Instructions for Form 706

Department of the Treasury

Internal Revenue Service

(Rev. August 2011)

For decedents dying after December 31, 2010, and before January 1, 2012
United States Estate (and Generation-Skipping Transfer) Tax Return
Section references are to the Internal Contents Page • The Tax Relief, Unemployment
Revenue Code unless otherwise noted. Schedule B — Stocks and Insurance Reauthorization and Job
Bonds . . . . . . . . . . . . . . . . . . . . . 16 Creation Act of 2010 (Act) included
Prior Revisions of Form 706 Schedule C — Mortgages, several provisions affecting the 2011
Notes, and Cash . . . . . . . . . . . . . 18 Form 706. They are:
For Use Schedule D — Insurance on the a. Estates, generation-skipping
Decedents Revision transfers (GST), and lifetime gifts all
Dying of
Decedent’s Life . . . . . . . . . . . . . . 18
and Form 706 Schedule E — Jointly Owned have a maximum tax rate of 35%.
After Before Dated Property . . . . . . . . . . . . . . . . . . . 19 b. The credit for transfers made by
December January July 1999 Schedule F — Other gift is reunified with the credit for
31, 1998 1, 2001 Miscellaneous Property . . . . . . . . 20 transfers made at death. Both will
December January November Schedule G — Transfers receive a combined unified credit of
31, 2000 1, 2002 2001 During Decedent’s Life . . . . . . . . . 21 $1,730,800 (basic exclusion amount
December January August
Schedule H — Powers of of $5,000,000) under section 2010.
31, 2001 1, 2003 2002 c. The applicable exclusion amount
December January August Appointment . . . . . . . . . . . . . . . . 22
Schedule I — Annuities . . . . . . . . . . . 23 now may consist of a basic exclusion
31, 2002 1, 2004 2003
Schedule J — Funeral amount of $5,000,000 and, in the
December January August
case of a surviving spouse, the
31, 2003 1, 2005 2004 Expenses and Expenses
unused exclusion amount of a
December January August Incurred in Administering predeceased spouse (who died after
31, 2004 1, 2006 2005 Property Subject to Claims . . . . . . 25
December January October December 31, 2010). A timely and
Schedule K — Debts of the complete Form 706 filed for the
31, 2005 1, 2007 2006
December January September
Decedent and Mortgages predeceased spouse’s estate is
31, 2006 1, 2008 2007 and Liens . . . . . . . . . . . . . . . . . . . 26 required, even if there is no tax due,
December January August Schedule L — Net Losses to allow the surviving spouse to use
31, 2007 1, 2009 2008 During Administration and the last predeceased spouse’s
December January September Expenses Incurred in unused exclusion amount. See
31, 2008 1, 2010 2009 Administering Property Not instructions for Part 2 — Tax
December January July 2011 Subject to Claims . . . . . . . . . . . . . 27 Computation, line 9 and Part
31, 2009 1, 2011 Schedule M — Bequests, etc., 4 — General Information, line 3 and
to Surviving Spouse (Marital line 4.
Contents Page Deduction) . . . . . . . . . . . . . . . . . . 27 d. If the estate chooses not to allow
What’s New . . . . . . . . . . . . . . . . . . . .1 Schedule O — Charitable, the surviving spouse to take into
Reminders . . . . . . . . . . . . . . . . . . . .2 Public, and Similar Gifts and account, for estate and gift tax
General Instructions . . . . . . . . . . . .2 Bequests . . . . . . . . . . . . . . . . . . . 30 purposes, the decedent’s unused
Purpose of Form . . . . . . . . . . . . . . . .2 Schedule P — Credit for exclusion amount, then do one of the
Which Estates Must File . . . . . . . . . .2 Foreign Death Taxes . . . . . . . . . . 31 following: attach a statement to the
Executor . . . . . . . . . . . . . . . . . . . . . .2 Schedule Q — Credit for Tax Form 706 indicating that the estate is
When To File . . . . . . . . . . . . . . . . . .2 on Prior Transfers . . . . . . . . . . . . 32 not making the election under
Where To File . . . . . . . . . . . . . . . . . .2 Worksheet for Schedule Q . . . . . . . . 33 section 2010(c)(5) or enter “No
Paying the Tax . . . . . . . . . . . . . . . . .2 Election Under Section 2010(c)(5)”
Schedules R and across the top of the first page of
Signature and Verification . . . . . . . . .3 R-1 — Generation-Skipping
Amending Form 706 . . . . . . . . . . . . .3 Form 706.
Transfer Tax . . . . . . . . . . . . . . . . 34
Supplemental Documents . . . . . . . . .3 e. Prior gifts must be calculated at
Schedule U — Qualified the rate in effect at the decedent’s
Rounding Off to Whole Dollars . . . . .3 Conservation Easement date of death. See Worksheet TG
Penalties . . . . . . . . . . . . . . . . . . . . . .3 Exclusion . . . . . . . . . . . . . . . . . . . 38 — Taxable Gifts Reconciliation, Line
Obtaining Forms and Continuation Schedule . . . . . . . . . . . 40 4 Worksheet, and Line 7 Worksheet
Publications . . . . . . . . . . . . . . . . . .3 Privacy Act and Paperwork (Unified Credit Allowable for Prior
Specific Instructions . . . . . . . . . . . .4 Reduction Act Notice . . . . . . . . . . 41 Periods), below.
Part 1 — Decedent and Index . . . . . . . . . . . . . . . . . . . . . . . 42 • Various dollar amounts and
Executor . . . . . . . . . . . . . . . . . . . .4 Checklist . . . . . . . . . . . . . . . . . . . . . 43 limitations in the Form 706 are indexed
Part 2 — Tax Computation . . . . . . . . .4 for inflation. For decedents dying in
Part 3 — Elections by the 2011, the following amounts are
Executor . . . . . . . . . . . . . . . . . . . .7 applicable:
Part 4 — General Information . .
Part 5 — Recapitulation . . . . . .
.
.
.
.
.
.
. 12
. 13 What’s New a. The ceiling on special-use
valuation is $1,020,000.
Schedule A — Real Estate . . . . . . . . 14 • Use this revision of Form 706 only for b. The amount used in figuring the
Schedule A-1 — Section 2032A the estates of decedents who died in 2% portion of estate tax payable in
Valuation . . . . . . . . . . . . . . . . . . . 15 calendar year 2011. installments is $1,360,000.

