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The executor of a decedent's estate uses Form 706 to figure the estate tax imposed by Chapter 11 of the Internal Revenue Code. This tax is levied on the entire taxable estate, not just on the share received by a particular beneficiary. Form 706 is also used to compute the generation-skipping transfer (GST) tax imposed by Chapter 13 on direct skips (transfers to skip persons of interests in property included in the decedent's gross estate).
For decedents dying in 2008, Form 706 must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $2,000,000.
To determine whether you must file a return for the estate, add:
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The adjusted taxable gifts (under section 2001(b)) made by the decedent after December 31, 1976;
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The total specific exemption allowed under section 2521 (as in effect before its repeal by the Tax Reform Act of 1976) for gifts made by the decedent after September 8, 1976; and
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The decedent's gross estate valued at the date of death.
The gross estate includes all property in which the decedent had an interest (including real property outside the United States). It also includes:
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Certain transfers made during the decedent's life without an adequate and full consideration in money or money's worth,
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Annuities,
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The includible portion of joint estates with right of survivorship (see the instructions on the back of Schedule E),
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The includible portion of tenancies by the entirety (see the instructions on the back of Schedule E),
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Certain life insurance proceeds (even though payable to beneficiaries other than the estate) (see the instructions on the back of Schedule D),
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Property over which the decedent possessed a general power of appointment,
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Dower or curtesy (or statutory estate) of the surviving spouse, and
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Community property to the extent of the decedent's interest as defined by applicable law.
For more specific information, see the instructions for Schedules A through I.
File Form 706 for the estates of decedents who were either U.S. citizens or U.S. residents at the time of death. For estate tax purposes, a resident is someone who had a domicile in the United States at the time of death. A person acquires a domicile by living in a place for even a brief period of time, as long as the person had no intention of moving from that place.
File Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States, for the estates of nonresident alien decedents (decedents who were neither U.S. citizens nor residents at the time of death).
All references to citizens of the United States are subject to the provisions of sections 2208 and 2209, relating to decedents who were U.S. citizens and residents of a U.S. possession on the date of death. If such a decedent became a U.S. citizen only because of his or her connection with a possession, then the decedent is considered a nonresident alien decedent for estate tax purposes, and you should file Form 706-NA. If such a decedent became a U.S. citizen wholly independently of his or her connection with a possession, then the decedent is considered a U.S. citizen for estate tax purposes, and you should file Form 706.
The term “executor” means the executor, personal representative, or administrator of the decedent's estate. If none of these is appointed, qualified, and acting in the United States, every person in actual or constructive possession of any property of the decedent is considered an executor and must file a return.
You must file Form 706 to report estate and/or generation-skipping transfer tax within 9 months after the date of the decedent's death unless you receive an extension of time to file. 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 6-month extension of time to file.
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File Form 706 at the following address:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999
The estate and GST taxes are due within 9 months after the date of the decedent's death unless an extension of time for payment has been granted, or unless you have been granted an election under section 6166 to pay in installments, or under section 6163 to postpone the part of the tax attributable to a reversionary or remainder interest. These elections are made by checking lines 3 and 4 (respectively) of Part 3—Elections by the Executor, and attaching the required statements.
If the tax paid with the return is different from the balance due as figured on the return, explain the difference in an attached statement. If you have made prior payments to the IRS, attach a statement to Form 706 including these facts.
If there is more than one executor, all listed executors are responsible for the return. However, it is sufficient for only one of the co-executors to sign the return.
All executors are responsible for the return as filed and are liable for penalties provided for erroneous or false returns.
If two or more persons are liable for filing the return, they should all join together in filing one complete return. However, if they are unable to join in making one complete return, each is required to file a return disclosing all the information the person has in the case, including the name of every person holding an interest in the property and a full description of the property. If the appointed, qualified, and acting executor is unable to make a complete return, then every person holding an interest in the property must, on notice from the IRS, make a return regarding that interest.
The executor who files the return must, in every case, sign the declaration on page 1 under penalties of perjury.
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 executor.
Note.
A paid preparer may sign original or amended returns by rubber stamp, mechanical device, or computer software program.
If you find that you must change something on a return that has already been filed, you should:
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File another Form 706;
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Enter “Supplemental Information” across the top of page 1 of the form; and
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Attach a copy of pages 1, 2, and 3 of the original Form 706 that has already been filed.
If you have already been notified that the return has been selected for examination, you should provide the additional information directly to the office conducting the examination.
If the decedent was a citizen or resident and died testate, attach a certified copy of the will to the return. If you cannot obtain a certified copy, attach a copy of the will and an explanation of why it is not certified. Other supplemental documents may be required as explained below. Examples include Forms 712, 709, and 706-CE, trust and power of appointment instruments, death certificate, and state certification of payment of death taxes. If you do not file these documents with the return, the processing of the return will be delayed.
If the decedent was a U.S. citizen but not a resident of the United States, you must attach the following documents to the return:
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A copy of the inventory of property and the schedule of liabilities, claims against the estate, and expenses of administration filed with the foreign court of probate jurisdiction, certified by a proper official of the court;
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A copy of the return filed under the foreign inheritance, estate, legacy, succession tax, or other death tax act, certified by a proper official of the foreign tax department, if the estate is subject to such a foreign tax; and
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If the decedent died testate, a certified copy of the will.
You may show the money items on the return and accompanying schedules as whole-dollar amounts. To do so, drop any amount less than 50 cents and increase any amount from 50 cents through 99 cents to the next higher dollar.
payment is attributable to valuation understatements. A valuation understatement occurs when the value of property reported on Form 706 is 65% or less of the actual value of the property. This penalty increases to 40% if there is a gross valuation under-
statement. A gross valuation under-
statement occurs if any property on the return is valued at 40% or less of the value determined to be correct.
These penalties also apply to late filing, late payment, and underpayment of GST taxes.
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