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US Internal Revenue Service: f706--2001
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(Rev. November 2001)
Estate of a citizen or resident of the United States (see separate instructions). To be filed for decedents dying after December 31, 2000, and before January 1, 2002. For Paperwork Reduction Act Notice, see page 25 of the separate instructions.
OMB No. 1545-0015 2 Decedent’s Social Security No.
Legal residence (domicile) at time of death (county, state, and ZIP code, or foreign country) Name of executor (see page 4 of the instructions)
Executor’s social security number (see page 4 of the instructions) Name and location of court where will was probated or estate administered 7b Case number
If decedent died testate, check here and attach a certified copy of the will. 9 If Form 4768 is attached, check here If Schedule R-1 is attached, check here Total gross estate less exclusion (from Part 5, Recapitulation, page 3, item 12) Total allowable deductions (from Part 5, Recapitulation, page 3, item 23) Taxable estate (subtract line 2 from line 1) Adjusted taxable gifts (total taxable gifts (within the meaning of section 2503) made by the decedent after December 31, 1976, other than gifts that are includible in decedent’s gross estate (section 2001(b))) Add lines 3 and 4 Tentative tax on the amount on line 5 from Table A on page 12 of the instructions 7a 7b 7c 8 1 2 3 4 5 6
7a If line 5 exceeds $10,000,000, enter the lesser of line 5 or $17,184,000. If line 5 is $10,000,000 or less, skip lines 7a and 7b and enter -0- on line 7c b Subtract $10,000,000 from line 7a c Enter 5% (.05) of line 7b 8 9 Part 2.—Tax Computation Total tentative tax (add lines 6 and 7c)
Total gift tax payable with respect to gifts made by the decedent after December 31, 1976. Include gift taxes by the decedent’s spouse for such spouse’s share of split gifts (section 2513) only if the decedent was the donor of these gifts and they are includible in the decedent’s gross estate (see instructions) Gross estate tax (subtract line 9 from line 8) Maximum unified credit (applicable credit amount) against estate tax 11 Adjustment to unified credit (applicable credit amount). (This adjustment 12 may not exceed $6,000. See page 4 of the instructions.) Allowable unified credit (applicable credit amount) (subtract line 12 from line 11) Subtract line 13 from line 10 (but do not enter less than zero) Credit for state death taxes. Do not enter more than line 14. Figure the credit by using the amount on line 3 less $60,000. See Table B in the instructions and attach credit evidence (see instructions) Subtract line 15 from line 14 Credit for Federal gift taxes on pre-1977 gifts (section 2012) (attach computation) Credit for foreign death taxes (from Schedule(s) P). (Attach Form(s) 706-CE.) Credit for tax on prior transfers (from Schedule Q) Total (add lines 17, 18, and 19) Net estate tax (subtract line 20 from line 16) Generation-skipping transfer taxes (from Schedule R, Part 2, line 10) Total transfer taxes (add lines 21 and 22) Prior payments. Explain in an attached statement United States Treasury bonds redeemed in payment of estate tax Total (add lines 24 and 25) Balance due (or overpayment) (subtract line 26 from line 23) 17 18 19
Form 706 (Rev. 11-01)
Part 3—Elections by the Executor
Please check the “Yes” or “No” box for each question. (See instructions beginning on page 5.) 1 2 3 4 Do you elect alternate valuation? Do you elect special use valuation? If “Yes,” you must complete and attach Schedule A–1. Do you elect to pay the taxes in installments as described in section 6166? If “Yes,” you must attach the additional information described on page 8 of the instructions. Do you elect to postpone the part of the taxes attributable to a reversionary or remainder interest as described in section 6163?
Part 4—General Information
(Note: Please attach the necessary supplemental documents. You must attach the death certificate.) (See instructions on page 9.)
Authorization to receive confidential tax information under Regs. sec. 601.504(b)(2)(i); to act as the estate’s representative before the IRS; and to make written or oral presentations on behalf of the estate if return prepared by an attorney, accountant, or enrolled agent for the executor:
4c Amount received (see page 9 of the instructions)
All unascertainable beneficiaries and those who receive less than $5,000 Total Please check the “Yes” or “No” box for each question. 6 Does the gross estate contain any section 2044 property (qualified terminable interest property (QTIP) from a prior gift or estate) (see page 9 of the instructions)?
Part 4—General Information (continued)
Please check the “Yes” or “No” box for each question. 7a Have Federal gift tax returns ever been filed? If “Yes,” please attach copies of the returns, if available, and furnish the following information: 7b Period(s) covered 7c Internal Revenue office(s) where filed If you answer “Yes” to any of questions 8–16, you must attach additional information as described in the instructions. 8a Was there any insurance on the decedent’s life that is not included on the return as part of the gross estate? b Did the decedent own any insurance on the life of another that is not included in the gross estate? 9 Did the decedent at the time of death own any property as a joint tenant with right of survivorship in which (a) one or more of the other joint tenants was someone other than the decedent’s spouse, and (b) less than the full value of the property is included on the return as part of the gross estate? If “Yes,” you must complete and attach Schedule E Did the decedent, at the time of death, own any interest in a partnership or unincorporated business or any stock in an inactive or closely held corporation? Did the decedent make any transfer described in section 2035, 2036, 2037, or 2038 (see the instructions for Schedule G beginning on page 11 of the separate instructions)? If “Yes,” you must complete and attach Schedule G Were there in existence at the time of the decedent’s death: a Any trusts created by the decedent during his or her lifetime? b Any trusts not created by the decedent under which the decedent possessed any power, beneficial interest, or trusteeship? Did the decedent ever possess, exercise, or release any general power of appointment? If “Yes,” you must complete and attach Schedule H Was the marital deduction computed under the transitional rule of Public Law 97-34, section 403(e)(3) (Economic Recovery Tax Act of 1981)? If “Yes,” attach a separate computation of the marital deduction, enter the amount on item 20 of the Recapitulation, and note on item 20 “computation attached.” Was the decedent, immediately before death, receiving an annuity described in the “General” paragraph of the instructions for Schedule I? If “Yes,” you must complete and attach Schedule I Was the decedent ever the beneficiary of a trust for which a deduction was claimed by the estate of a pre-deceased spouse under section 2056(b)(7) and which is not reported on this return? If “Yes,” attach an explanation
Part 5—Recapitulation
Schedule A—Real Estate Schedule B—Stocks and Bonds Schedule C—Mortgages, Notes, and Cash Schedule D—Insurance on the Decedent’s Life (attach Form(s) 712) Schedule E—Jointly Owned Property (attach Form(s) 712 for life insurance) Schedule F—Other Miscellaneous Property (attach Form(s) 712 for life insurance) Schedule G—Transfers During Decedent’s Life (att. Form(s) 712 for life insurance) Schedule H—Powers of Appointment Schedule I—Annuities Total gross estate (add items 1 through 9). Schedule U—Qualified Conservation Easement Exclusion Total gross estate less exclusion (subtract item 11 from item 10). Enter here and on line 1 of Part 2—Tax Computation
Schedule J—Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims Schedule K—Debts of the Decedent Schedule K—Mortgages and Liens Total of items 13 through 15 Allowable amount of deductions from item 16 (see the instructions for item 17 of the Recapitulation) Schedule L—Net Losses During Administration Schedule L—Expenses Incurred in Administering Property Not Subject to Claims Schedule M—Bequests, etc., to Surviving Spouse Schedule O—Charitable, Public, and Similar Gifts and Bequests Schedule T—Qualified Family-Owned Business Interest Deduction Total allowable deductions (add items 17 through 22). Enter here and on line 2 of the Tax Computation
● For jointly owned property that must be disclosed on Schedule E, see the instructions on the reverse side of Schedule E. ● Real estate that is part of a sole propr ietorship should be shown on Schedule F. ● Real estate that is included in the gross estate under section 2035, 2036, 2037, or 2038 should be shown on Schedule G. ● Real estate that is included in the gross estate under section 2041 should be shown on Schedule H. ● If you elect section 2032A valuation, you must complete Schedule A and Schedule A-1.