Nov 04, 2011 Cat. No. 16779E

 The IRS will publish amounts for to allow the decedent’s surviving you should file Form 706-NA. If such a
future years in annual revenue spouse to use the decedent’s unused decedent became a U.S. citizen wholly
procedures. exclusion amount for estate and gift tax independently of his or her connection
• Executors must provide purposes. See instructions for line 4, with a possession, then the decedent is
documentation of their status. Part 4 — General Information, below, considered a U.S. citizen for estate tax
• The IRS has created a page on and section 2010(c)(4) and (c)(5). purposes, and you should file Form
IRS.gov for information about Form 706 706.
and its instructions, at www.irs.gov/ Gross Estate
form706. Information about any future The gross estate includes all property in Executor
developments affecting Form 706 (such which the decedent had an interest The term “executor” means the
as legislation enacted after we release (including real property outside the executor, personal representative, or
it) will be posted on that page. United States). It also includes: administrator of the decedent’s estate.
• Certain transfers made during the If none of these is appointed, qualified,
decedent’s life without an adequate and
Reminders full consideration in money or money’s
and acting in the United States, every
person in actual or constructive
worth, possession of any property of the
In 2008, we added a worksheet to help • Annuities,
executors figure how much of the decedent is considered an executor
estate tax may be paid in installments
• The includible portion of joint estates and must file a return.
with right of survivorship (see
under section 6166. See Determine instructions for Schedule E), Executors must provide
how much of the estate tax may be • The includible portion of tenancies by documentation proving their status.
paid in installments under section 6166, the entirety (see instructions for Documentation will vary, but may
below. Schedule E), include documents such as a certified
• Certain life insurance proceeds (even copy of the will or a court order
General Instructions though payable to beneficiaries other designating the executor(s). A
statement by the executor attesting to
than the estate) (see instructions for
Schedule D), their status is insufficient.
Purpose of Form • Property over which the decedent
The executor of a decedent’s estate possessed a general power of When To File
uses Form 706 to figure the estate tax appointment, You must file Form 706 to report estate
imposed by Chapter 11 of the Internal • Dower or curtesy (or statutory estate) and/or GST tax within 9 months after
Revenue Code. This tax is levied on of the surviving spouse, and the date of the decedent’s death. If you
the entire taxable estate and not just on • Community property to the extent of are unable to file Form 706 by the due
the share received by a particular the decedent’s interest as defined by date, you may receive an extension of
beneficiary. Form 706 is also used to applicable law. time to file. Use Form 4768, Application
figure the generation-skipping transfer for Extension of Time To File a Return
(GST) tax imposed by Chapter 13 on For more specific information, see
and/or Pay U.S. Estate (and
direct skips (transfers to skip persons of the instructions for Schedules A
Generation-Skipping Transfer) Taxes,
interests in property included in the through I.
to apply for an automatic 6-month
decedent’s gross estate). U.S. Citizens or Residents; extension of time to file.
Nonresident Noncitizens Private delivery services. You can
Which Estates Must File use certain private delivery services
For decedents dying in 2011, Form 706 File Form 706 for the estates of designated by the IRS to meet the
must be filed by the executor for the decedents who were either U.S. “timely mailing as timely filing/paying”
estate of every U.S. citizen or resident: citizens or U.S. residents at the time of rule for tax returns and payments.
death. For estate tax purposes, a These private delivery services include
a. Whose gross estate, plus adjusted resident is someone who had a
taxable gifts and specific exemption, only the following:
domicile in the United States at the time • DHL Express (DHL): DHL Same Day
is more than $5,000,000; or, of death. A person acquires a domicile
b. Whose executor wants to make Service.
by living in a place for even a brief • Federal Express (FedEx): FedEx
the election to permit the decedent’s period of time, as long as the person
surviving spouse to use the Priority Overnight, FedEx Standard
had no intention of moving from that Overnight, FedEx 2Day, FedEx
decedent’s unused exclusion place.
amount, regardless of the size of the International Priority, FedEx
decedent’s gross estate. See File Form 706-NA, U.S. Estate (and International First.
instructions for Part 4, line 4. Generation-Skipping Transfer) Tax • United Parcel Service (UPS): UPS
Return, for the estates of nonresident Next Day Air, UPS Next Day Air Saver,
alien decedents (decedents who were UPS 2nd Day Air, UPS 2nd Day Air
To determine whether you must file neither U.S. citizens nor U.S. residents A.M., UPS Worldwide Express Plus,
a return for the estate, add: at the time of death). and UPS Worldwide Express.
1. The adjusted taxable gifts (as The private delivery service can tell
defined in section 2503) made by the Residents of U.S. you how to get written proof of the
decedent after December 31, 1976; Possessions mailing date.
2. The total specific exemption All references to citizens of the United
allowed under section 2521 (as in effect States are subject to the provisions of Where To File
before its repeal by the Tax Reform Act sections 2208 and 2209, relating to File Form 706 at the following address:
of 1976) for gifts made by the decedent decedents who were U.S. citizens and
after September 8, 1976; and residents of a U.S. possession on the Department of the Treasury
3. The decedent’s gross estate date of death. If such a decedent Internal Revenue Service Center
valued at the date of death. became a U.S. citizen only because of Cincinnati, OH 45999
his or her connection with a
If you determine filing a return for the possession, then the decedent is Paying the Tax
estate is not required, you nonetheless considered a nonresident alien The estate and GST taxes are due
should file a return if you intend to elect decedent for estate tax purposes, and within 9 months after the date of the
-2- General Instructions
decedent’s death. You may request an
extension of time for payment by filing
Amending Form 706 Penalties
Form 4768. You may also elect under If you find that you must change Late filing and late payment. Section
section 6166 to pay in installments or something on a return that has already 6651 provides for penalties for both late
under section 6163 to postpone the been filed, you should: filing and for late payment unless there
part of the tax attributable to a • File another Form 706; is reasonable cause for the delay. The
reversionary or remainder interest. • Enter “Supplemental Information” law also provides for penalties for willful
These elections are made by checking across the top of page 1 of the form; attempts to evade payment of tax. The
lines 3 and 4 (respectively) of Part and late filing penalty will not be imposed if
3 — Elections by the Executor, and • Attach a copy of pages 1, 2, and 3 of the taxpayer can show that the failure
attaching the required statements. the original Form 706 that has already to file a timely return is due to
been filed. reasonable cause.
If the tax paid with the return is Reasonable cause determinations.
different from the balance due as If you have already been notified If you receive a notice about penalties
figured on the return, explain the that the return has been selected for after you file Form 706, send an
difference in an attached statement. If examination, you should provide the explanation and we will determine if you
you have made prior payments to the additional information directly to the meet reasonable cause criteria. Do not
IRS, attach a statement to Form 706 office conducting the examination. attach an explanation when you file
including these facts. Form 706. Explanations attached to the
Paying by check. Make the check Supplemental Documents return at the time of filing will not be
payable to the “United States considered.
Treasury.” Please write the decedent’s Note. You must attach the death Valuation understatement. Section
name, social security number (SSN), certificate to the return. 6662 provides a 20% penalty for the
and “Form 706” on the check to assist If the decedent was a citizen or underpayment of estate tax that
