Instructions for Form 706-QDT |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Part I. General Information
Line 1b.
Enter the taxpayer identification number (TIN) of the surviving spouse. The TIN is the social security number (SSN)
or individual taxpayer
identification number (ITIN).
Lines 2a, b, and c.
If the trustee is filing the entire return, enter the trustee's information on lines 2a, b,
and c.
Line 2b.
If the trustee/designated filer is an individual, enter his or her social security number (SSN). Otherwise, enter
the employer identification
number (EIN) of the trustee/designated filer.
Line 2c.
Enter the address at which you wish to receive correspondence from the IRS regarding this return. This must be an
address for the designated filer,
or if the trustee is filing the return, one of the individual trustees who is a U.S. citizen or a trustee that is a domestic
corporation.
Line 4a.
Enter the name of the decedent on whose estate tax return the QDOT election was made.
Line 4b.
Enter the SSN of the decedent or, if applicable, the number previously assigned to the decedent's estate by the service center.
Part II. Elections by the Trustee/Designated Filer
If this return is being filed because of the death of the surviving spouse, and any property remaining in the QDOT at that
time is includible in
the estate of the surviving spouse (or would be includible if the surviving spouse had been a U.S. citizen or resident), then
the trustee/designated
filer may elect to apply certain estate tax benefits on this return, provided the estate of the surviving spouse would be
eligible for these benefits.
Line 1. Alternate Valuation
Unless you elect at the time you file this return to adopt alternate valuation under section 2032, then you must value all
property of all trusts
listed in Part III of Schedule A on the date of the surviving spouse's death.
Note:
You may not elect alternate valuation for any property reported in Parts I and II of Schedule A.
You may not elect alternate valuation unless the election will decrease both the value of the Part III, Schedule A, property
and the net tax due on
the return.
A designated filer filing for multiple trusts must make this election for all of the Part III, Schedule A, property in all
of the trusts, taken as
a whole. The election cannot be made unless the requirements are met for all of the property.
You elect alternate valuation by checking “Yes” on line 1 and filing Form 706-QDT. Once made, the election may not be revoked.
If you elect alternate valuation, you must value all of the property to which the election applies as of the applicable date
as follows:
-
Any property distributed, sold, exchanged, or otherwise disposed of by any method within 6 months after the surviving spouse's
death is
valued on the date of distribution, sale, exchange, or other disposition, whichever occurs first. Value the property on the
date title passes as a
result of the sale, exchange, or other disposition.
-
Any property not distributed, sold, exchanged, or otherwise disposed of within the 6-month period is valued on the date 6
months after the
date of the surviving spouse's death.
-
Any property that is “affected by mere lapse of time” is valued as of the date of the surviving spouse's death. However, you may change
the date of death value to account for any change in value that is not due to “mere lapse of time” on the date of its distribution, sale,
exchange, or other disposition.
For additional details, see Instructions for Part 3. Elections by the Executor in the separate Instructions for Form 706.
Line 2. Special Use Valuation of Section 2032A
Under section 2032A, you may elect to value certain farm and closely held business real property at its farm or business use
value rather than its
fair market value. You may elect both special use valuation and alternate valuation. To elect this valuation, you must check
“Yes” to line 2 and
complete and attach Schedule A-1 of Form 706 and its required additional statements. You must file Schedule A-1 of Form 706 and its required
attachments with Form 706-QDT for this election to be valid.
The total value of the property valued under section 2032A may not be decreased from fair market value by more than $820,000
for decedents dying in
2002. For future years, the IRS will publish the amount in an annual revenue procedure.
Real property may qualify for the section 2032A election if:
-
The real property is located in the United States;
-
The real property is used for farming or in a trade or business;
-
The real property was acquired from or passed from the surviving spouse to a qualified heir of the surviving spouse;
-
The real property was owned and used in a qualified manner by the surviving spouse or a member of the surviving spouse's family
for 5 of the
8 years before the surviving spouse's death; and
-
The qualified property is the percentage of the surviving spouse's gross estate specified in section 2032A.
For definitions and additional information, see section 2032A and the related regulations and the Form 706 instructions for
Elections by the
Executor and Schedule A-1.