If the total gross estate contains any real estate, you must complete Schedule A and file it with the return. On Schedule A list real estate the decedent owned or had contracted to purchase. Number each parcel in the left-hand column. Describe the real estate in enough detail so that the IRS can easily locate it for inspection and valuation. For each parcel of real estate, report the area and, if the parcel is improved, describe the improvements. For city or town property, report the street and number, ward, subdivision, block and lot, etc. For rural property, report the township, range, landmarks, etc. If any item of real estate is subject to a mortgage for which the decedent’s estate is liable; that is, if the indebtedness may be charged against other property of the estate that is not subject to that mortgage, or if the decedent was personally liable for that mortgage, you must report the full value of the property in the value column. Enter the amount of the mortgage under “Description” on this schedule. The unpaid amount of the mortgage may be deducted on Schedule K.
If the decedent’s estate is NOT liable for the amount of the mortgage, report only the value of the equity of redemption (or value of the property less the indebtedness) in the value column as part of the gross estate. Do not enter any amount less than zero. Do not deduct the amount of indebtedness on Schedule K. Also list on Schedule A real property the decedent contracted to purchase. Report the full value of the property and not the equity in the value column. Deduct the unpaid part of the purchase price on Schedule K. Report the value of real estate without reducing it for homestead or other exemption, or the value of dower, curtesy, or a statutory estate created instead of dower or curtesy. Explain how the reported values were determined and attach copies of any appraisals.
In this example, alternate valuation is not adopted; the date of death is January 1, 2001.
House and lot, 1921 William Street NW, Washington, DC (lot 6, square 481). Rent of $2,700 due at end of each quarter, February 1, May 1, August 1, and November 1. Value based on appraisal, copy of which is attached Rent due on item 1 for quarter ending November 1, 2000, but not collected at date of death Rent accrued on item 1 for November and December 2000
House and lot, 304 Jefferson Street, Alexandria, VA (lot 18, square 40). Rent of $600 payable monthly. Value based on appraisal, copy of which is attached Rent due on item 2 for December 2000, but not collected at date of death
In this example, alternate valuation is adopted; the date of death is January 1, 2001.
House and lot, 1921 William Street NW, Washington, DC (lot 6, square 481). Rent of $2,700 due at end of each quarter, February 1, May 1, August 1, and November 1. Value based on appraisal, copy of which is attached. Not disposed of within 6 months following death Rent due on item 1 for quarter ending November 1, 2000, but not collected until February 1, 2001 Rent accrued on item 1 for November and December 2000, collected on February 1, 2001
House and lot, 304 Jefferson Street, Alexandria, VA (lot 18, square 40). Rent of $600 payable monthly. Value based on appraisal, copy of which is attached. Property exchanged for farm on May 1, 2001 Rent due on item 2 for December 2000, but not collected until February 1, 2001
5/1/01 2/1/01
Instructions for Schedule A-1. Section 2032A Valuation
specially valued property received by the skip person at their special use value and one showing the same interests at their fair market value. If the skip person received interests in specially valued property that were shown on Schedule R-1, show these interests on the Schedule R, Parts 2 and 3 worksheets, as appropriate. Do not use Schedule R-1 as a worksheet. Completing the Special Use Value Worksheets. On lines 2–4 and 6, enter -0-. Completing the Fair Market Value Worksheets. Lines 2 and 3, fixed taxes and other charges. If valuing the interests at their fair market value (instead of special use value) causes any of these taxes and charges to increase, enter the increased amount (only) on these lines and attach an explanation of the increase. Otherwise, enter -0-. Line 6—GST exemption. If you completed line 10 of Schedule R, Part 1, enter on line 6 the amount shown for the skip person on the line 10 special use allocation schedule you attached to Schedule R. If you did not complete line 10 of Schedule R, Part 1, enter -0- on line 6. Total GST Tax Savings. For each skip person, subtract the tax amount on line 10, Part 2 of the special use value worksheet from the tax amount on line 10, Part 2 of the fair market value worksheet. This difference is the skip person’s total GST tax savings.
Part 1. Type of Election
Estate and GST Tax Elections. If you elect special use valuation for the estate tax, you must also elect special use valuation for the GST tax and vice versa. You must value each specific property interest at the same value for GST tax purposes that you value it at for estate tax purposes. Protective Election. To make the protective election described in the separate instructions for line 2 of Part 3, Elections by the Executor, you must check this box, enter the decedent’s name and social security number in the spaces provided at the top of Schedule A-1, and complete line 1 and column A of lines 3 and 4 of Part 2. For purposes of the protective election, list on line 3 all of the real property that passes to the qualified heirs even though some of the property will be shown on line 2 when the additional notice of election is subsequently filed. You need not complete columns B–D of lines 3 and 4. You need not complete any other line entries on Schedule A-1. Completing Schedule A-1 as described above constitutes a Notice of Protective Election as described in Regulations section 20.2032A-8(b).
Part 3. Agreement to Special Valuation Under Section 2032A
Part 2. Notice of Election
Line 10. Because the special use valuation election creates a potential tax liability for the recapture tax of section 2032A(c), you must list each person who receives an interest in the specially valued property on Schedule A-1. If there are more than eight persons who receive interests, use an additional sheet that follows the format of line 10. In the columns “Fair market value” and “Special use value,” you should enter the total respective values of all the specially valued property interests received by each person.
To compute the additional GST tax due upon disposition (or cessation of qualified use) of the property, each “skip person” (as defined in the instructions to Schedule R) who receives an interest in the specially valued property must know the total GST tax savings on all of the interests in specially valued property received. This GST tax savings is the difference between the total GST tax that was imposed on all of the interests in specially valued property received by the skip person valued at their special use value and the total GST tax that would have been imposed on the same interests received by the skip person had they been valued at their fair market value. Because the GST tax depends on the executor’s allocation of the GST exemption and the grandchild exclusion, the skip person who receives the interests is unable to compute this GST tax savings. Therefore, for each skip person who receives an interest in specially valued property, you must attach worksheets showing the total GST tax savings attributable to all of that person’s interests in specially valued property. How To Compute the GST Tax Savings. Before computing each skip person’s GST tax savings, you must complete Schedules R and R-1 for the entire estate (using the special use values). For each skip person, you must complete two Schedules R (Parts 2 and 3 only) as worksheets, one showing the interests in
Checklist for Section 2032A Election. If you are going to make the special use valuation election on Schedule A-1, please use this checklist to ensure that you are providing everything necessary to make a valid election. To have a valid special use valuation election under section 2032A, you must file, in addition to the Federal estate tax return, (a) a notice of election (Schedule A-1, Part 2), and (b) a fully executed agreement (Schedule A-1, Part 3). You must include certain information in the notice of election. To ensure that the notice of election includes all of the information required for a valid election, use the following checklist. The checklist is for your use only. Do not file it with the return. 1. Does the notice of election include the decedent’s name and social security number as they appear on the estate tax return? 2. Does the notice of election include the relevant qualified use of the property to be specially valued? 3. Does the notice of election describe the items of real property shown on the estate tax return that are to be specially valued and identify the property by the Form 706 schedule and item number? 4. Does the notice of election include the fair market value of the real property to be specially valued and also include its value based on the qualified use (determined without the adjustments provided in section 2032A(b)(3)(B))? 5. Does the notice of election include the adjusted value (as defined in section 2032A(b)(3)(B)) of (a) all real property that both passes from the decedent and is used in a qualified use, without regard to whether it is to be specially valued, and (b) all real property to be specially valued? 6. Does the notice of election include (a) the items of personal property shown on the estate tax return that pass from the decedent to a qualified heir and that are used in qualified use and (b) the total value of such personal property adjusted under section 2032A(b)(3)(B)? 7. Does the notice of election include the adjusted value of the gross estate? (See section 2032A(b)(3)(A).) 8. Does the notice of election include the method used to determine the special use value? 9. Does the notice of election include copies of written appraisals of the fair market value of the real property? 10. Does the notice of election include a statement that the decedent and/or a member of his or her family has owned all of the specially valued property for at
least 5 years of the 8 years immediately preceding the date of the decedent’s death? 11. Does the notice of election include a statement as to whether there were any periods during the 8-year period preceding the decedent’s date of death during which the decedent or a member of his or her family did not (a) own the property to be specially valued, (b) use it in a qualified use, or (c) materially participate in the operation of the farm or other business? (See section 2032A(e)(6).) 12. Does the notice of election include, for each item of specially valued property, the name of every person taking an interest in that item of specially valued property and the following information about each such person: (a) the person’s address, (b) the person’s taxpayer identification number, (c) the person’s relationship to the decedent, and (d) the value of the property interest passing to that person based on both fair market value and qualified use? 13. Does the notice of election include affidavits describing the activities constituting material participation and the identity of the material participants? 14. Does the notice of election include a legal description of each item of specially valued property? (In the case of an election made for qualified woodlands, the information included in the notice of election must include the reason for entitlement to the woodlands election.) Any election made under section 2032A will not be valid unless a properly executed agreement (Schedule A-1, Part 3) is filed with the estate tax return. To ensure that the agreement satisfies the requirements for a valid election, use the following checklist. 1. Has the agreement been signed by each and every qualified heir having an interest in the property being specially valued? 2. Has every qualified heir expressed consent to personal liability under section 2032A(c) in the event of an early disposition or early cessation of qualified use? 3. Is the agreement that is actually signed by the qualified heirs in a form that is binding on all of the qualified heirs having an interest in the specially valued property? 4. Does the agreement designate an agent to act for the parties to the agreement in all dealings with the IRS on matters arising under section 2032A? 5. Has the agreement been signed by the designated agent and does it give the address of the agent?
