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Partially Taxable Involuntary 

Conversions or Exchanges

If the cost of the qualified replacement 

property is less than the amount 

realized in the involuntary conversion or 

if other property in addition to qualified 

exchange property is received in the 

exchange, the conversion or exchange 

is partially taxable. You should complete 

all of Form 706-A and determine the tax 

using Part II.

List on Schedule A all specially 

valued property that the qualified heir 

disposed of or discontinued use of, 

regardless of whether he or she 

received replacement or exchange 

property for it. List on Schedule B only 

the replacement or exchange property 

the qualified heir actually received.

Qualified Replacement or 

Exchange Property

Qualified replacement property means 

any real property that is to be used for 

the qualified use and that:

• Was acquired in an exchange that 

qualified under section 1031,

• Was purchased by the qualified heir 

within the time specified by section 

1033 to replace the qualified property, 

or

• Is real property into which the 

qualified real property has been 

converted.

Qualified exchange property means 

any real property that is to be used for 

the same qualified use that the property 

for which it was exchanged was used.

The period of the decedent's or 

family member's ownership, qualified 

use, or material participation with 

respect to replaced or exchanged 

property is treated as the period of 

ownership, qualified use, or material 

participation with respect to the qualified 

replacement or exchange property. This 

applies only to that part of the FMV of 

the replacement or exchange property 

(at the date of acquisition) that does not 

exceed the FMV of the replaced or 

exchanged property (at the date of 

disposition).

Note. The 10-year recapture period is 

extended under certain circumstances. 

See Two-Year Grace 

Period—Commencement Date, earlier.

How To Complete

Schedule B

Column A. Make one entry for each 

item of qualified replacement or 

exchange property.

Column B. Describe the qualified 

replacement property with enough detail 

so that the IRS can locate and value it. 

For more information, see the 

instructions to Schedule A of Form 706.

Column C. For an involuntary 

conversion, enter the cost of the 

replacement property. For an exchange, 

enter the FMV of the replacement 

property.

Part II—Tax Computation

Line 2

Enter the total value at the estate tax 

valuation date of all specially valued 

property that the executor elected, on 

the Form 706 filed for the decedent's 

estate, to value at actual use rather than 

FMV.

Line 3a

Enter the amount of the estate tax for 

the decedent's estate that is 

recomputed using FMV at the estate tax 

valuation date rather than actual use 

value. Attach a schedule showing the 

recomputed estate tax.

Schedule C. Dispositions 

to Family Members of the 

Qualified Heir

Agreement by transferee. You may 

enter a disposition to a family member 

of the qualified heir on Schedule C only 

if you file this Form 706-A on time 

(including extensions) and attach an 

agreement by the transferee to be 

personally liable for any additional 

estate tax under section 2032A(c) on 

the interest received. For a format of the 

agreement, see Form 706,

Schedule A-1.

If you are not filing this Form 706-A 

on time, or if the transferee does not 

enter into the agreement, you must 

enter the disposition(s) on Schedule A 

instead of Schedule C.

How To Complete

Schedule C

See the instructions for completing 

columns A, B, and C of Schedule A 

under Schedule A. Disposition of 

Specially Valued Property or Cessation 

of Qualified Use, earlier.

Signature(s)

Form 706-A must be signed. The 

taxpayer (or person filing on his or her 

behalf) must verify and sign the 

declaration on page 1 under penalties of 

perjury. The taxpayer may use Form 

2848, Power of Attorney and 

Declaration of Representative, to 

authorize another person to act for him 

or her before the IRS.

Generally, anyone who is paid to 

prepare the return must sign the return 

in the space provided and fill in the Paid 

Preparer's Use Only area. See section 

7701(a)(36)(B) for exceptions.

In addition to signing and completing 

the required information, the paid 

preparer must give a copy of the 

completed return to the taxpayer.

Note. A paid preparer may sign original 

or amended returns by rubber stamp, 

mechanical device, or computer 

software program.

Paid Preparer 

Authorization

If you want to allow the IRS to discuss 

the tax return with the paid preparer who 

signed it, check the “Yes” box in the 

signature area of the return. This 

authorization applies only to the 

individual whose signature appears in 

the Paid Preparer Use Only section of 

the return. It does not apply to the firm, if 

any, shown in that section. If the “Yes” 

box is checked, you are authorizing the 

IRS to call the paid preparer to answer 

any questions that may arise during the 

processing of its return. You are also 

authorizing the paid preparer to:

• Give the IRS any information that is 

missing from your return;

• Call the IRS for information about the 

processing of your return or the status of 

any refund or payment(s); and

• Respond to certain IRS notices that 

you may have shared with the preparer 

about math errors, offsets, and return 

preparation.

The notices will not be sent to the 

preparer. You are not authorizing the 

paid preparer to receive any refund 

check, bind you to anything (including 

any additional tax liability), or otherwise 

represent you before the IRS. If you 

want to expand the paid preparer’s 

authorization, see Pub. 947, Practice 

Before the IRS and Power of Attorney. 

However, the authorization will 

automatically end no later than the due 

date (excluding extensions) for filing the 

tax return. If you want to revoke the 

authorization before it ends, see Pub. 

947.

Privacy Act and Paperwork Reduction Act Notice. We ask for the 

information on this form to carry out the 

Internal Revenue laws of the United 

States. We need it to figure and collect 

the right amount of tax. Subtitle B, 

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Estate and Gift Taxes, of the Internal 

Revenue Code, imposes a tax in some 

cases on qualified heirs who dispose of 

property valued under special valuation 

rules. This form is used to determine the 

amount of the taxes that you owe. 

Section 6011 requires you to provide 

the requested information if the tax is 

applicable to you. Section 6109 requires 

you to provide your identifying number.

Generally, tax returns and return 

information are confidential, as required 

by section 6103. However, section 6103 

allows or requires the IRS to disclose or 

give the information shown on your tax 

return to others described in the Code. 

For example, we may disclose your tax 

information to the Department of Justice 

for civil and criminal litigation, and to 

cities, states, the District of Columbia, 

and U.S. commonwealths and 

possessions for use in administering 

their tax laws. We may also disclose this 

information to other countries under a 

tax treaty, to federal and state agencies 

to enforce federal nontax criminal laws, 

or to federal law enforcement and 

intelligence agencies to combat 

terrorism. If you fail to provide this 

information in a timely manner, you may 

be subject to penalties and interest.

You are not required to provide the 

information requested on a form that is 

subject to the Paperwork Reduction Act 

unless the form displays a valid OMB 

control number. Books or records 

relating to a form or its instructions must 

be retained as long as their contents 

may become material in the 

administration of any Internal Revenue 

law.

The time needed to complete and file 

this form will vary depending on 

individual circumstances. The estimated 

average time is:

Recordkeeping ....... 3 hr., 17 min.

Learning about the law 

or the form ........ 2 hr., 11 min.

Preparing the form .... 1 hr., 39 min.

Copying, assembling, 

and sending the form 

to the IRS ......... 1 hr., 3 min.

If you have comments concerning the 

accuracy of these time estimates or 

suggestions for making this form 

simpler, we would be happy to hear 

from you. You can send us comments 

from IRS.gov/FormComments. Or you 

can write to the Internal Revenue 

Service, Tax Forms and Publications 

Division, 1111 Constitution Ave. NW, 

IR-6526, Washington, DC 20224. Do 

not send the tax form to this address. 

Instead, see Where To File, earlier.

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