us in posting it to the proper account. resident of the United States and died exceeds $5,000 when the under-
testate, attach a certified copy of the payment is attributable to valuation
Signature and Verification will to the return. If you cannot obtain a understatements. A valuation
certified copy, attach a copy of the will understatement occurs when the value
If there is more than one and an explanation of why it is not of property reported on Form 706 is
! executor, all listed executors are certified. Other supplemental 65% or less of the actual value of the
CAUTION responsible for the return. documents may be required as property.
However, it is sufficient for only one of explained below. Examples include This penalty increases to 40% if
the co-executors to sign the return. Forms 712, Life Insurance Statement; there is a gross valuation under-
All executors are responsible for the 709, United States Gift (and statement. A gross valuation under-
return as filed and are liable for Generation-Skipping Transfer) Tax statement occurs if any property on the
penalties provided for erroneous or Return; and 706-CE, Certificate of return is valued at 40% or less of the
false returns. Payment of Foreign Death Tax; trust value determined to be correct.
and power of appointment instruments; Penalties also apply to late filing, late
If two or more persons are liable for and state certification of payment of payment, and underpayment of GST
filing the return, they should all join death taxes. If you do not file these taxes.
together in filing one complete return. documents with the return, the Return preparer. Estate tax return
However, if they are unable to join in processing of the return will be delayed. preparers, who prepare any return or
making one complete return, each is claim for refund which reflects an
required to file a return disclosing all If the decedent was a U.S. citizen
but not a resident of the United States, understatement of tax liability due to
the information the person has about willful or reckless conduct, are subject
the estate, including the name of every you must attach the following
documents to the return: to a penalty of $5,000 or 50% of the
person holding an interest in the income derived (or income to be
property and a full description of the 1. A copy of the inventory of
property and the schedule of liabilities, derived), whichever is greater, for the
property. If the appointed, qualified, and preparation of each such return. See
acting executor is unable to make a claims against the estate, and
expenses of administration filed with section 6694, the regulations
complete return, then every person thereunder, and Ann. 2009-15, 2009-11
holding an interest in the property must, the foreign court of probate jurisdiction,
certified by a proper official of the court; I.R.B. 687 (available at www.irs.gov/
on notice from the IRS, make a return pub/irs-irbs/irb09-11.pdf) for more
regarding that interest. 2. A copy of the return filed under information.
The executor who files the return the foreign inheritance, estate, legacy,
succession tax, or other death tax act,
must, in every case, sign the
certified by a proper official of the Obtaining Forms and
declaration on page 1 under penalties
of perjury. foreign tax department, if the estate is Publications To File or Use
subject to such a foreign tax; and
Generally, anyone who is paid to 3. If the decedent died testate, a Internet. You can access the IRS
prepare the return must sign the return certified copy of the will. website 24 hours a day, 7 days a week
in the space provided and fill in the at IRS.gov to:
“Paid Preparer Use Only” area. See • Download forms, instructions, and
section 7701(a)(36)(B) for exceptions. Rounding Off to Whole publications;
• Order IRS products online;
In addition to signing and completing Dollars • Research your tax questions online;
the required information, the paid • Search publications online by topic or
preparer must give a copy of the You may show the money items on the
return and accompanying schedules as keyword; and
completed return to the executor. • Sign up to receive local and national
whole-dollar amounts. To do so, drop
Note. A paid preparer may sign any amount less than 50 cents and tax news by email.
original or amended returns by rubber increase any amount from 50 cents Other forms that may be required.
stamp, mechanical device, or computer through 99 cents to the next higher • Form SS-5, Application for Social
software program. dollar. Security Card.
General Instructions -3-
• Form 706-CE, Certificate of Payment IF . . . THEN . . . elected alternate valuation on line 1 of
of Foreign Death Tax. Part 3 — Elections by the Executor.
• Form 706-NA, United States Estate you enter zero on any
item of the
you need not file the
schedule (except for
• When you complete the return, staple
(and Generation-Skipping Transfer) Tax Recapitulation, Schedule F) referred to
all the required pages together in the
Return, Estate of nonresident not a on that item. proper order.
citizen of the United States.
• Form 709, United States Gift (and you claim an exclusion complete and attach
Generation-Skipping Transfer) Tax
Return.
on item 11, Schedule U.
Part 1—Decedent and
• Form 712, Life Insurance Statement. you claim any complete and attach the Executor
• Form 2848, Power of Attorney and deductions on items 13
through 21 of the
appropriate schedules to
support the claimed
Declaration of Representative. Recapitulation, deductions. Line 2
• Form 4768, Application for Extension Enter the SSN assigned specifically to
of Time To File a Return and/or Pay you claim credits for complete and attach
U.S. Estate (and Generation-Skipping the decedent. You cannot use the SSN
foreign death taxes or Schedule P or Q.
Transfer) Taxes. tax on prior transfers, assigned to the decedent’s spouse. If
• Form 4808, Computation of Credit for the decedent did not have an SSN, the
Gift Tax. there is not enough attach a Continuation executor should obtain one for the
• Form 8821, Tax Information space on a schedule to Schedule (or additional decedent by filing Form SS-5, with a
Authorization.
list all the items, sheets of the same size) local Social Security Administration
to the back of the office.
• Form 8822, Change of Address. schedule;
Additional Information. The following (see the Continuation
Line 6a. Name of Executor
publications may assist you in learning Schedule at the end of
about and preparing Form 706: Form 706); If there is more than one executor,
photocopy the blank enter the name of the executor to be
• Publication 559, Survivors, schedule before
Executors, and Administrators. completing it, if you will
contacted by the IRS. List the other
• Publication 910, IRS Guide to Free need more than one executors’ names, addresses, and
Tax Services. copy. SSNs (if applicable) on an attached
• Publication 950, Introduction to sheet.
Estate and Gift Taxes.
Note. For information about release of
Also consider the following: Line 6b. Executor’s Address
nonresident U.S. citizen decedents’ • Form 706 has 28 numbered pages. Use Form 8822 to report a change of
assets using transfer certificates under The pages are perforated so that you the executor’s address.
Regulation 20.6325-1, write to: can remove them for copying and filing.
• Number the items you list on each Line 6c. Executor’s Social
Internal Revenue Service schedule, beginning with the number Security Number
Cincinnati, OH 45999 “1” each time, or using the numbering
convention as indicated on the Only individual executors should
Stop 824G complete this line. If there is more than
schedule (for example, Schedule M).
one executor, all should list their SSNs
• Total the items listed on the schedule on an attached sheet.
Specific Instructions and its attachments, Continuation
Schedules, etc.
You must file the first three pages of • Enter the total of all attachments,
Form 706 and all required schedules. Continuation Schedules, etc., at the Part 2—Tax
File Schedules A through I, as
appropriate, to support the entries in
bottom of the printed schedule, but do Computation
not carry the totals forward from one In general, the estate tax is figured by
items 1 through 9 of Part schedule to the next.
5 — Recapitulation. applying the unified rates shown in
• Enter the total, or totals, for each Table A to the total of transfers both
schedule on page 3, Part during life and at death, and then
5 — Recapitulation. subtracting the gift taxes, as refigured
• Do not complete the “Alternate based on the date of death rates. See
valuation date” or “Alternate value” Worksheet TG, Line 4 Worksheet, and
columns of any schedule unless you Line 7 Worksheet.