Form 706 (Rev. 11-01) Decedent’s Social Security Number
Estate of: SCHEDULE A-1—Section 2032A Valuation Part 1. Type of Election (Before making an election, see the checklist on page 7.):
Protective election (Regulations section 20.2032A-8(b)). Complete Part 2, line 1, and column A of lines 3 and 4. (See instructions.) Regular election. Complete all of Part 2 (including line 11, if applicable) and Part 3. (See instructions.)
Note: All real property entered on lines 2 and 3 must also be entered on Schedules A, E, F, G, or H, as applicable. 1 2 Farm used for farming, or Trade or business other than farming Real property used in a qualified use, passing to qualified heirs, and to be specially valued on this Form 706.
Qualified use—check one
11 Woodlands election. Check here if you wish to make a woodlands election as described in section 2032A(e)(13). Enter the Schedule and item numbers from Form 706 of the property for which you are making this election You must attach a statement explaining why you are entitled to make this election. The IRS may issue regulations that require more information to substantiate this election. You will be notified by the IRS if you must supply further information.
being all other parties having interests in the property which is qualified real property and which is valued under section 2032A of the , Internal Revenue Code, do hereby approve of the election made by , Executor/Administrator of the estate of pursuant to section 2032A to value said property on the basis of the qualified use to which the property is devoted and do hereby enter into this agreement pursuant to section 2032A(d). The undersigned agree and consent to the application of subsection (c) of section 2032A of the Code with respect to all the property described on line 2 of Part 2 of Schedule A-1 of Form 706, attached to this agreement. More specifically, the undersigned heirs expressly agree and consent to personal liability under subsection (c) of 2032A for the additional estate and GST taxes imposed by that subsection with respect to their respective interests in the above-described property in the event of certain early dispositions of the property or early cessation of the qualified use of the property. It is understood that if a qualified heir disposes of any interest in qualified real property to any member of his or her family, such member may thereafter be treated as the qualified heir with respect to such interest upon filing a Form 706-A and a new agreement. The undersigned interested parties who are not qualified heirs consent to the collection of any additional estate and GST taxes imposed under section 2032A(c) of the Code from the specially valued property. If there is a disposition of any interest which passes, or has passed to him or her, or if there is a cessation of the qualified use of any specially valued property which passes or passed to him or her, each of the undersigned heirs agrees to file a Form 706-A, United States Additional Estate Tax Return, and pay any additional estate and GST taxes due within 6 months of the disposition or cessation. It is understood by all interested parties that this agreement is a condition precedent to the election of special use valuation under section 2032A of the Code and must be executed by every interested party even though that person may not have received the estate (or GST) tax benefits or be in possession of such property. Each of the undersigned understands that by making this election, a lien will be created and recorded pursuant to section 6324B of the Code on the property referred to in this agreement for the adjusted tax differences with respect to the estate as defined in section 2032A(c)(2)(C). As the interested parties, the undersigned designate the following individual as their agent for all dealings with the Internal Revenue Service concerning the continued qualification of the specially valued property under section 2032A of the Code and on all issues regarding the special lien under section 6324B. The agent is authorized to act for the parties with respect to all dealings with the Service on matters affecting the qualified real property described earlier. This authority includes the following: ● To receive confidential information on all matters relating to continued qualification under section 2032A of the specially valued real property and on all matters relating to the special lien arising under section 6324B. ● To furnish the Internal Revenue Service with any requested information concerning the property. ● To notify the Internal Revenue Service of any disposition or cessation of qualified use of any part of the property. ● To receive, but not to endorse and collect, checks in payment of any refund of Internal Revenue taxes, penalties, or interest. ● To execute waivers (including offers of waivers) of restrictions on assessment or collection of deficiencies in tax and waivers of notice of disallowance of a claim for credit or refund. ● To execute closing agreements under section 7121. (continued on next page)
Part 3. Agreement to Special Valuation Under Section 2032A ( Continued)
● Other acts (specify) By signing this agreement, the agent agrees to provide the Internal Revenue Service with any requested information concerning this property and to notify the Internal Revenue Service of any disposition or cessation of the qualified use of any part of this property.
Item number Description including face amount of bonds or number of shares and par value where needed for identification. Give 9-digit CUSIP number. CUSIP number Unit value Alternate valuation date Alternate value Value at date of death
Total from continuation schedules (or additional sheets) attached to this schedule TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 2.) (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (The instructions to Schedule B are in the separate instructions.) Schedule B—Page 12
Instructions for Schedule C— Mortgages, Notes, and Cash
Complete Schedule C and file it with your return if the total gross estate contains any: ● mortgages, ● notes, or ● cash. List on Schedule C: ● Mortgages and notes payable to the decedent at the time of death. ● Cash the decedent had at the date of death. Do not list on Schedule C: ● Mortgages and notes payable by the decedent. (If these are deductible, list them on Schedule K.) List the items on Schedule C in the following order: ● mortgages, ● promissory notes, ● contracts by decedent to sell land, ● cash in possession, and ● cash in banks, savings and loan associations, and other types of financial organizations. What to enter in the “Description” column: For mortgages, list: ● face value, ● unpaid balance, ● date of mortgage, ● date of maturity, ● name of maker, ● property mortgaged, ● interest dates, and ● interest rate.
Example to enter in “Description” column: “Bond and mortgage of $50,000, unpaid balance: $24,000; dated: January 1, 1983; John Doe to Richard Roe; premises: 22 Clinton Street, Newark, NJ; due: January 1, 2001; interest payable at 10% a year--January 1 and July 1.” For promissory notes, list: ● in the same way as mortgages. For contracts by the decedent to sell land, list: ● name of purchaser, ● contract date, ● property description, ● sale price, ● initial payment, ● amounts of installment payment, ● unpaid balance of principal, and ● interest rate. For cash in possession, list: ● such cash separately from bank deposits. For cash in banks, savings and loan associations, and other types of financial organizations, list: ● name and address of each financial organization, ● amount in each account, ● serial or account number, ● nature of account--checking, savings, time deposit, etc., and ● unpaid interest accrued from date of last interest payment to the date of death. Important: If you obtain statements from the financial organizations, keep them for IRS inspection.
