United States Estate (and Generation-Skipping Transfer) Tax Return

G. Signature and Verification

If there is more than one executor, all listed executors must verify and 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. If the return is prepared by someone other than the person who is filing the return, the preparer must also sign at the bottom of page 1.

H. Amending Form 706

If you find that you must change something on a return that has already been filed, you should file another Form 706 and write Supplemental Information across the top of page 1 of the form. 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.

I. Supplemental Documents

You must attach the death certificate to the return.

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, 709-A, 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:

1. 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;
2. 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
3. If the decedent died testate, a certified copy of the will.

J. Rounding Off to Whole Dollars

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.

K. Penalties

Late filing and late payment. Section 6651 provides for penalties for both late filing and for late payment unless there is reasonable cause for the delay. The law also provides for penalties for willful attempts to evade payment of tax. The late filing penalty will not be imposed if the taxpayer can show that the failure to file a timely return is due to reasonable cause. Executors filing late (after the due date, including extensions) should attach an explanation to the return to show reasonable cause.

Valuation understatement. Section 6662 provides a 20% penalty for the underpayment of estate tax of $5,000 or more when the underpayment is attributable to valuation understatements. A valuation understatement occurs when the value of property reported on Form 706 is 50% or less of the actual value of the property.

This penalty increases to 40% if there is a gross valuation understatement. A gross valuation understatement occurs if any property on the return is valued at 25% or less of the value determined to be correct.

These penalties also apply to late filing, late payment, and underpayment of GST taxes.

L. Obtaining Forms and Publications To File or Use

Personal computer. You can access the IRS's web site 24 hours a day, 7 days a week at www.irs.gov to:

• Download forms, instructions, and publications.
• See answers to frequently asked tax questions.
• Search publications on-line by topic or keyword.
• Send us comments or request help via e-mail.
• Sign up to receive local and national tax news by e-mail.

You can also reach us using file transfer protocol at ftp.irs.gov.

CD-ROM. Order Pub. 1796, Federal Tax Products on CD-ROM, and get:

• Current year forms, instructions, and publications.
• Prior year forms and instructions and publications.
• Frequently requested tax forms that may be filled in electronically, printed out for submission, and saved for recordkeeping.
• The Internal Revenue Bulletin.

Buy the CD-ROM on the Internet at www.irs.gov/cdorders from the National Technical Information Service (NTIS), or call 1-877-CDFORMS (1-877-233-6767) toll-free to buy the CD-ROM. (Prices may differ at these two locations.)

By phone and in person. You can order forms and publications 24 hours a day, 7 days a week, by calling 1-800-TAX-FORM (1-800-829-3676). You can also get most forms and publications at your local IRS office.

Forms and Publications to file or use.

• Forms: The title for forms to file or use are given within these instructions.
• Publications:
  • Publication 910. Guide to Free Tax Services
  • Publication 559. Survivors, Executors, and Administrators

• You must file the first three pages of Form 706 and all required schedules.
• File Schedules A through I, as appropriate, to support the entries in items 1 through 9 of the Recapitulation.

IF . . .
you enter zero on any item of the Recapitulation,	you need not file the schedule (except for Schedule F) referred to on that item.
you claim an exclusion on item 11,	complete and attach Schedule U.
you claim any deductions on items 13 through 23 of the Recapitulation,	complete and attach the appropriate schedules to support the claimed deductions.
you claim the credits for foreign death taxes or tax on prior transfers,	complete and attach Schedule P or Q.
there is not enough space on a schedule to list all the items,	attach a Continuation Schedule (or additional sheets of the same size) to the back of the schedule;(see the Form 706 package for the Continuation Schedule);photocopy the blank schedule before completing it, if you will need more than one copy.

• Form 706 has 44 numbered pages. The pages are perforated so that you can remove them for copying and filing.
• When you complete the return, staple all the required pages together in the proper order.
• Number the items you list on each schedule, beginning with the number 1 each time.
• Total the items listed on the schedule and its attachments, Continuation Schedules, etc.
• Enter the total of all attachments, Continuation Schedules, etc., at the bottom of the printed schedule, but do not carry the totals forward from one schedule to the next.
• Enter the total, or totals, for each schedule on the Recapitulation, page 3, Form 706.
• Do not complete the Alternate valuation date or Alternate value columns of any schedule unless you elected alternate valuation on line 1 of Part 3, Elections by the Executor.