Line 3. Installment Payments
If you check this line to make a protective election, you should attach a notice of protective election as described in Regulations
section
20.6166-1(d). If you check this line to make a final election, you should attach the notice of election described in Regulations
section 20.6166-1(b).
In computing the adjusted gross estate under section 6166(b)(6) for purposes of determining whether an election may be made
under section 6166, the
net amount of any real estate in a closely held business must be used.
If the surviving spouse has become a U.S. citizen, the QDOT tax will not apply to any distributions made after the surviving
spouse became a
citizen as long as either:
-
The surviving spouse had been a U.S. resident at all times after the death of the decedent and before becoming a citizen;
or
-
No QDOT tax had been imposed on any distributions prior to the surviving spouse becoming a citizen.
You should file a final Form 706-QDT to notify the IRS that the QDOT tax no longer applies for this reason.
If the surviving spouse does not meet either of the conditions above, the QDOT tax will still not apply to distributions after
he or she became a
citizen if the surviving spouse elects both:
-
To treat any distributions that were subject to QDOT tax as taxable gifts for purposes of determining the estate or gift tax
under sections
2001 and 2501, respectively, for the year the surviving spouse became a citizen and all subsequent years; and
-
To treat any of the decedent's unified credit (applicable credit amount) that was used to reduce the QDOT tax on taxable distributions
as
use of the surviving spouse's own unified credit for purposes of determining the spouse's available unified credit under section
2505 for the year he
or she became a citizen and for all subsequent years.
To make these elections, check the “Yes” box on line 4.
Part I. General Information
If the trustee is filing the entire return, you need to complete only lines 1a and 1b of this part of Schedule B (but all
of Parts II through VI).
When completing Part I on page 1, enter the remaining trustee's information on lines 2a, b, and c.
Line 1b.
All trusts filing Form 706-QDT must have an EIN. A trust that does not have an EIN should apply for one on Form SS-4, Application for
Employer Identification Number. You can get Form SS-4, and other IRS tax forms and publications, by calling 1-800-TAX-FORM
(1-800-829-3676) or by
accessing the IRS Web Site at www.irs.gov. Send the completed Form SS-4 to the same Internal Revenue Service Center where Form 706-QDT will
be filed. If the EIN has not been received by the filing time for Form 706-QDT, write “ Applied for” on line 1b.
Line 2a.
You must enter on this line either the name of an individual trustee who is a U.S. citizen or a trustee that is a
domestic corporation. If there is
more than one trustee, enter the one to be contacted by the IRS. List the names of all additional trustees on a sheet of paper
attached to this
return. Include the SSN or EIN of all U.S. citizens or domestic corporations.
Line 2b.
Enter the SSN or EIN, as applicable, of the trustee listed on line 2a.
Part II. Taxable Distributions From Prior Years
Enter here the total of all taxable distributions that were or should have been reported on previously filed Forms 706-QDT.
Part III. Current Taxable Distributions
Enter here the total amount of corpus distributed during the calendar year or other period covered by this return and before
the date of death of
the surviving spouse. Include as a distribution on this line any QDOT estate tax paid during the calendar year out of the
QDOT. Include all
distributions even if the hardship exemption is being claimed.
Also include as distributions in this part any reportable payments to the surviving spouse from nonassignable annuities and
other arrangements when
the executor has filed with the estate tax return for the decedent's estate an agreement to pay section 2056A estate tax on
such distributions. For
details, see Regulations section 20.2056A-4(c).
The date of distribution is the date on which the title to the distributed property passed from the trustee to the surviving
spouse.
Include in the description the name of the individual(s) to whom the distribution was made.
Real estate.
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 location and, if the parcel is improved, describe the improvements. For city or town property, report the street number,
ward, subdivision, block
and lot, etc. For rural property, report the township, range, landmarks, etc.
Stocks and bonds.
For stocks indicate:
|
Number of shares |
|
Whether common or preferred |
|
Issue |
|
Par value where needed for valuation |
|
Price per share |
|
Exact name of corporation |
|
Principal exchange upon which sold, if listed on an exchange |
|
CUSIP number. |
For bonds indicate:
|
Quantity and denomination |
|
Name of obligor |
|
Date of maturity |
|
Interest rate |
|
Interest due date |
|
Principal exchange if listed on an exchange |
|
CUSIP number. |
If the stock or bond is unlisted, show the company's principal business office.