Instructions for Schedule D—Insurance on the Decedent’s Life
If you are required to file Form 706 and there was any insurance on the decedent’s life, whether or not included in the gross estate, you must complete Schedule D and file it with the return. Insurance you must include on Schedule D. Under section 2042 you must include in the gross estate: ● Insurance on the decedent’s life receivable by or for the benefit of the estate; and ● Insurance on the decedent’s life receivable by beneficiaries other than the estate, as described below. The term ‘‘insurance’’ refers to life insurance of every description, including death benefits paid by fraternal beneficiary societies operating under the lodge system, and death benefits paid under no-fault automobile insurance policies if the no-fault insurer was unconditionally bound to pay the benefit in the event of the insured’s death. Insurance in favor of the estate. Include on Schedule D the full amount of the proceeds of insurance on the life of the decedent receivable by the executor or otherwise payable to or for the benefit of the estate. Insurance in favor of the estate includes insurance used to pay the estate tax, and any other taxes, debts, or charges that are enforceable against the estate. The manner in which the policy is drawn is immaterial as long as there is an obligation, legally binding on the beneficiary, to use the proceeds to pay taxes, debts, or charges. You must include the full amount even though the premiums or other consideration may have been paid by a person other than the decedent. Insurance receivable by beneficiaries other than the estate. Include on Schedule D the proceeds of all insurance on the life of the decedent not receivable by or for the benefit of the decedent’s estate if the decedent possessed at death any of the incidents of ownership, exercisable either alone or in conjunction with any person. Incidents of ownership in a policy include: ● The right of the insured or estate to its economic benefits; ● The power to change the beneficiary;
Item number Description For securities, give CUSIP number. Alternate valuation date Alternate value Value at date of death
Enter Item letter for number co-tenant Description (including alternate valuation date if any) For securities, give CUSIP number. Percentage includible Includible alternate value Includible value at date of death
Instructions for Schedule E—Jointly Owned Property
If you are required to file Form 706, you must complete Schedule E and file it with the return if the decedent owned any joint property at the time of death, whether or not the decedent’s interest is includible in the gross estate. Enter on this schedule all property of whatever kind or character, whether real estate, personal property, or bank accounts, in which the decedent held at the time of death an interest either as a joint tenant with right to survivorship or as a tenant by the entirety. Do not list on this schedule property that the decedent held as a tenant in common, but report the value of the interest on Schedule A if real estate, or on the appropriate schedule if personal property. Similarly, community property held by the decedent and spouse should be reported on the appropriate Schedules A through I. The decedent’s interest in a partnership should not be entered on this schedule unless the partnership interest itself is jointly owned. Solely owned partnership interests should be reported on Schedule F, “Other Miscellaneous Property.” Part 1—Qualified joint interests held by decedent and spouse. Under section 2040(b)(2), a joint interest is a qualified joint interest if the decedent and the surviving spouse held the interest as: ● Tenants by the entirety, or ● Joint tenants with right of survivorship if the decedent and the decedent’s spouse are the only joint tenants. Interests that meet either of the two requirements above should be entered in Part 1. Joint interests that do not meet either of the two requirements above should be entered in Part 2. Under “Description,” describe the property as required in the instructions for Schedules A, B, C, and F for the type of property involved. For example, jointly held stocks and bonds should be described using the rules given in the instructions to Schedule B. Under “Alternate value” and “Value at date of death,” enter the full value of the property. Note: You cannot claim the special treatment under section 2040(b) for property held jointly by a decedent and a surviving spouse who is not a U.S. citizen. You must report these joint interests on Part 2 of Schedule E, not Part 1.
Part 2—Other joint interests. All joint interests that were not entered in Part 1 must be entered in Part 2. For each item of property, enter the appropriate letter A, B, C, etc., from line 2a to indicate the name and address of the surviving co-tenant. Under “Description,” describe the property as required in the instructions for Schedules A, B, C, and F for the type of property involved. In the “Percentage includible” column, enter the percentage of the total value of the property that you intend to include in the gross estate. Generally, you must include the full value of the jointly owned property in the gross estate. However, the full value should not be included if you can show that a part of the property originally belonged to the other tenant or tenants and was never received or acquired by the other tenant or tenants from the decedent for less than adequate and full consideration in money or money’s worth, or unless you can show that any part of the property was acquired with consideration originally belonging to the surviving joint tenant or tenants. In this case, you may exclude from the value of the property an amount proportionate to the consideration furnished by the other tenant or tenants. Relinquishing or promising to relinquish dower, curtesy, or statutory estate created instead of dower or curtesy, or other marital rights in the decedent’s property or estate is not consideration in money or money’s worth. See the Schedule A instructions for the value to show for real property that is subject to a mortgage. If the property was acquired by the decedent and another person or persons by gift, bequest, devise, or inheritance as joint tenants, and their interests are not otherwise specified by law, include only that part of the value of the property that is figured by dividing the full value of the property by the number of joint tenants. If you believe that less than the full value of the entire property is includible in the gross estate for tax purposes, you must establish the right to include the smaller value by attaching proof of the extent, origin, and nature of the decedent’s interest and the interest(s) of the decedent’s co-tenant or co-tenants. In the “Includible alternate value” and “Includible value at date of death” columns, you should enter only the values that you believe are includible in the gross estate.
Description For securities, give CUSIP number.
Instructions for Schedule F—Other Miscellaneous Property
You must complete Schedule F and file it with the return. On Schedule F list all items that must be included in the gross estate that are not reported on any other schedule, including: ● Debts due the decedent (other than notes and mortgages included on Schedule C) ● Interests in business ● Insurance on the life of another (obtain and attach Form 712, Life Insurance Statement, for each policy) Note for single premium or paid-up policies: In certain situations, for example where the surrender value of the policy exceeds its replacement cost, the true economic value of the policy will be greater than the amount shown on line 59 of Form 712. In these situations, you should report the full economic value of the policy on Schedule F. See Rev. Rul. 78-137, 1978-1 C.B. 280 for details. ● Section 2044 property (see Decedent Who Was a Surviving Spouse below) ● Claims (including the value of the decedent’s interest in a claim for refund of income taxes or the amount of the refund actually received) ● Rights ● Royalties ● Leaseholds ● Judgments ● Reversionary or remainder interests ● Shares in trust funds (attach a copy of the trust instrument) ● Household goods and personal effects, including wearing apparel ● Farm products and growing crops ● Livestock ● Farm machinery ● Automobiles If the decedent owned any interest in a partnership or unincorporated business, attach a statement of assets and liabilities for the valuation date and for the 5 years before the valuation date. Also attach statements of the net earnings for the same 5 years.
You must account for goodwill in the valuation. In general, furnish the same information and follow the methods used to value close corporations. See the instructions for Schedule B. All partnership interests should be reported on Schedule F unless the partnership interest, itself, is jointly owned. Jointly owned partnership interests should be reported on Schedule E. If real estate is owned by the sole proprietorship, it should be reported on Schedule F and not on Schedule A. Describe the real estate with the same detail required for Schedule A. Line 1. If the decedent owned at the date of death articles with artistic or intrinsic value (e.g., jewelry, furs, silverware, books, statuary, vases, oriental rugs, coin or stamp collections), check the “Yes” box on line 1 and provide full details. If any one article is valued at more than $3,000, or any collection of similar articles is valued at more than $10,000, attach an appraisal by an expert under oath and the required statement regarding the appraiser’s qualifications (see Regulations section 20.2031-6(b)).
If the decedent was a surviving spouse, he or she may have received qualified terminable interest property (QTIP) from the predeceased spouse for which the marital deduction was elected either on the predeceased spouse’s estate tax return or on a gift tax return, Form 709. The election was available for gifts made and decedents dying after December 31, 1981. List such property on Schedule F. If this election was made and the surviving spouse retained his or her interest in the QTIP property at death, the full value of the QTIP property is includible in his or her estate, even though the qualifying income interest terminated at death. It is valued as of the date of the surviving spouse’s death, or alternate valuation date, if applicable. Do not reduce the value by any annual exclusion that may have applied to the transfer creating the interest. The value of such property included in the surviving spouse’s gross estate is treated as passing from the surviving spouse. It therefore qualifies for the charitable and marital deductions on the surviving spouse’s estate tax return if it meets the other requirements for those deductions. For additional details, see Regulations section 20.2044-1.
Gift tax paid by the decedent or the estate for all gifts made by the decedent or his or her spouse within 3 years before the decedent’s death (section 2035(b)) Transfers includible under section 2035(a), 2036, 2037, or 2038:
Note: Generally, no exclusion is allowed for the estates of decedents dying after December 31, 1984 (see page 14 of the instructions).
A Are you excluding from the decedent’s gross estate the value of a lump-sum distribution described in section 2039(f)(2) Yes No (as in effect before its repeal by the Deficit Reduction Act of 1984)? If “Yes,” you must attach the information required by the instructions.
Total funeral expenses B. Administration expenses: 1 2 3 Executors’ commissions—amount estimated/agreed upon/paid. (Strike out the words that do not apply.) Attorney fees—amount estimated/agreed upon/paid. (Strike out the words that do not apply.) Accountant fees—amount estimated/agreed upon/paid. (Strike out the words that do not apply.)
Total miscellaneous expenses from continuation schedules (or additional sheets) attached to this schedule Total miscellaneous expenses TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 13.) (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (See the instructions on the reverse side.)