Table A — Unified Rate Schedule

Column A Column B Column C Column D
Taxable amount over Taxable amount not Tax on amount in Rate of tax on excess
over Column A over amount in
Column A
$0 $10,000 $0 18%
$10,000 20,000 $1,800 20%
20,000 40,000 3,800 22%
40,000 60,000 8,200 24%
60,000 80,000 13,000 26%
80,000 100,000 18,200 28%
100,000 150,000 23,800 30%
150,000 250,000 38,800 32%
250,000 500,000 70,800 34%
500,000 ---- 155,800 35%

-4- General, Specific, and Part Instructions

Worksheet TG and Line 4 Worksheet

Worksheet TG— Taxable Gifts Reconciliation

(To be used for lines 4 and 7 of the Tax Computation)
a. b. Note. For the definition of a taxable gift, see section 2503. Follow Form 709. That
is, include only the decedent’s one-half of split gifts, whether the gifts were made
Gifts made after June 6,

by the decedent or the decedent’s spouse. In addition to gifts reported on Form

1932, and before 1977

Calendar year or Total taxable gifts for

calendar quarter period (see Note) 709, you must include any taxable gifts in excess of the annual exclusion that
were not reported on Form 709.

c. d. e. f.
Taxable amount
Taxable amount included in col. b for Gift tax paid by Gift tax paid by
included in col. b gifts that qualify for decedent on gifts decedent’s spouse on
for gifts included “special treatment of in col. d gifts in col. c
1. Total taxable gifts in the gross estate split gifts” described
made before 1977 below
Gifts made
after 1976

2. Totals for gifts made after 1976

Line 4 Worksheet—Adjusted Taxable Gifts Made After 1976

1. Taxable gifts made after 1976. Enter the amount from Worksheet TG, line 2, column b 1
2. Taxable gifts made after 1976 reportable on Schedule G. Enter the amount
from Worksheet TG, line 2, column c 2
3. Taxable gifts made after 1976 that qualify for “special treatment.” Enter the
amount from Worksheet TG, line 2, column d 3
4. Add lines 2 and 3 4
5. Adjusted taxable gifts. Subtract line 4 from line 1. Enter here and on Part 2—Tax Computation,
line 4 5

Note. You must complete Part 2 — Tax finally allowed unless you pay the state You should send the following
Computation. death taxes and claim the deduction evidence to the IRS:
within 4 years after the return is filed, or 1. Certificate of the proper officer of
Line 1 later (see section 2058(b)) if: the taxing state, or the District of
If you elected alternate valuation on line • A petition is filed with the Tax Court Columbia, showing the:
1, Part 3 — Elections by the Executor, of the United States, a. Total amount of tax imposed
enter the amount you entered in the • You have an extension of time to (before adding interest and penalties
“Alternate value” column of item 12 of pay, or and before allowing discount),
Part 5 — Recapitulation. Otherwise, • You file a claim for refund or credit of b. Amount of discount allowed,
enter the amount from the “Value at an overpayment which extends the c. Amount of penalties and interest
date of death” column. deadline for claiming the deduction. imposed or charged,
Note. The deduction is not subject to d. Total amount actually paid in
Line 3b. State Death Tax dollar limits. cash, and
Deduction If you make a section 6166 election e. Date of payment.
to pay the federal estate tax in 2. Any additional proof the IRS
The estates of decedents dying installments and make a similar election specifically requests.
! after December 31, 2004, will be
CAUTION allowed a deduction for state
to pay the state death tax in You should file the evidence
installments, see section 2058(b) for requested above with the return, if
death taxes, instead of a credit. The exceptions and periods of limitation.
state death tax credit was repealed as possible. Otherwise, send it as soon
of January 1, 2005. If you transfer property other than after you file the return as possible.
cash to the state in payment of state
You may take a deduction on line 3b inheritance taxes, the amount you may
for estate, inheritance, legacy, or claim as a deduction is the lesser of the Line 6
succession taxes paid as the result of state inheritance tax liability discharged To figure the tentative tax on the
the decedent’s death to any state or the or the fair market value (FMV) of the amount on line 5, use Table A —
District of Columbia. property on the date of the transfer. For Unified Rate Schedule, above, and put
You may claim an anticipated more information on the application of the result on this line.
amount of deduction and figure the such transfers, see the principles
federal estate tax on the return before discussed in Revenue Ruling 86-117, Lines 4 and 7
the state death taxes have been paid. 1986-2 C.B. 157, prior to the repeal of Three worksheets are provided to help
However, the deduction cannot be section 2011. you figure the entries for these lines.
Part Instructions -5-
Line 7 Worksheet (Unified Credit Allowable for Prior Periods) Keep for Your Records
Line 7 Worksheet – Tax on Gifts Made After 1976
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l)

Period Taxable Total Cumulative Tax Tax Based Tax on Maximum Unified Available Credit Tax Payable
Gifts for Taxable Taxable Based on on 2011 Gifts for Unified Credit Credit in Allowable for Current
the Gifts for Gifts 2011 Rates on Current Credit Allowable Current (Lesser of Period
Current Prior Including Rates on Cumulative Period Available in Prior Period Col. (g) (Col. (g) –
Period Periods1 Current Gifts Gifts (Col. (f) – for Current Periods4 (Col. (h) – and Col. Col. (k))
Period. from Including Col. (e)) Period Col. (i)) (j))
(Col. (b) + Prior Current (based on
Col. (c)) Periods Period 2011
(Col. (c))2 (Col. (d)) rates)3
Pre-1977

1. Total gift taxes payable on gifts made after 1976 (add all amounts in column (l)). 1.
2. Gift taxes paid by the decedent on gifts that qualify for “special treatment.” Enter the amount from Worksheet TG, line 2.
2, column e.
3. Subtract line 2 from 1. 3.
4. Gift tax paid by decedent’s spouse on split gift included on Schedule G. Enter amount from Worksheet TG, 4.
line 2, column (f).
5. Add lines 3 and 4. Enter here and on Part 2 — Tax Computation, line 7. 5.
1. Column (c): Enter amount from column (d) of the previous row.
2. Column (e): Enter amount from column (f) of the previous row.
3. Column (h): Enter amount from the Table of Unified Credits. (For each row in column (h), subtract 20 percent of any amount allowed as a specific exemption for gifts
made after September 8, 1976, and before January 1, 1977.)
4. Column (i): Enter the sum of column (i) and column (k) from the previous row.

