Prior Revisions of Form 706

For Decedents Dying and		Use Revision of Form 706 Dated
After	Before
........................	January 1, 1982	November 1981
December 31, 1981	October 23, 1986	November 1987
December 31, 1989	October 9, 1990	October 1988
October 8, 1990	January 1, 1998	April 1997
December 31, 1997	January 1, 1999	July 1998
December 31, 1998	January 1, 2001	July 1999

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General Instructions

Changes To Note

• Use this revision of Form 706 only for the estates of decedents dying in calendar year 2001.
• Except for the returns of nonresident U.S. citizens, all estate tax returns should be filed at the Cincinnati Service Center. See Where To File on page 2.
• Various dollar amounts and limitations relevant to Form 706 are indexed for inflation. For decedents dying in 2001, the following amounts have increased:
  • · the ceiling on special use valuation is $800,000;
  • · the generation-skipping transfer tax exemption is $1,060,000; and
  • · the amount used in computing the 2% portion of estate tax payable in installments is $1,060,000.

  The IRS will publish amounts for future years in an annual revenue procedure.

• To expedite closing the estate, a copy of the Estate Tax Closing Document is included in the back of the form package. See the instructions on the reverse side of the Closing Document.
• The Victims of Terrorism Tax Relief Act of 2001 provides special treatment for the estates of decedents who died as the result of certain terrorist acts. See the instructions for Lines 6-9 on page 5 for more information.
• The qualified conservation easement exclusion has been expanded to include all land in the United States and its possessions, and the amount of the exclusion for the estates of decedents dying in 2001 is $400,000.

A. Purpose of Form

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).

B. Which Estates Must File

For decedents dying in 2001, 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 $675,000.

To determine whether you must file a return for the estate, add:

1. The adjusted taxable gifts (under section 2001(b)) made by the decedent after December 31, 1976;
2. 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
3. The decedent's gross estate valued at the date of death.

Gross Estate

The gross estate includes all property in which the decedent had an interest (including real property outside the United States). It also includes:

• Certain transfers made during the decedent's life without an adequate and full consideration in money or money's worth;
• Annuities;
• The includible portion of joint estates with right of survivorship (see the instructions on the back of Schedule E);
• The includible portion of tenancies by the entirety (see the instructions on the back of Schedule E);
• Certain life insurance proceeds (even though payable to beneficiaries other than the estate) (see the instructions on the back of Schedule D);
• Property over which the decedent possessed a general power of appointment;
• Dower or curtesy (or statutory estate) of the surviving spouse;
• 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.

U. S. Citizens or Residents; Nonresident Noncitizens

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).

Residents of U. S. Possessions

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.

C. Executor

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.

D. When To File

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 extension of time to file. If you received an extension, attach a copy of it to Form 706.

Private delivery services. You can use certain private delivery services designated by the IRS to meet the timely mailing as timely filing/paying rule for tax returns and payments. The most recent list of designated private delivery services was published by the IRS in October 2001. The list includes only the following:

• Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, Second Day Service.
• DHL Worldwide Express (DHL): DHL Same Day Service, DHL USA Overnight.
• Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2 Day.
• United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M, UPS Worldwide Express Plus, and UPS Worldwide Express.

The private delivery service can tell you how to get written proof of the mailing date.

E. Where To File

Note: Except for foreign returns filed in Philadelphia, the processing of all Forms 706 (and all other estate and gift tax forms) has been centralized at the Cincinnati Service Center.

Except for nonresident U.S. citizens, file all Forms 706 at the Cincinnati Service Center, regardless of the domicile of the decedent. Use one of the following addresses:

• For U.S. Postal Service: Internal Revenue Service Center Cincinnati, OH 45999
• For private delivery services: Internal Revenue Service Center 201 W. Rivercenter Blvd. Covington, KY 41019

Continue to file returns for the estates of nonresident U.S. citizens with the Internal Revenue Service Center, Philadelphia, PA 19255, USA.

F. Paying the Tax

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 properly elected 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 IRS or redeemed certain marketable United States Treasury bonds to pay the estate tax (see the last paragraph of the instructions to Schedule B), attach a statement to Form 706 including these facts. If an extension of time to pay has been granted, attach a copy of the approved Form 4768 to Form 706.

Paying by check. Make the check payable to the United States Treasury. Please write the decedent's name, social security number, and Form 706 on the check to assist us in posting it to the proper account.

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