Instructions for Schedule J—Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims
General. You must complete and file Schedule J if you claim a deduction on item 13 of Part 5, Recapitulation. On Schedule J, itemize funeral expenses and expenses incurred in administering property subject to claims. List the names and addresses of persons to whom the expenses are payable and describe the nature of the expense. Do not list expenses incurred in administering property not subject to claims on this schedule. List them on Schedule L instead. The deduction is limited to the amount paid for these expenses that is allowable under local law but may not exceed: 1. The value of property subject to claims included in the gross estate, plus 2. The amount paid out of property included in the gross estate but not subject to claims. This amount must actually be paid by the due date of the estate tax return. The applicable local law under which the estate is being administered determines which property is and is not subject to claims. If under local law a particular property interest included in the gross estate would bear the burden for the payment of the expenses, then the property is considered property subject to claims. Unlike certain claims against the estate for debts of the decedent (see the instructions for Schedule K in the separate instructions), you cannot deduct expenses incurred in administering property subject to claims on both the estate tax return and the estate’s income tax return. If you choose to deduct them on the estate tax return, you cannot deduct them on a Form 1041 filed for the estate. Funeral expenses are only deductible on the estate tax return. Funeral Expenses. Itemize funeral expenses on line A. Deduct from the expenses any amounts that were reimbursed, such as death benefits payable by the Social Security Administration and the Veterans Administration. Executors’ Commissions. When you file the return, you may deduct commissions that have actually been paid to you or that you expect will be paid. You may not deduct commissions if none will be collected. If the amount of the commissions has not been fixed by decree of the proper court, the deduction will be allowed on the final examination of the return, provided that: ● The Estate and Gift Tax Territory Manager is reasonably satisfied that the commissions claimed will be paid; ● The amount entered as a deduction is within the amount allowable by the laws of the jurisdiction where the estate is being administered; ● It is in accordance with the usually accepted practice in that jurisdiction for estates of similar size and character. If you have not been paid the commissions claimed at the time of the final examination of the return, you must
support the amount you deducted with an affidavit or statement signed under the penalties of perjury that the amount has been agreed upon and will be paid.
You may not deduct a bequest or devise made to you instead of commissions. If, however, the decedent fixed by will the compensation payable to you for services to be rendered in the administration of the estate, you may deduct this amount to the extent it is not more than the compensation allowable by the local law or practice. Do not deduct on this schedule amounts paid as trustees’ commissions whether received by you acting in the capacity of a trustee or by a separate trustee. If such amounts were paid in administering property not subject to claims, deduct them on Schedule L. Note: Executors’ commissions are taxable income to the executors. Therefore, be sure to include them as income on your individual income tax return. Attorney Fees. Enter the amount of attorney fees that have actually been paid or that you reasonably expect to be paid. If on the final examination of the return the fees claimed have not been awarded by the proper court and paid, the deduction will be allowed provided the Estate and Gift Tax Territory Manager is reasonably satisfied that the amount claimed will be paid and that it does not exceed a reasonable payment for the services performed, taking into account the size and character of the estate and the local law and practice. If the fees claimed have not been paid at the time of final examination of the return, the amount deducted must be supported by an affidavit, or statement signed under the penalties of perjury, by the executor or the attorney stating that the amount has been agreed upon and will be paid. Do not deduct attorney fees incidental to litigation incurred by the beneficiaries. These expenses are charged against the beneficiaries personally and are not administration expenses authorized by the Code. Interest Expense. Interest expenses incurred after the decedent’s death are generally allowed as a deduction if they are reasonable, necessary to the administration of the estate, and allowable under local law. Interest incurred as the result of a Federal estate tax deficiency is a deductible administrative expense. Penalties are not deductible even if they are allowable under local law. Note: If you elect to pay the tax in installments under section 6166, you may not deduct the interest payable on the installments. Miscellaneous Expenses. Miscellaneous administration expenses necessarily incurred in preserving and distributing the estate are deductible. These expenses include appraiser’s and accountant’s fees, certain court costs, and costs of storing or maintaining assets of the estate. The expenses of selling assets are deductible only if the sale is necessary to pay the decedent’s debts, the expenses of administration, or taxes, or to preserve the estate or carry out distribution.
Total from continuation schedules (or additional sheets) attached to this schedule TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 14.)
Total from continuation schedules (or additional sheets) attached to this schedule TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 15.) (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) (The instructions to Schedule K are in the separate instructions.) Schedule K—Page 25
Total from continuation schedules (or additional sheets) attached to this schedule TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 18.)
Total from continuation schedules (or additional sheets) attached to this schedule TOTAL. (Also enter on Part 5, Recapitulation, page 3, at item 19.) (If more space is needed, attach the continuation schedule from the end of this package or additional sheets of the same size.) Schedule L—Page 26 (The instructions to Schedule L are in the separate instructions.)
Election To Deduct Qualified Terminable Interest Property Under Section 2056(b)(7). If a trust (or other property) meets the requirements of qualified terminable interest property under section 2056(b)(7), and a. The trust or other property is listed on Schedule M, and b. The value of the trust (or other property) is entered in whole or in part as a deduction on Schedule M, then unless the executor specifically identifies the trust (all or a fractional portion or percentage) or other property to be excluded from the election, the executor shall be deemed to have made an election to have such trust (or other property) treated as qualified terminable interest property under section 2056(b)(7). If less than the entire value of the trust (or other property) that the executor has included in the gross estate is entered as a deduction on Schedule M, the executor shall be considered to have made an election only as to a fraction of the trust (or other property). The numerator of this fraction is equal to the amount of the trust (or other property) deducted on Schedule M. The denominator is equal to the total value of the trust (or other property). Election To Deduct Qualified Domestic Trust Property Under Section 2056A. If a trust meets the requirements of a qualified domestic trust under section 2056A(a) and this return is filed no later than 1 year after the time prescribed by law (including extensions) for filing the return, and a. The entire value of a trust or trust property is listed on Schedule M, and b. The entire value of the trust or trust property is entered as a deduction on Schedule M, then unless the executor specifically identifies the trust to be excluded from the election, the executor shall be deemed to have made an election to have the entire trust treated as qualified domestic trust property.
Did any property pass to the surviving spouse as a result of a qualified disclaimer? If ‘‘Yes,’’ attach a copy of the written disclaimer required by section 2518(b). In what country was the surviving spouse born? What is the surviving spouse’s date of birth? Is the surviving spouse a U.S. citizen? If the surviving spouse is a naturalized citizen, when did the surviving spouse acquire citizenship? If the surviving spouse is not a U.S. citizen, of what country is the surviving spouse a citizen? Election Out of QTIP Treatment of Annuities—Do you elect under section 2056(b)(7)(C)(ii) not to treat as qualified terminable interest property any joint and survivor annuities that are included in the gross estate and would otherwise be treated as qualified terminable interest property under section 2056(b)(7)(C)? (see instructions)
Description of property interests passing to surviving spouse
Total from continuation schedules (or additional sheets) attached to this schedule 4 Total amount of property interests listed on Schedule M 4
5a 5a Federal estate taxes payable out of property interests listed on Schedule M 5b b Other death taxes payable out of property interests listed on Schedule M c Federal and state GST taxes payable out of property interests listed on 5c Schedule M d Add items 5a, b, and c 6 Net amount of property interests listed on Schedule M (subtract 5d from 4). Also enter on Part 5, Recapitulation, page 3, at item 20
Instructions for Schedule M—Bequests, etc., to Surviving Spouse (Marital Deduction)
You must complete Schedule M and file it with the return if you claim a deduction on item 20 of Part 5, Recapitulation. The marital deduction is authorized by section 2056 for certain property interests that pass from the decedent to the surviving spouse. You may claim the deduction only for property interests that are included in the decedent’s gross estate (Schedules A through I ). Note: The marital deduction is generally not allowed if the surviving spouse is not a U.S. citizen. The mar ital deduction is allowed for property passing to such a surviving spouse in a “qualified domestic trust” or if such property is transferred or irrevocably assigned to such a trust before the estate tax retur n is filed. The executor must elect qualified domestic trust status on this retur n. See the instructions that follow, on pages 29–30, for details on the election.
taker in default at the decedent’s nonexercise of a power; 4. As a beneficiary of insurance on the decedent’s life; 5. As the surviving spouse taking under dower or curtesy (or similar statutory interest); and 6. As a transferee of a transfer made by the decedent at any time.