You need not file these worksheets with through 2005, and $12,000 for 2006 percent of the amount allowed as a
your return but should keep them for through 2008. For 2009, 2010, and specific exemption for gifts made after
your records. Worksheet TG — Taxable 2011, the annual exclusion for gifts of September 8, 1976, and before
Gifts Reconciliation allows you to present interest is $13,000 per donee. January 1, 1977 (but no more than
reconcile the decedent’s lifetime $6,000).
taxable gifts to figure totals that will be How to complete line 7 worksheet
Column (a). Beginning with the earliest Column (i). Enter the sum of column (i)
used for the Line 4 Worksheet and the and column (k) from the previous row.
Line 7 Worksheet. year in which taxable gifts were made,
enter the quarter/year of the prior Column (j). Subtract the amount in
You must have all of the decedent’s gift(s). column (i) from the amount in column
gift tax returns (Form 709) before you Column (b). Enter all taxable gifts. (h).
complete Worksheet TG — Taxable Enter all pre-1977 gifts on the pre-1977 Column (k). Enter the lesser of column
Gifts Reconciliation. The amounts you row. (g) and column (j) for the current row.
will enter on Worksheet TG can usually Column (c). Enter the amount from Column (l). Subtract the amount in
be derived from the filed returns that column (d) of the previous row. column (k) from the amount in column
were subject to tax. However, if any of Column (d). Enter the sum of column (g) to determine any tax due. Enter
the returns were audited by the IRS, (b) and column (c) from the current row. result in column (l).
you should use the amounts that were Column (e). Enter the amount from Repeat for each year in which
finally determined as a result of the column (f) of the previous row. taxable gifts were made.
audits. Column (f). Enter the tax based on the
In addition, you must make a amount in column (d) of the current row
reasonable inquiry as to the existence from Table A — Unified Rate Schedule For examples of how to use the Line
of any gifts in excess of the annual above. 7 Worksheet, see the examples in the
exclusion made by the decedent (or on Column (g). Subtract the amount in 2010 Instructions for Form 709, United
behalf of the decedent under a power column (e) from the amount in column States Gift (and Generation-Skipping
of attorney) for which no Forms 709 (f) for the current row. Transfer) Tax Return, schedule B,
were filed. Include the value of such Column (h). Enter the amount from the column C (Unified Credit Allowable for
gifts in column b of Worksheet TG. The Table of Unified Credits (as Prior Periods). Add a column to the
annual exclusion per donee for 1977 recalculated using 2010 rates). right of column (k) to determine the tax
through 1981 was $3,000, $10,000 for Note. The entries in each row of payable for the current period (column
1981 through 2001, $11,000 for 2002 column (h) must be reduced by 20 (g) minus column (k)).