The CUSIP (Committee on Uniform Security Identification Procedure) number is a nine-digit number that is assigned
to all stocks and bonds traded on
major exchanges and many unlisted securities. Usually the CUSIP number is printed on the face of the stock certificate. If
the CUSIP number is not
printed on the certificate, it may be obtained through the company's transfer agent.
Other personal property.
Any personal property distributed must be described in enough detail that its value can be ascertained by the IRS.
The value of a distribution is its fair market value on the date of distribution. Fair market value is the price at which
the property would change
hands between a willing buyer and a willing seller, when neither is forced to buy or to sell, and both have reasonable knowledge
of all the relevant
facts. Fair market value may not be determined by a forced sale price, nor by the sale price of the item in a market other
than that in which the item
is most commonly sold to the public. The location of the item must be taken into account whenever relevant.
Stocks and bonds.
The fair market value of a stock or bond (whether listed or unlisted) is the mean between the highest and lowest selling
prices quoted on the
valuation date. If only the closing selling prices are available, then the fair market value is the mean between the quoted
closing selling price on
the valuation date and on the trading day before the valuation date. To figure the fair market value if there were no sales
on the valuation date:
-
Find the mean between the highest and lowest selling prices on the nearest trading day before and the nearest trading day
after the
valuation date. Both trading days must be reasonably close to the valuation date.
-
Prorate the difference between the mean prices to the valuation date.
-
Add or subtract (whichever applies).
See the instructions for Schedule B of Form 706 for additional information on valuing stocks and bonds.
Distributions to the surviving spouse on account of hardship are exempt from the QDOT tax. Enter in column (d) the amount
of any distribution for
which the hardship exemption is being claimed. Do not enter any amount here that has not been included in the amount listed in column (c).
Also, if the surviving spouse is the beneficiary of more than one QDOT, you may not claim the hardship exemption unless the
decedent's executor
selected a designated filer as explained on
page 1.
Part IV. Taxable Property in Trust at Death of Surviving Spouse
You must report in Part IV all property remaining in the QDOT on the date of death of the surviving spouse (or the date the
trust failed to qualify
as a QDOT, if applicable). This includes both corpus and undistributed income.
Interest accrued to the date of the surviving spouse's death on bonds, notes, and other interest bearing obligations is property
of the QDOT on the
date of death. Rent accrued to the date of the surviving spouse's death on leased real and personal property is property of
the QDOT on the date of
death.
Outstanding dividends that were declared to stockholders of record on or before the date of the surviving spouse's death are
considered property of
the QDOT on the date of death. Ordinary dividends declared to stockholders of record after the date of the surviving spouse's
death are not property
of the QDOT on the date of death. However, if you have elected alternate valuation on line 1 of Part II, page 1, and dividends
are declared to
stockholders of record after the date of the surviving spouse's death so that the shares of stock at the later valuation date
do not reasonably
represent the same property at the date of the surviving spouse's death, include those dividends (except dividends paid from
earnings of the
corporation after the date of the surviving spouse's death) in the alternate valuation.
If there is not enough space to list all of the property, attach additional sheets of the same size, using the same format
as Part IV.
Assign a separate item number to each separate type of property. For example, you can include under a single item number all
stock of the same
issuer and type, but must list separate types (e.g., preferred and common) under separate item numbers.
See the instructions for column (b), Part III, on page 4.
If this return involves only one trust, enter the alternate valuation date only if you answered “Yes” to question 1 of Elections by the
Trustee/Designated Filer.
If the designated filer is filing this return for multiple trusts, the individual trustees will complete Part IV, but only
the designated filer can
elect alternate valuation. To allow the designated filer to make this decision, the trustee must provide on an attachment
to Schedule B both the
regular and the alternate value (and the alternate valuation date) for all assets, unless the designated filer has notified
the trustee that this is
not required.
See the instructions for column (c), Part III, on this page.
Parts V and VI. Marital and Charitable Deductions
Marital and charitable deductions are allowable for any property that both remained in the QDOT on the date of the surviving
spouse's death and was
includible in the gross estate of the surviving spouse (or would have been includible if the surviving spouse had been a U.S.
citizen or resident).