Generally, you may list on Schedule M all property interests that pass from the decedent to the surviving spouse and are included in the gross estate. However, you should not list any “Nondeductible terminable interests” (described below) on Schedule M unless you are making a QTIP election. The property for which you make this election must be included on Schedule M. See “Qualified terminable interest property” on the following page. For the rules on common disaster and survival for a limited period, see section 2056(b)(3). You may list on Schedule M only those interests that the surviving spouse takes: 1. As the decedent’s legatee, devisee, heir, or donee; 2. As the decedent’s surviving tenant by the entirety or joint tenant; 3. As an appointee under the decedent’s exercise of a power or as a
Certain interests in property passing from a decedent to a surviving spouse are referred to as terminable interests. These are interests that will terminate or fail after the passage of time, or on the occurrence or nonoccurrence of some contingency. Examples are: life estates, annuities, estates for terms of years, and patents. The ownership of a bond, note, or other contractual obligation, which when discharged would not have the effect of an annuity for life or for a term, is not considered a terminable interest. Nondeductible terminable interests. A terminable interest is nondeductible, and should not be entered on Schedule M (unless you are making a QTIP election) if:
in the property passing to another person and even if the terminable interest would otherwise have been deductible under the exceptions described below for life estate and life insurance and annuity payments with powers of appointment. For more information, see Regulations sections 20.2056(b)-1(f) and 20.2056(b)-1(g), Example (7). If any property interest passing from the decedent to the surviving spouse may be paid or otherwise satisfied out of any of a group of assets, the value of the property interest is, for the entry on Schedule M, reduced by the value of any asset or assets that, if passing from the decedent to the surviving spouse, would be nondeductible terminable interests. Examples of property interests that may be paid or otherwise satisfied out of any of a group of assets are a bequest of the residue of the decedent’s estate, or of a share of the residue, and a cash legacy payable out of the general estate. Example: A decedent bequeathed $100,000 to the surviving spouse. The general estate includes a term for years (valued at $10,000 in determining the value of the gross estate) in an office building, which interest was retained by the decedent under a deed of the building by gift to a son. Accordingly, the value of the specific bequest entered on Schedule M is $90,000. Life Estate With Power of Appointment in the Surviving Spouse. A property interest, whether or not in trust, will be treated as passing to the surviving spouse, and will not be treated as a nondeductible terminable interest if: (a) the surviving spouse is entitled for life to all of the income from the entire interest; (b) the income is payable annually or at more frequent intervals; (c) the surviving spouse has the power, exercisable in favor of the surviving spouse or the estate of the surviving spouse, to appoint the entire interest; (d) the power is exercisable by the surviving spouse alone and (whether exercisable by will or during life) is exercisable by the surviving spouse in all events; and (e) no part of the entire interest is subject to a power in any other person to appoint any part to any person other than the surviving spouse (or the surviving spouse’s legal representative or relative if the surviving spouse is disabled. See Rev. Rul. 85-35, 1985-1 C.B. 328). If these five conditions are satisfied only for a specific portion of the entire interest, see the section 2056(b) regulations to determine the amount of the marital deduction. Life Insurance, Endowment, or Annuity Payments, With Power of Appointment in Surviving Spouse. A property interest consisting of the entire proceeds under
a life insurance, endowment, or annuity contract is treated as passing from the decedent to the surviving spouse, and will not be treated as a nondeductible terminable interest if: (a) the surviving spouse is entitled to receive the proceeds in installments, or is entitled to interest on them, with all amounts payable during the life of the spouse, payable only to the surviving spouse; (b) the installment or interest payments are payable annually, or more frequently, beginning not later than 13 months after the decedent’s death; (c) the surviving spouse has the power, exercisable in favor of the surviving spouse or of the estate of the surviving spouse, to appoint all amounts payable under the contract; (d) the power is exercisable by the surviving spouse alone and (whether exercisable by will or during life) is exercisable by the surviving spouse in all events; and (e) no part of the amount payable under the contract is subject to a power in any other person to appoint any part to any person other than the surviving spouse. If these five conditions are satisfied only for a specific portion of the proceeds, see the section 2056(b) regulations to determine the amount of the marital deduction. Charitable Remainder Trusts. An interest in a charitable remainder trust will not be treated as a nondeductible terminable interest if: 1. The interest in the trust passes from the decedent to the surviving spouse; and 2. The surviving spouse is the only beneficiary of the trust other than charitable organizations described in section 170(c). A “charitable remainder trust” is either a charitable remainder annuity trust or a charitable remainder unitrust. (See section 664 for descriptions of these trusts.)
unless you file the amended return on or before the due date for filing the original Form 706. The effect of the election is that the property (interest) will be treated as passing to the surviving spouse and will not be treated as a nondeductible terminable interest. All of the other marital deduction requirements must still be satisfied before you may make this election. For example, you may not make this election for property or property interests that are not included in the decedent’s gross estate. Qualified terminable interest property is property (a) that passes from the decedent, and (b) in which the surviving spouse has a qualifying income interest for life. The surviving spouse has a qualifying income interest for life if the surviving spouse is entitled to all of the income from the property payable annually or at more frequent intervals, or has a usufruct interest for life in the property, and during the surviving spouse’s lifetime no person has a power to appoint any part of the property to any person other than the surviving spouse. An annuity is treated as an income interest regardless of whether the property from which the annuity is payable can be separately identified. Amendments to Regulations sections 20.2044-1, 20.2056(b)-7 and 20.2056(b)-10 clarify that an interest in property is eligible for QTIP treatment if the income interest is contingent upon the executor’s election even if that portion of the property for which no election is made will pass to or for the benefit of beneficiaries other than the surviving spouse. The QTIP election may be made for all or any part of qualified terminable interest property. A partial election must relate to a fractional or percentile share of the property so that the elective part will reflect its proportionate share of the increase or decline in the whole of the property when applying sections 2044 or 2519. Thus, if the interest of the surviving spouse in a trust (or other property in which the spouse has a qualified life estate) is qualified terminable interest property, you may make an election for a part of the trust (or other property) only if the election relates to a defined fraction or percentage of the entire trust (or other property). The fraction or percentage may be defined by means of a formula.
The marital deduction is allowed for transfers to a surviving spouse who is not a U.S. citizen only if the property passes to the surviving spouse in a “qualified domestic trust” (QDOT) or if
such property is transferred or irrevocably assigned to a QDOT before the decedent’s estate tax return is filed. A QDOT is any trust: 1. That requires at least one trustee to be either an individual who is a citizen of the United States or a domestic corporation; 2. That requires that no distribution of corpus from the trust can be made unless such a trustee has the right to withhold from the distribution the tax imposed on the QDOT; 3. That meets the requirements of any applicable regulations; and 4. For which the executor has made an election on the estate tax return of the decedent. Note: For trusts created by an instrument executed before November 5, 1990, paragraphs 1 and 2 above will be treated as met if the trust instrument requires that all trustees be individuals who are citizens of the United States or domestic corporations. You make the QDOT election simply by listing the qualified domestic trust or the entire value of the trust property on Schedule M and deducting its value. You are presumed to have made the QDOT election if you list the trust or trust property and deduct its value on Schedule M. Once made, the election is irrevocable. If an election is made to deduct qualified domestic trust property under section 2056A(d), the following information should be provided for each qualified domestic trust on an attachment to this schedule: 1. The name and address of every trustee; 2. A description of each transfer passing from the decedent that is the source of the property to be placed in trust; and 3. The employer identification number (EIN) for the trust. The election must be made for an entire QDOT trust. In listing a trust for which you are making a QDOT election, unless you specifically identify the trust as not subject to the election, the election will be considered made for the entire trust. The determination of whether a trust qualifies as a QDOT will be made as of the date the decedent’s Form 706 is filed. If, however, judicial proceedings are brought before the Form 706’s due date (including extensions) to have the trust revised to meet the QDOT requirements, then the determination will not be made until the court-ordered changes to the trust are made.