-6- Part Instructions

 Table of Unified Credits See also instructions for line 3, Part taken (on line 15) for pre-1977 federal
(as Recalculated for 2011 Rates) 4 — General Information, below, and gift taxes.
Period Unified Credit
section 2010(c)(5). Canadian marital credit. In addition
to using line 15 to report credit for
1977 (Quarters 1 and 2) $6,000 Line 10. Adjustment to federal gift taxes on pre-1977 gifts, you
1977 (Quarters 3 and 4) $30,000 Unified Credit (applicable may also use line 15 to claim the
credit amount) Canadian marital credit, where
1978 $34,000 applicable.
If the decedent made gifts (including
1979 $38,000 gifts made by the decedent’s spouse When taking the marital credit under
and treated as made by the decedent the 1995 Canadian Protocol:
1980 $42,500 • Include the credit in the amount on
by reason of gift splitting) after
1981 $47,000 September 8, 1976, and before line 15 and
January 1, 1977, for which the • Identify and enter the amount of the
1982 $62,800 credit you are taking on the dotted line
decedent claimed a specific exemption,
1983 $79,300 the unified credit (applicable credit to the left of the entry space for line 15
amount) on this estate tax return must on page 1 of Form 706 with a notation,
1984 $96,300 “Canadian marital credit.”
be reduced. The reduction is figured by
1985 $121,800 entering 20% of the specific exemption Also, attach a statement to the return
claimed for these gifts. that refers to the treaty, waives QDOT
1986 $155,800 rights, and shows the computation of
Note. The specific exemption was
1987 through 1997 $190,800 allowed by section 2521 for gifts made the marital credit. See the 1995
before January 1, 1977. Canadian income tax treaty protocol for
1998 $199,550 details on figuring the credit.
1999 $208,300 If the decedent did not make any
gifts between September 8, 1976, and
2000 and 2001 $217,050 January 1, 1977, or if the decedent
made gifts during that period but did not
Part 3—Elections by the
2002 through 2010 $330,800
claim the specific exemption, enter Executor
2011 $1,730,800 zero. Note. For decedents dying in 2011,
the election to allow the decedent’s
Note. In figuring the line 7 amount, do
Line 15. Total Credits surviving spouse to use the decedent’s
not include any tax paid or payable on Generally, line 15 is used to report the unused exclusion amount is made by
gifts made before 1977. The line 7 total of credit for foreign death taxes filing a timely and complete Form 706.
amount is a hypothetical figure used to (line 13) and credit for tax on prior See instructions for line 4, Part
calculate the estate tax. transfers (line 14). 4 — General Information, below and
section 2010(c)(4) and (c)(5).
Special treatment of split gifts. However, you may also use line 15
These special rules apply only if: to report credit taken for federal gift Line 1. Alternate Valuation
• The decedent’s spouse predeceased taxes imposed by Chapter 12 of the
the decedent; Code, and the corresponding provisions See the example showing the
• The decedent’s spouse made gifts of prior laws, on certain transfers the TIP use of Schedule B where the
that were “split” with the decedent decedent made before January 1, alternate valuation is adopted.
under the rules of section 2513; 1977, that are included in the gross
• The decedent was the “consenting estate. The credit cannot be more than Unless you elect at the time you file
spouse” for those split gifts, as that the amount figured by the following the return to adopt alternate valuation
term is used on Form 709; and formula: as authorized by section 2032, you
• The split gifts were included in the Gross estate tax minus (the sum must value all property included in the
decedent’s spouse’s gross estate under of the state death taxes and gross estate on the date of the
section 2035. unified credit) Value of decedent’s death. Alternate valuation
Value of gross estate minus (the
x included cannot be applied to only a part of the
If all four conditions above are met, sum of the deductions for
gift property.
do not include these gifts on line 4 of charitable, public, and similar You may elect special-use valuation
the Tax Computation and do not gifts and bequests and marital (line 2) in addition to alternate
include the gift taxes payable on these deduction)
valuation.
gifts on line 7 of the Tax Computation.
These adjustments are incorporated When taking the credit for pre-1977 You may not elect alternate
into the worksheets. federal gift taxes: valuation unless the election will
• Include the credit in the amount on decrease both the value of the gross
Line 9. Maximum Unified line 15 and estate and the sum (reduced by
Credit (applicable credit • Identify and enter the amount of the allowable credits) of the estate and
credit you are taking on the dotted line GST taxes payable by reason of the
amount) to the left of the entry space for line 15 decedent’s death for the property
The maximum unified credit (applicable on page 1 of Form 706 with a notation, includible in the decedent’s gross
credit amount) is the tentative tax on “section 2012 credit.” estate.
the applicable exclusion amount. For You elect alternate valuation by
estates of decedents dying in 2011, the For more information, see the
regulations under section 2012. This checking “Yes” on line 1 and filing Form
applicable exclusion amount equals: 706. You may make a protective
computation may be made using Form
• The basic exclusion amount of 4808. Attach a copy of a completed alternate valuation election by checking
$5,000,000, PLUS Form 4808 or the computation of the “Yes” on line 1, writing the word
• The deceased spousal unused credit. Also, attach all available copies “protective,” and filing Form 706 using
exclusion amount (DSUE amount), in of Forms 709 filed by the decedent to regular values.
the case of a decedent having a help verify the amounts entered on Once made, the election may not be
predeceased spouse dying in 2011. lines 4 and 7, and the amount of credit revoked. The election may be made on
Part Instructions -7-
a late-filed Form 706 provided it is not the decedent’s death are not property Line 2. Special-Use Valuation
filed later than 1 year after the due date of the gross estate on the date of death
(including extensions actually granted). and are not included in the alternate of Section 2032A
Relief under sections 301.9100-1 and valuation. However, if dividends are In general. Under section 2032A, you
301.9100-3 may be available to make declared to stockholders of record after may elect to value certain farm and
an alternate valuation election or a the date of the decedent’s death so that closely held business real property at
protective alternate valuation election, the shares of stock at the later its farm or business use value rather
provided a Form 706 is filed no later valuation date do not reasonably than its fair market value (FMV). You
than 1 year after the due date of the represent the same property at the date may elect both special-use valuation
return (including extensions actually of the decedent’s death, include those and alternate valuation.
granted). dividends (except dividends paid from To elect this valuation, you must
If you elect alternate valuation, value earnings of the corporation after the check “Yes” on line 2 and complete and
the property that is included in the date of the decedent’s death) in the attach Schedule A-1 and its required
gross estate as of the applicable dates alternate valuation. additional statements. You must file
as follows: As part of each Schedule A through Schedule A-1 and its required
• Any property distributed, sold, I, you must show: attachments with Form 706 for this
exchanged, or otherwise disposed of or election to be valid. You may make the
separated or passed from the gross 1. What property is included in the election on a late-filed return so long as
estate by any method within 6 months gross estate on the date of the it is the first return filed.
after the decedent’s death is valued on decedent’s death;
the date of distribution, sale, exchange, 2. What property was distributed, The total value of the property
or other disposition, whichever occurs sold, exchanged, or otherwise disposed valued under section 2032A may not be
first. Value this property on the date it of within the 6-month period after the decreased from FMV by more than
ceases to form a part of the gross decedent’s death, and the dates of $1,020,000 for decedents dying in
estate; for example, on the date the title these distributions, etc. 2011.
passes as the result of its sale, (These two items should be entered in Real property may qualify for the
exchange, or other disposition. the “Description” column of each section 2032A election if:
• Any property not distributed, sold, schedule. Briefly explain the status or 1. The decedent was a U.S. citizen
exchanged, or otherwise disposed of disposition governing the alternate or resident at the time of death;
within the 6-month period is valued on valuation date, such as: “Not disposed 2. The real property is located in the
the date 6 months after the date of the of within 6 months following death,” United States;
decedent’s death. “Distributed,” “Sold,” “Bond paid on 3. At the decedent’s death, the real
• Any property, interest, or estate that maturity,” etc. In this same column, property was used by the decedent or a
is “affected by mere lapse of time” is describe each item of principal and family member for farming or in a trade
valued as of the date of decedent’s includible income); or business, or was rented for such use
death or on the date of its distribution, 3. The date of death value, entered by either the surviving spouse or a
sale, exchange, or other disposition, in the appropriate value column with lineal descendant of the decedent to a
whichever occurs first. However, you items of principal and includible income family member on a net cash basis;
may change the date of death value to shown separately; and 4. The real property was acquired
account for any change in value that is 4. The alternate value, entered in from or passed from the decedent to a
not due to a “mere lapse of time” on the the appropriate value column with items qualified heir of the decedent;
date of its distribution, sale, exchange, of principal and includible income 5. The real property was owned and
or other disposition. shown separately. used in a qualified manner by the
The property included in the (In the case of any interest or estate, decedent or a member of the
alternate valuation and valued as of 6 the value of which is affected by lapse decedent’s family during 5 of the 8
months after the date of the decedent’s of time, such as patents, leaseholds, years before the decedent’s death;
death, or as of some intermediate date estates for the life of another, or 6. There was material participation
(as described above) is the property remainder interests, the value shown by the decedent or a member of the
included in the gross estate on the date under the heading “Alternate value” decedent’s family during 5 of the 8
of the decedent’s death. Therefore, you must be the adjusted value; for years before the decedent’s death; and
must first determine what property was example, the value as of the date of 7. The qualified property meets the