Do not make an entry in Parts V and VI unless there is an entry in Part IV of Schedule B. Also, the sum of the total of the
amounts entered in
Parts V and VI cannot exceed the total of the amount entered in Part IV of
Schedule B.
For details on the marital and charitable deductions, see the instructions for Schedule M and Schedule O of Form 706, as applicable.
When a designated filer is filing Form 706-QDT for more than one trust, use Schedule A to summarize the Schedule B amounts provided by
the trustees. Under “EIN of QDOT” enter the EIN of the appropriate trust. If the trustee is filing the return, simply transfer the
totals from Schedule B to the corresponding “Total” lines on
Schedule A.
Part III. Tax Computation
(Page 1)
Enter the amount of the taxable estate from line 3, Part 2, Tax Computation, of the Form 706 (or line 1, Part II, of Form
706-NA) filed for the
decedent's estate or as finally determined by the IRS.
Using the same revision of Form 706 or Form 706-NA on which the executor filed the decedent's estate tax return, recompute
the decedent's net
estate tax by substituting as instructed the amounts on line 9 and line 8 of this Form 706-QDT for the decedent's taxable
estate (Form 706, line 3,
Part 2, Tax Computation; or line 1, Part II of Form 706-NA).
Prior year versions of Forms 706 and 706-NA can be obtained by calling 1-800-TAX-FORM (1-800-829-3676) or by accessing the
IRS Web Site at
www.irs.gov.
Note that as a result of the recomputation, some items other than the taxable estate might be different from what was on the
decedent's actual
estate tax return. If the decedent's estate did not fully use its unified credit, additional unified credit may be allowable
in the recomputation.
Also, if the decedent's estate claimed a credit for tax on prior transfers and the credit was limited by section 2013(c),
the recomputed credit may
be different than on the return as filed.
Also, if the decedent's estate claimed a credit for state or foreign death taxes and the amount of credit that could be claimed
was limited by
section 2011(b) or 2014(b), the recomputed credit may be different.
If the final determination of the tax due on the estate of the decedent has not been made at the time this return is filed,
you must compute the
tax on these lines using the highest rate of tax (see table below) in effect at the time of the decedent's death.
Also, if there is more than one QDOT with respect to any decedent, you must compute the tax on lines 10 and 11 using the highest
rate of tax (see
table below) in effect at the time of the decedent's death unless all of the following conditions are met:
-
The decedent's executor has designated a single person to be responsible for filing Form 706-QDT for all of the trusts (designated
filer);
-
That person is either an individual who is a U.S. citizen or is a domestic corporation; and
-
The person meets the requirements of all applicable regulations.
Further, if the return is being filed because of the death of the surviving spouse, then in computing line 10, any state or
foreign death taxes
paid by the estate of the surviving spouse may be used in determining the allowable credits in recomputing the decedent's
estate tax, if all of the
following conditions are met:
-
This return is being filed because of the death of the surviving spouse;
-
Any property remaining in the QDOT at that time is includible in the estate of the surviving spouse (or would be includible
if the surviving
spouse had been a U.S. citizen or resident);
-
The credit is allowable (or would be allowable if the surviving spouse had been a U.S. citizen or resident) to the estate
of the surviving
spouse with respect to the property referred to in 2, above; and
-
The taxes were actually paid to a state or foreign jurisdiction.
For details on claiming these credits, see the Instructions for Form 706. If you claim the foreign death tax credit, you must
complete and attach
Schedule P (Form 706). If you claim the state death tax credit, attach your computation and evidence of the credit as described
in the Instructions
for Form 706.
Table of Maximum Tax Rates
If the decedent died |
The maximum tax rate is |
Before January 1, 2002 |
55% |
After December 31, 2001 but before January 1, 2003 |
50% |
After December 31, 2002 but before January 1, 2004 |
49% |
After December 31, 2003 but before January 1, 2005 |
48% |
After December 31, 2004 but before January 1, 2006 |
47% |
After December 31, 2005 but before January 1, 2007 |
46% |
After December 31, 2006 |
45% |
Make the check payable to the “United States Treasury.” Please write the surviving spouse's SSN (or ITIN, if applicable) and “Form
706-QDT” on the check to assist us in posting it to the proper account.
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