Instructions for Part 1. Decedent and Executor (Page 1 of Form 706)

Line 2

Enter the social security number assigned specifically to the decedent. You cannot use the social security number assigned to the decedent's spouse. If the decedent did not have a social security number, the executor should obtain one for the decedent by filing Form SS-5, Application for Social Security Card, with a local Social Security Administration office.

Line 6a - Name of Executor

If there is more than one executor, enter the name of the executor to be contacted by the IRS. List the other executors' names, addresses, and SSNs (if applicable) on an attached sheet.

Line 6b - Executor's Address

Use Form 8822, Change of Address, to report a change of the executor's address.

Line 6c - Executor's Social Security Number

Only individual executors should complete this line. If there is more than one individual executor, all should list their social security numbers on an attached sheet.

Instructions for Part 2. Tax Computation (Page 1 of Form 706)

In general, the estate tax is figured by applying the unified rates shown in Table A, on page 12, to the total of transfers both during life and at death, and then subtracting the gift taxes. You must complete the Tax Computation.

Line 1

If you elected alternate valuation on line 1, Part 3, Elections by the Executor, enter the amount you entered in the Alternate value column of item 12 of Part 5, Recapitulation. Otherwise, enter the amount from the Value at date of death column.

Lines 4 and 9

Three worksheets are provided to help you compute the entries for these lines. You need not file these worksheets with your return but should keep them for your records. Worksheet TG - Taxable Gifts Reconciliation, above, allows you to reconcile the decedent's lifetime taxable gifts to compute totals that will be used for the line 4 and line 9 worksheets.

You must get all of the decedent's gift tax returns (Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return) before you complete Worksheet TG. The amounts you will enter on Worksheet TG can usually be derived from these returns as filed. However, if any of the returns were audited by the IRS, you should use the amounts that were finally determined as a result of the audits.

In addition, you must include in column b of Worksheet TG any gifts in excess of the annual exclusion made by the decedent (or on behalf of the decedent under a power of attorney) but for which no Forms 709 were filed. You must make a reasonable inquiry as to the existence of any such gifts. The annual exclusion for 1977 through 1981 was $3,000 per donee per year and $10,000 for years after 1981.

For tax years beginning after 1998 the annual $10,000 exclusion for gifts is indexed for inflation. For calendar year 2001, the annual exclusion for gifts remained at $10,000, however.

Note: In figuring the line 9 amount, do not include any tax paid or payable on gifts made before 1977. The line 9 amount is a hypothetical figure based only on gifts made after 1976 and used to calculate the estate tax.

Special treatment of split gifts. These special rules apply only if:

1. The decedent's spouse predeceased the decedent;
2. The decedent's spouse made gifts that were split with the decedent under the rules of section 2513;
3. The decedent was the consenting spouse for those split gifts, as that term is used on Form 709; and
4. The split gifts were included in the decedent's spouse's gross estate under section 2035.

If all four conditions above are met, do not include these gifts on line 4 of the Tax Computation and do not include the gift taxes payable on these gifts on line 9 of the Tax Computation. These adjustments are incorporated into the worksheets.

Lines 6-9

Section 2201, as amended by the Victims of Terrorism Tax Relief Act of 2001, applies to the estates of individuals who died as the result of wounds or injuries incurred as a result of the terrorist attacks against the United States on April 19, 1995, and September 11, 2001. It also includes the estate of anyone who dies as a result of illness incurred as a result of an attack involving anthrax that occurred on or after September 11, 2001, and before January 1, 2002. If the executor elects to apply revised section 2201 to the estate, complete the return following the general rules except for the following modifications:

1. Write Section 2201 at the top of page 1 of the return.
2. Figure the tax on lines 6 and 9 using the special tax rate schedule which is on page 25 of these instructions.
3. Skip lines 7a-c and enter the amount from line 6 on line 8.

The executor will be considered to have made the election to apply revised section 2201 if the return is completed with these modifications.