If Schedule M includes a bequest of the residue or a part of the residue of the decedent’s estate, attach a copy of the computation showing how the value of the residue was determined. Include a statement showing: ● The value of all property that is included in the decedent’s gross estate (Schedules A through I) but is not a part of the decedent’s probate estate, such as lifetime transfers, jointly owned property that passed to the survivor on decedent’s death, and the insurance payable to specific beneficiaries. ● The values of all specific and general legacies or devises, with reference to the applicable clause or paragraph of the decedent’s will or codicil. (If legacies are made to each member of a class; for example, $1,000 to each of decedent’s employees, only the number in each class and the total value of property received by them need be furnished.) ● The date of birth of all persons, the length of whose lives may affect the value of the residuary interest passing to the surviving spouse. ● Any other important information such as that relating to any claim to any part of the estate not arising under the will. Lines 5a, b, and c—The total of the values listed on Schedule M must be reduced by the amount of the Federal estate tax, the Federal GST tax, and the amount of state or other death and GST taxes paid out of the property interest involved. If you enter an amount for state or other death or GST taxes on lines 5b or 5c, identify the taxes and attach your computation of them. Attachments. If you list property interests passing by the decedent’s will on Schedule M, attach a certified copy of the order admitting the will to probate. If, when you file the return, the court of probate jurisdiction has entered any decree interpreting the will or any of its provisions affecting any of the interests listed on Schedule M, or has entered any order of distribution, attach a copy of the decree or order. In addition, the IRS may request other evidence to support the marital deduction claimed.
4a Federal estate tax payable out of property interests listed above b Other death taxes payable out of property interests listed above c Federal and state GST taxes payable out of property interests listed above d Add items 4a, b, and c 5
Net value of property interests listed above (subtract 4d from 3). Also enter on Part 5, Recapitulation, page 3, at item 21
SCHEDULE Q—Credit for Tax on Prior Transfers Part 1—Transferor Information
A B C Check here if section 2013(f) (special valuation of farm, etc., real property) adjustments to the computation of the credit were made (see page 18 of the instructions).
Part 2—Computation of Credit (see instructions beginning on page 18)
Note: To avoid application of the deemed allocation rules, Form 706 and Schedule R should be filed to allocate the GST exemption to trusts that may later have taxable ter minations or distributions under section 2612 even if the form is not required to be filed to report estate or GST tax. The GST tax is imposed on taxable transfers of interests in property located outside the United States as well as property located inside the United States. See instructions beginning on page 19.
Part 1—GST Exemption Reconciliation (Section 2631) and Section 2652(a)(3) (Special QTIP) Election
You no longer need to check a box to make a section 2652(a)(3) (special QTIP) election. If you list qualifying property in Part 1, line 9, below, you will be considered to have made this election. See page 20 of the separate instructions for details. 1 Maximum allowable GST exemption 2 Total GST exemption allocated by the decedent against decedent’s lifetime transfers 3 Total GST exemption allocated by the executor, using Form 709, against decedent’s lifetime transfers 4 GST exemption allocated on line 6 of Schedule R, Part 2 5 GST exemption allocated on line 6 of Schedule R, Part 3 6 Total GST exemption allocated on line 4 of Schedule(s) R-1 7 Total GST exemption allocated to intervivos transfers and direct skips (add lines 2–6) 8 GST exemption available to allocate to trusts and section 2032A interests (subtract line 7 from line 1) 9 Allocation of GST exemption to trusts (as defined for GST tax purposes):
Part 2—Direct Skips Where the Property Interests Transferred Bear the GST Tax on the Direct Skips
1 Total estate tax values of all property interests listed above 2 Estate taxes, state death taxes, and other charges borne by the property interests listed above 3 GST taxes borne by the property interests listed above but imposed on direct skips other than those shown on this Part 2 (see instructions) 4 Total fixed taxes and other charges (add lines 2 and 3) 5 Total tentative maximum direct skips (subtract line 4 from line 1) 6 GST exemption allocated 7 Subtract line 6 from line 5 8 GST tax due (divide line 7 by 2.818182) 9 Enter the amount from line 8 of Schedule R, Part 3 10 Total GST taxes payable by the estate (add lines 8 and 9). Enter here and on line 22 of Part 2—Tax Computation, on page 1
Part 3—Direct Skips Where the Property Interests Transferred Do Not Bear the GST Tax on the Direct Skips
Part 1—Computation of the GST Tax on the Direct Skip Description of property interests subject to the direct skip Estate tax value
You can pay by check or money order. ● Make it payable to the “United States Treasury.” ● Make the check or money order for the amount on line 6 of Schedule R-1. ● Write “GST Tax” and the trust’s EIN on the check or money order.
SCHEDULE T—Qualified Family-Owned Business Interest Deduction
For details on the deduction, including trades and businesses that do not qualify, see page 22 of the separate Instructions for Form 706.
Part 1—Election
Note: The executor is deemed to have made the election under section 2057 if he or she files Schedule T and deducts any qualifying business interests from the gross estate.
Part 2—General Qualifications
1 2 Yes No Yes No Were there any periods during the 8-year period preceding the date of the decedent’s death during which the decedent or a member of his or her family: a Did not own the business interests listed on this schedule? b Did not materially participate, within the meaning of section 2032A(e)(6), in the operation of the business to which such interests relate? If “Yes” to either of the above, you must attach a statement listing the periods. If applicable, describe whether the exceptions of sections 2032A(b)(4) or (5) are met. Attach affidavits describing the activities constituting material participation and the identity and relationship to the decedent of the material participants. Check the applicable box(es). The qualified family-owned business interest(s) is: An interest as a proprietor in a trade or business carried on as a proprietorship. An interest in an entity, at least 50% of which is owned (directly or indirectly) by the decedent and members of the decedent’s family. An interest in an entity, at least 70% of which is owned (directly or indirectly) by members of 2 families and at least 30% of which is owned (directly or indirectly) by the decedent and members of the decedent’s family. An interest in an entity, at least 90% of which is owned (directly or indirectly) by members of 3 families and at least 30% of which is owned (directly or indirectly) by the decedent and members of the decedent’s family. Persons holding interests. Enter the requested information for each party who received any interest in the family-owned business. If any qualified heir is not a U.S. citizen, see the line 4 instructions beginning on page 23 of the separate instructions. (Each of the qualified heirs receiving an interest in the business must sign the agreement that begins on the following page 40, and the agreement must be filed with this return.) Name A B C D E F G H Identifying number A B C D E F G H Relationship to decedent Value of interest Address Did the decedent and/or a member of the decedent’s family own the business interests listed on line 5 of this schedule for at least 5 of the 8 years immediately preceding the date of the decedent’s death?
Schedule T (Form 706)—Page 38
Part 3—Adjusted Value of Qualified Family-Owned Business Interests
Qualified family-owned business interests reported on this return. Note: All property listed on line 5 must also be entered on Schedules A, B, C, E, F, G, or H, as applicable. A Schedule and item number from Form 706 B Description of business interest and principal place of business C Reported value
Total reported value Amount of claims or mortgages deductible under section 2053(a)(3) or (4) (see separate instructions)
8a Enter the amount of any indebtedness on qualified residence of the decedent (see separate instructions) b Enter the amount of any indebtedness used for educational or medical expenses (see separate instructions)
c Enter the amount of any indebtedness other than that listed on line 8a or 8b, but do not enter more than $10,000 8c (see separate instructions) 8d d Total (add lines 8a through 8c) 9 Subtract line 8d from line 7 10 Adjusted value of qualified family-owned business interests (subtract line 9 from line 6)
Part 4—Qualifying Estate
Includible gifts of qualified family-owned business interests (see separate instructions):
a Amount of gifts taken into account under section 2001(b)(1)(B) b Amount of such gifts excluded under section 2503(b) c Add lines 11a and 11b 12 Add lines 10 and 11c
Adjusted gross estate (see separate instructions): Amount of gross estate Enter the amount from line 7 Subtract line 13b from line 13a Enter the amount from line 11c Enter the amount of transfers, if any, to the decedent’s spouse (see inst.) Enter the amount of other gifts (see inst.) Add the amounts on lines 13d, 13e, and 13f
h Enter any amounts from line 13g that are otherwise includible in the gross 13h estate 13i i Subtract line 13h from line 13g j Adjusted gross estate (add lines 13c and 13i) 14 Enter one-half of the amount on line 13j Note: If line 12 does not exceed line 14, stop here; the estate does not qualify for the deduction. Otherwise, complete line 15.