part of the gross estate at the death with an adjustment reflecting any following percentage requirements:
decedent’s death. difference in its value as of the later a. At least 50% of the adjusted
Interest. Interest accrued to the date date not due to lapse of time.) value of the gross estate must consist
of the decedent’s death on bonds, of the adjusted value of real or personal
notes, and other interest-bearing Distributions, sales, exchanges, and property that was being used as a farm
obligations is property of the gross other dispositions of the property within or in a closely held business and that
estate on the date of death and is the 6-month period after the decedent’s was acquired from, or passed from, the
included in the alternate valuation. death must be supported by evidence. decedent to a qualified heir of the
If the court issued an order of decedent, and
Rent. Rent accrued to the date of the b. At least 25% of the adjusted
decedent’s death on leased real or distribution during that period, you must
submit a certified copy of the order as value of the gross estate must consist
personal property is property of the of the adjusted value of qualified farm
gross estate on the date of death and is part of the evidence. The IRS may
require you to submit additional or closely held business real property.
included in the alternate valuation.
evidence, if necessary.
Dividends. Outstanding dividends that For this purpose, adjusted value is
were declared to stockholders of record If the alternate valuation method is the value of property determined
on or before the date of the decedent’s used, the values of life estates, without regard to its special-use value.
death are considered property of the remainders, and similar interests are The value is reduced for unpaid
gross estate on the date of death, and figured using the age of the recipient on mortgages on the property or any
are included in the alternate valuation. the date of the decedent’s death and indebtedness against the property, if
Ordinary dividends declared to the value of the property on the the full value of the decedent’s interest
stockholders of record after the date of alternate valuation date. in the property (not reduced by such
-8- Part Instructions
mortgage or indebtedness) is included passed from the decedent if one of the unable to materially participate in the
in the value of the gross estate. The following applies: operation of the farm or other business.
adjusted value of the qualified real and • The property is considered to have The substitute time period for
personal property used in different been acquired from or to have passed material participation for these
businesses may be combined to meet from the decedent under section decedents is a period totaling at least 5
the 50% and 25% requirements. 1014(b) (relating to basis of property years out of the 8-year period that
acquired from a decedent);
Qualified Real Property • The property is acquired by any
ended on the earlier of:
• The date the decedent began
Qualified use. Qualified use means person from the estate; or receiving social security benefits or
the use of the property as a farm for • The property is acquired by any • The date the decedent became
farming purposes or the use of property person from a trust, to the extent the disabled.
in a trade or business other than property is includible in the gross
farming. Trade or business applies only estate. Surviving spouse. A surviving
to the active conduct of a business. It spouse who received qualified real
Qualified heir. A person is a qualified property from the predeceased spouse
does not apply to passive investment heir of property if he or she is a
activities or the mere passive rental of is considered to have materially
member of the decedent’s family and participated if he or she was engaged
property to a person other than a acquired or received the property from
member of the decedent’s family. Also, in the active management of the farm
the decedent. If a qualified heir or other business. If the surviving
no trade or business is present in the disposes of any interest in qualified real
case of activities not engaged in for spouse died within 8 years of the first
property to any member of his or her spouse’s death, you may add the
profit. family, that person will then be treated period of material participation of the
Ownership. To qualify as special-use as the qualified heir for that interest. predeceased spouse to the period of
property, the decedent or a member of active management by the surviving
the decedent’s family must have owned The term “member of the family”
includes only: spouse to determine if the surviving
and used the property in a qualified use
for 5 of the last 8 years before the • An ancestor (parent, grandparent, spouse’s estate qualifies for special-use
etc.) of the individual; valuation. To qualify for this, the
decedent’s death. Ownership may be
direct or indirect through a corporation, • The spouse of the individual; property must have been eligible for
a partnership, or a trust. • The lineal descendant (child, special-use valuation in the
stepchild, grandchild, etc.) of the predeceased spouse’s estate, though it
If the ownership is indirect, the individual, the individual’s spouse, or a does not have to have been elected by
business must qualify as a closely held parent of the individual; or that estate.
business under section 6166. The • The spouse, widow, or widower of
ownership, when combined with For additional details regarding
any lineal descendant described above. material participation, see Regulations
periods of direct ownership, must meet A legally adopted child of an individual
the requirements of section 6166 on the section 20.2032A-3(e).
is treated as a child of that individual by
date of the decedent’s death and for a blood. Valuation Methods
period of time that equals at least 5 of The primary method of valuing
the 8 years preceding death. Material Participation special-use value property that is used
If the property was leased by the To elect special-use valuation, either for farming purposes is the annual
decedent to a closely held business, it the decedent or a member of his or her gross cash rental method. If
qualifies as long as the business entity family must have materially participated comparable gross cash rentals are not
to which it was rented was a closely in the operation of the farm or other available, you can substitute
held business for the decedent on the business for at least 5 of the 8 years comparable average annual net share
date of the decedent’s death and for ending on the date of the decedent’s rentals. If neither of these are available,
sufficient time to meet the “5 in 8 years” death. The existence of material or if you so elect, you can use the
test explained above. participation is a factual determination, method for valuing real property in a
Structures and other real property but passively collecting rents, salaries, closely held business.
improvements. Qualified real draws, dividends, or other income from Average annual gross cash rental.
property includes residential buildings the farm or other business does not Generally, the special-use value of
and other structures and real property constitute material participation. Neither property that is used for farming
improvements regularly occupied or does merely advancing capital and purposes is determined as follows:
used by the owner or lessee of real reviewing a crop plan and financial
property (or by the employees of the reports each season or business year. 1. Subtract the average annual
owner or lessee) to operate the farm or state and local real estate taxes on
In determining whether the required actual tracts of comparable real
business. A farm residence which the participation has occurred, disregard
decedent had occupied is considered to property from the average annual gross
brief periods (that is, 30 days or less) cash rental for that same comparable
have been occupied for the purpose of during which there was no material
operating the farm even when a family property and
participation, as long as such periods 2. Divide the result in (1) by the
member and not the decedent was the were both preceded and followed by
person materially participating in the average annual effective interest rate
substantial periods (more than 120 charged for all new Federal Land Bank
operation of the farm. days) during which there was loans.
Qualified real property also includes uninterrupted material participation.
roads, buildings, and other structures Retirement or disability. If, on the The computation of each average
and improvements functionally related date of death, the time period for annual amount is based on the 5 most
to the qualified use. material participation could not be met recent calendar years ending before the
Elements of value such as mineral because the decedent had retired or date of the decedent’s death. See
rights that are not related to the farm or was disabled, a substitute period may Effective interest rate below.
business use are not eligible for apply. The decedent must have retired Gross cash rental. Generally,
special-use valuation. on social security or been disabled for a gross cash rental is the total amount of
Property acquired from the continuous period ending with death. A cash received in a calendar year for the
decedent. Property is considered to person is disabled for this purpose if he use of actual tracts of comparable farm
have been acquired from or to have or she was mentally or physically real property in the same locality as the
Part Instructions -9-
property being specially valued. You annual gross cash rental can be section 2032A(b)(1)(B) must be
may not use: determined. Net share rental is the specially valued under the election.
• Appraisals or other statements difference between the gross value of If joint or undivided interests (that is,
regarding rental value or areawide produce received by the lessor from the interests as joint tenants or tenants in
averages of rentals, or comparable land and the cash common) in the same property are
• Rents that are paid wholly or partly operating expenses (other than real received from a decedent by qualified
in-kind, and the amount of rent may not estate taxes) of growing the produce heirs, an election for one heir’s joint or
be based on production. that, under the lease, are paid by the undivided interest need not include any
The rental must have resulted from an lessor. The production of the produce other heir’s interest in the same
arm’s-length transaction. Also, the must be the business purpose of the property if the electing heir’s interest
amount of rent is not reduced by the farming operation. For this purpose, plus other property to be specially
amount of any expenses or liabilities produce includes livestock. valued satisfies the requirements of
associated with the farm operation or section 2032A(b)(1)(B).
the lease. The gross value of the produce is
generally the gross amount received if If successive interests (that is, life
Comparable property. the produce was disposed of in an estates and remainder interests) are