Line 7

Lines 7a-c are used to calculate the phaseout of the graduated rates. The phaseout applies only to estates in which the amount the tentative tax is computed on exceeds $10 million.

Line 11 - Unified Credit (Applicable credit amount)

The applicable credit amount (formerly the unified credit) , is $220,550 for the estates of decedents dying in 2001. The amount of the credit cannot exceed the amount of estate tax imposed.

Important: If the estate is claiming a qualified family-owned business interest deduction, see Coordination with unified credit on page 22 before completing line 11.

Line 12 - Adjustment to Unified credit (applicable credit amount)

If the decedent made gifts (including gifts made by the decedent's spouse and treated as made by the decedent by reason of gift splitting) after September 8, 1976, and before January 1, 1977, for which the decedent claimed a specific exemption, the unified credit (applicable credit amount) on this estate tax return must be reduced. The reduction is figured by entering 20% of the specific exemption claimed for these gifts.

Note: (The specific exemption was allowed by section 2521 for gifts made before January 1, 1977.)

If the decedent did not make any gifts between September 8, 1976, and January 1, 1977, or if the decedent made gifts during that period but did not claim the specific exemption, enter zero.

Line 15 - Credit for state death taxes

You may take a credit on line 15 for estate, inheritance, legacy, or succession taxes paid as the result of the decedent's death to any state or the District of Columbia. However, see section 2053(d) and the related regulations for exceptions and limits if you elected to deduct the taxes from the value of the gross estate.

If you make a section 6166 election to pay the Federal estate tax in installments and make a similar election to pay the state death tax in installments, see Rev. Rul. 86-38, 1986-1 C.B. 296, for the method of computing the credit allowed with this Form 706.

If you have elected to extend the time to pay the tax on a reversionary or remainder interest, you may take a credit against that portion of the Federal estate tax for state death taxes attributable to the reversionary or remainder interest. The state death taxes must be paid and claimed before the expiration of the extended time for paying the estate tax.

The credit may not be more than the amount figured by using Table B, on page 12, based on the value of the adjusted taxable estate. The adjusted taxable estate is the amount of the Federal taxable estate (line 3 of the Tax Computation) reduced by $60,000. You may claim an anticipated amount of credit and figure the Federal estate tax on the return before the state death taxes have been paid. However, the credit cannot be finally allowed unless you pay the state death taxes and claim the credit within 4 years after the return is filed (or later as provided by the Code if a petition is filed with the Tax Court of the United States, or if you have an extension of time to pay) and submit evidence that the tax has been paid. If you claim the credit for any state death tax that is later recovered, see Regulations section 20.2016-1 for the notice you are required to give the IRS within 30 days.

If you transfer property other than cash to the state in payment of state inheritance taxes, the amount you may claim as a credit is the lesser of the state inheritance tax liability discharged or the fair market value of the property on the date of the transfer.

For more details, see Rev. Rul. 86-117, 1986-2 C.B. 157.

You should send the following evidence to the IRS:

1. Certificate of the proper officer of the taxing state, or the District of Columbia, showing the:
   1. total amount of tax imposed (before adding interest and penalties and before allowing discount);
   2. amount of discount allowed;
   3. amount of penalties and interest imposed or charged;
   4. total amount actually paid in cash; and
   5. date of payment.
2. Any additional proof the IRS specifically requests.

   You should file the evidence requested above with the return if possible. Otherwise, send it as soon after you file the return as possible.

Worksheet TG

Line 17 - Credit for Federal Gift Taxes

You may take a credit for Federal gift taxes imposed by Chapter 12 of the Code, and the corresponding provisions of prior laws, on certain transfers the decedent made before January 1, 1977, that are included in the gross estate. The credit cannot be more than the amount figured by the following formula:

For more information, see the regulations under section 2012. This computation may be made using Form 4808, Computation of Credit for Gift Tax. Attach a copy of a completed Form 4808 or the computation of the credit. Also attach all available copies of Forms 709 filed by the decedent to help verify the amounts entered on lines 4, 9, and 17. You can get Form 4808 on the internet at www.irs.gov.

Line 25 - United States Treasury Bonds

You may not use these bonds to pay the GST tax.

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