Net value of qualified family-owned business interests you elect to deduct (line 10 reduced by any marital or other deductions)—DO NOT enter more than $675,000—(see instructions) (attach schedule)—enter here and on Part 5, Recapitulation, page 3, at item 22
Schedule T—Page 39
Part 5—Agreement to Family-Owned Business Interest Deduction Under Section 2057
There cannot be a valid election unless: ● The agreement is executed by each and every one of the qualified heirs, and ● The agreement is included with the estate tax return when the estate tax return is filed. We (list all qualified heirs and other persons having an interest in the business required to sign this agreement) , being all the qualified heirs and , being all other parties having interests in the business(es) which are deducted under section 2057 of the Internal Revenue Code, do hereby approve of the election made by , , Executor/Administrator of the estate of pursuant to section 2057 to deduct said interests from the gross estate and do hereby enter into this agreement pursuant to section 2057(h). The undersigned agree and consent to the application of subsection (f) of section 2057 of the Code with respect to all the qualified family-owned business interests deducted on Schedule T of Form 706, attached to this agreement. More specifically, the undersigned heirs expressly agree and consent to personal liability under subsection (c) of 2032A (as made applicable by section 2057(i)(3)(F) of the Code) for the additional estate tax imposed by that subsection with respect to their respective interests in the above-described business interests in the event of certain early dispositions of the interests or the occurrence of any of the disqualifying acts described in section 2057(f)(1) of the Code. It is understood that if a qualified heir disposes of any deducted interest to any member of his or her family, such member may thereafter be treated as the qualified heir with respect to such interest upon filing a new agreement and any other form required by the Internal Revenue Service. The undersigned interested parties who are not qualified heirs consent to the collection of any additional estate tax imposed under section 2057(f) of the Code from the deducted interests. If there is a disposition of any interest which passes or has passed to him or her, each of the undersigned heirs agrees to file the appropriate form and pay any additional estate tax due within 6 months of the disposition or other disqualifying act. It is understood by all interested parties that this agreement is a condition precedent to the election of the qualified family-owned business deduction under section 2057 of the Code and must be executed by every interested party even though that person may not have received the estate tax benefits or be in possession of such property. Each of the undersigned understands that by making this election, a lien will be created and recorded pursuant to section 6324B of the Code on the interests referred to in this agreement for the applicable percentage of the adjusted tax differences with respect to the estate as defined in section 2057(f)(2)(C). As the interested parties, the undersigned designate the following individual as their agent for all dealings with the Internal Revenue Service concerning the continued qualification of the deducted property under section 2057 of the Code and on all issues regarding the special lien under section 6324B. The agent is authorized to act for all the parties with respect to all dealings with the Service on matters affecting the qualified interests described earlier. This authority includes the following: ● To receive confidential information on all matters relating to continued qualification under section 2057 of the deducted interests and on all matters relating to the special lien arising under section 6324B. ● To furnish the Service with any requested information concerning the interests. ● To notify the Service of any disposition or other disqualifying events specified in section 2057(f)(1) of the Code. ● To receive, but not to endorse and collect, checks in payment of any refund of Internal Revenue taxes, penalties, or interest. ● To execute waivers (including offers of waivers) of restrictions on assessment or collection of deficiencies in tax and waivers of notice of disallowance of a claim for credit or refund. ● To execute closing agreements under section 7121. (continued on next page)
Schedule T, Part 5—Page 40
Part 5. Agreement to Family-Owned Business Interest Deduction Under Section 2057 (continued)
● Other acts (specify) By signing this agreement, the agent agrees to provide the Internal Revenue Service with any requested information concerning the qualified business interests and to notify the Internal Revenue Service of any disposition or other disqualifying events with regard to said interests.
The interests to which this agreement relates are listed in Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, along with their fair market value according to section 2031 (or, if applicable, section 2032A) of the Code. The name, address, social security number, and interest (including the value) of each of the undersigned in this business(es) are as set forth in the attached Schedule T. IN WITNESS WHEREOF, the undersigned have hereunto set their hands at this day of . ,
Signature(s) of other interested parties
Schedule T, Part 5—Page 41
SCHEDULE U. Qualified Conservation Easement Exclusion Part 1—Election
Note: The executor is deemed to have made the election under section 2031(c)(6) if he or she files Schedule U and excludes any qualifying conservation easements from the gross estate.
1 2 3 Describe the land subject to the qualified conservation easement (see separate instructions) Did the decedent or a member of the decedent’s family own the land described above during the 3-year period ending on the date of the decedent’s death?
Describe the conservation easement with regard to which the exclusion is being claimed (see separate instructions).
Part 3—Computation of Exclusion
4 Estate tax value of the land subject to the qualified conservation instructions) 5 Date of death value of any easements granted prior to decedent’s death and included on line 10 below (see instructions) 6 Add lines 4 and 5 7 Value of retained development rights on the land (see instructions) 8 Subtract line 7 from line 6 9 Multiply line 8 by 30% (.30) 10 Value of qualified conservation easement for which the exclusion is being claimed (see instructions) Note: If line 10 is less than line 9, continue with line 11. If line 10 is equal to or more than line 9, skip lines 11 through 13, enter “.40” on line 14, and complete the schedule. 11 Divide line 10 by line 8. Figure to 3 decimal places (e.g., .123) If line 11 is equal to or less than .100, stop here; the estate does not qualify for the conservation easement exclusion. easement (see separate 4 5 6 7 8 9 10
Subtract line 11 from .300. Enter the answer in hundredths by rounding any thousandths up to the next higher hundredth (i.e., .030 = .03; but .031 = .04) 13 Multiply line 12 by 2 14 Subtract line 13 from .40 15 Deduction under section 2055(f) for the conservation easement (see separate instructions) 16 Amount of indebtedness on the land (see separate instructions) 17 Total reductions in value (add lines 7, 15, and 16) 18 Net value of land (subtract line 17 from line 4)
19 Multiply line 18 by line 14 20 Enter the smaller of line 19 or the exclusion limitation (see instructions). Also enter this amount on item 11, Part 5, Recapitulation, Page 3
Schedule U—Page 42
Item number Description For securities, give CUSIP number. (Enter letter of schedule you are continuing.) Unit value Alternate Alternate value (Sch. B, E, or G valuation date only) Value at date of death or amount deductible
Continuation Schedule—Page 43
When you need to list more assets or deductions than you have room for on one of the main schedules, use the Continuation Schedule on page 43. It provides a uniform format for listing additional assets from Schedules A through I and additional deductions from Schedules J, K, L, M, and O. Please keep the following points in mind: ● Use a separate Continuation Schedule for each main schedule you are continuing. Do not combine assets or deductions from different schedules on one Continuation Schedule. ● Make copies of the blank schedule before completing it if you expect to need more than one. ● Use as many Continuation Schedules as needed to list all the assets or deductions. ● Enter the letter of the schedule you are continuing in the space at the top of the Continuation Schedule. ● Use the Unit value column only if continuing Schedule B, E, or G. For all other schedules, use this space to continue the description. ● Carry the total from the Continuation Schedules forward to the appropriate line on the main schedule.
Where on Continuation Schedule Alter nate valuation date Alter nate valuation date Alter nate value Alter nate valuation date and Alter nate value Alter nate valuation date and Alter nate value Amount deductible
Percentage includible Amount unpaid to date Amount in contest Descr iption of deduction continuation Character of institution
Continuation Schedule—Page 44
Internal Revenue Service Cincinnati, OH 45999
Contact Person: Badge Number: Telephone: (Not Toll Free)
● Date: Estate Tax Closing Document (Not a bill for tax due) Executor or POA name ● Address: ● Address: ● City, State, and ZIP: Estate Name: Social Security Number: Date of Death: We have determined the following:
● NET ESTATE TAX: ● STATE DEATH TAX CREDIT: ● GENERATION-SKIPPING TAX:
These figures do not include any interest or penalties that may be charged. Please keep this document in your permanent records. You may need it to complete administration of the estate, such as: close probate proceedings, transfer title to property, and settle state taxes. Keep it with your cancelled check(s) to show that you have met the estate tax obligation. Proof of payment in the amount shown above releases you of personal liability (IRC 2204). If the time for payment is extended under section 6161, 6163 or 6166, personal liability is not released until full payment has been received. We will not reopen this return unless you notify us of changes to the return, or there is evidence of misrepresentation of a material fact, a clearly defined substantial error based upon an established Service position or a serious administrative omission. (See IRC 7121).
● Signature of Authorized Official ● c.c. Power of Attorney
Instructions for Estate Tax Closing Document
We are providing a copy of an Estate Tax Closing Document for your convenience. Completing it should facilitate the processing of the estate tax return. Complete the entries for Executor or POA name and address, the Estate Name, the decedent’s Social Security Number, and the Date of Death, and file the Document with Form 706.
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