706 Estate Tax

November 27, 2009 – 2:25 pm

Frequently Asked Questions

Q: What is the due date for filing Form 706, and can I file an extension?
A: The due date for Form 706 is nine months after the date of death. An automatic six-month extension can be granted by filing Form 4768. The IRS releases the current year forms in September. The 706 system is the only system to have a complete set of forms for two years, so the death date is required to determine which forms need to be filed.

Q: Why aren’t any forms appearing when I review the return?
A: This usually occurs when the date of death has not been entered on the return. This is a required field.

Q: What are the supporting schedules for Form 706?
A: Review the summary at the bottom of Form 706 (Recapitulation), page 3 for a list of the schedules.

Information to Note
• On January 1, 2008, the estate and gift tax treaty between the US and Sweden was terminated, therefore, Sweden has been deleted from the countries and Credit Under Treaties (Schedule P).

• Form 706 cannot be updated as it is only filed after death.

• Form 706 comprises mostly input grids.

• Assets and property are entered on Schedules A through I.

• Items carry to Schedule M from the asset schedules.

• The Alternate value date for the 2032 election on Form 706, page 2 is automated to six months after the date of death, unless overridden by an earlier date.

• Items from Schedules A, E, F, G, or H can be carried to Schedule A-1, 2032A property election.
a. All heirs must sign and agree to the special use valuation on page 4.
b. A reduction in value cannot exceed $960,000.
c. 25% of the gross estate must be 2032A real property.
d. 50% of the estate must be real or personal 2032A property.

• The 2032 and 2032A elections may be made together or separately.

• The Marital Deduction is automatically calculated on Schedule M.
a. Schedule M can be completed directly in the To Surviving Spouse grid.
b. No values will carry from the other schedules.
c. Additional information must be entered manually.

• Distributions to beneficiaries of the estate are entered on Schedule M, page 2, line 5.
a. Specific bequests may be entered separately, but cannot exceed the remainder.
b. The remainder of the estate can be distributed as a fraction, percentage, or amount.
c. The last heir receives any remainder.

• The Unified Credit is $780,800 for 2008, which is equivalent to sheltering $2,000,000 of the taxable estate.

• The amount used in computing the 2% portion of estate tax payable in installments is $1,280,000.

• The Generation-Skipping Transfer Tax (GST) exclusion is $2,000,000 in 2007.

• The GST Tax maximum rate has decreased to 45%.

• The Credit for State Death Taxes was repealed in 2005. There is now a State Death Tax Deduction.

• Schedules P, Q, R, and R-1 are not listed in the Recapitulation.
a. Schedule P is used to report foreign death taxes and any credits.
b. Schedule Q is used to calculate credits from taxes paid on prior transfers within ten years, prorated for the time since the transfer. The maximum is three entries in TaxWorks 2007.
c. Schedules R and R-1 are used to calculate GST taxes.

• Schedule U is

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