Comparable property must be situated arm’s-length transaction within the created by a decedent in otherwise
in the same locality as the specially period established by the Department qualified property, an election under
valued property as determined by of Agriculture for its price support section 2032A is available only for that
generally accepted real property program. Otherwise, the value is the property (or part) in which qualified
valuation rules. The determination of weighted average price for which the heirs of the decedent receive all of the
comparability is based on all the facts produce sold on the closest national or successive interests, and such an
and circumstances. It is often regional commodities market. The election must include the interests of all
necessary to value land in segments value is figured for the date or dates on of those heirs.
where there are different uses or land which the lessor received (or For example, if a surviving spouse
characteristics included in the specially constructively received) the produce. receives a life estate in otherwise
valued land.
Valuing a real property interest in qualified property and the spouse’s
The following list contains some of closely held business. Use this brother receives a remainder interest in
the factors considered in determining method to determine the special-use fee, no part of the property may be
comparability: valuation for qualifying real property valued under a section 2032A election.
• Similarity of soil; used in a trade or business other than Where successive interests in
• Whether the crops grown would farming. You may also use this method specially valued property are created,
deplete the soil in a similar manner; for qualifying farm property if there is no remainder interests are treated as
• Types of soil conservation comparable land or if you elect to use being received by qualified heirs only if
techniques that have been practiced on it. Under this method, the following the remainder interests are not
the two properties; factors are considered: contingent on surviving a nonfamily
• Whether the two properties are • The capitalization of income that the member or are not subject to
subject to flooding; property can be expected to yield for divestment in favor of a nonfamily
• Slope of the land; farming or for closely held business member.
• For livestock operations, the carrying purposes over a reasonable period of
capacity of the land; time with prudent management and Protective Election
• For timbered land, whether the traditional cropping patterns for the You may make a protective election to
timber is comparable; area, taking into account soil capacity, specially value qualified real property.
• Whether the property as a whole is terrain configuration, and similar Under this election, whether or not you
unified or segmented. If segmented, the factors; may ultimately use special-use
availability of the means necessary for • The capitalization of the fair rental valuation depends upon values as
movement among the different value of the land for farming or for finally determined (or agreed to
sections; closely held business purposes; following examination of the return)
• Number, types, and conditions of all • The assessed land values in a state meeting the requirements of section
buildings and other fixed improvements that provides a differential or use value 2032A.
located on the properties and their assessment law for farmland or closely To make a protective election, check
location as it affects efficient held business; “Yes” on line 2 and complete Schedule
management, use, and value of the • Comparable sales of other farm or A-1 according to the instructions for
property; and closely held business land in the same Protective election.
• Availability and type of transportation geographical area far enough removed
facilities in terms of costs and of If you make a protective election,
from a metropolitan or resort area so you should complete the initial Form
proximity of the properties to local that nonagricultural use is not a
markets. 706 by valuing all property at its FMV.
significant factor in the sales price; and Do not use special-use valuation.
You must specifically identify on the • Any other factor that fairly values the Usually, this will result in higher estate
return the property being used as farm or closely held business value of and GST tax liabilities than will be
comparable property. Use the type of the property. ultimately determined if special-use
descriptions used to list real property on valuation is allowed. The protective
Schedule A. Making the Election election does not extend the time to
Effective interest rate. See Tables Include the words “section 2032A pay the taxes shown on the return. If
2 and 3 of Revenue Ruling 2011-17, valuation” in the “Description” column of you wish to extend the time to pay the
2011-33 I.R.B. 160, available at www. any Form 706 schedule if section taxes, you should file Form 4768 in
irs.gov/pub/irs-irbs/irb11-33.pdf, for the 2032A property is included in the adequate time before the return due
average annual effective interest rates decedent’s gross estate. date.
in effect for 2011. An election under section 2032A If it is found that the estate qualifies
Net share rental. You may use need not include all the property in an for special-use valuation based on the
average annual net share rental from estate that is eligible for special-use values as finally determined (or agreed
comparable land only if there is no valuation, but sufficient property to to following examination of the return),
comparable land from which average satisfy the threshold requirements of you must file an amended Form 706
-10- Part Instructions
(with a complete section 2032A property of the estate. In addition, all of in a qualifying lending and financing
election) within 60 days after the date the persons having an interest in the business is treated as an asset used in
of this determination. Complete the designated property must consent to carrying on a trade or business; see
amended return using special-use the creation of this lien on the property section 6166(b)(10) for details. Stock in
values under the rules of section pledged. another corporation is a passive asset
2032A, and complete Schedule A-1 Percentage requirements. To qualify unless the stock is treated as held by
and attach all of the required for installment payments, the value of the decedent because of the election to
statements. the interest in the closely held business treat holding company stock as
that is included in the gross estate must business company stock; see Holding
Additional information company stock, below.
be more than 35% of the adjusted
For definitions and additional gross estate (the gross estate less If a corporation owns at least 20% in
information, see section 2032A and the expenses, indebtedness, taxes, and value of the voting stock of another
related regulations. losses — Schedules J, K, and L of Form corporation, or the other corporation
Line 3. Section 6166 706 (do not include any portion of the had no more than 45 shareholders and
state death tax deduction)). at least 80% of the value of the assets
Installment Payments Interests in two or more closely held of each corporation is attributable to
If the gross estate includes an interest businesses are treated as an interest in assets used in carrying on a trade or
in a closely held business, you may be a single business if at least 20% of the business, then these corporations will
able to elect to pay part of the estate total value of each business is included be treated as a single corporation, and
tax in installments under section 6166. in the gross estate. For this purpose, the stock will not be treated as a
The maximum amount that can be include any interest held by the passive asset. Stock held in the other
paid in installments is that part of the surviving spouse that represents the corporation is not taken into account in
estate tax that is attributable to the surviving spouse’s interest in a determining the 80% requirement.
closely held business; see Determine business held jointly with the decedent Interest in closely held business.
how much of the estate tax may be as community property or as joint For purposes of the installment
paid in installments under section 6166, tenants, tenants by the entirety, or payment election, an “interest in a
below. In general, that amount is the tenants in common. closely held business” means:
amount of tax that bears the same ratio Value. The value used for meeting • Ownership of a trade or business
to the total estate tax that the value of the percentage requirements is the carried on as a proprietorship,
the closely held business included in same value used for determining the • An interest as a partner in a
the gross estate bears to the adjusted gross estate. Therefore, if the estate is partnership carrying on a trade or
gross estate. valued under alternate valuation or business if 20% or more of the total
Bond or lien. The IRS may require special-use valuation, you must use capital interest was included in the
that an estate furnish a surety bond those values to meet the percentage gross estate of the decedent or the
when granting the installment payment requirements. partnership had no more than 45
election. In the alternative, the executor Transfers before death. Generally, partners, or
may consent to elect the special lien gifts made before death are not • Stock in a corporation carrying on a
provisions of section 6324A, in lieu of included in the gross estate. However, trade or business if 20% or more in
the bond. The IRS will contact you the estate must meet the 35% value of the voting stock of the
regarding the specifics of furnishing the requirement by both including in and corporation is included in the gross
bond or electing the special lien. The excluding from the gross estate any estate of the decedent or the
IRS will make this determination on a gifts made by the decedent in the corporation had no more than 45
case-by-case basis, and you may be 3-year period ending on the date of shareholders.
asked to provide additional information. death. The partnership or corporation must
If you elect the lien provisions, Passive assets. In determining the be carrying on a trade or business at
section 6324A requires that the lien be value of a closely held business and the time of the decedent’s death. For
placed on property having a value whether the 35% requirement is met, further information on whether certain
equal to the total deferred tax plus 4 do not include the value of any passive partnerships or corporations owning
years of interest. The property must be assets held by the business. A passive real property interests constitute a
expected to survive the deferral period, asset is any asset not used in carrying closely held business, see Revenue
and does not necessarily have to be on a trade or business. Any asset used Ruling 2006-34, 2006-26 I.R.B. 1171,
available at www.irs.gov/pub/irs-irbs/
irb06-26.pdf.
Line 3 Worksheet—Adjusted Gross Estate In determining the number of
partners or shareholders, a partnership
1 What is the value of the decedent’s interest in closely held or stock interest is treated as owned by
business(es) included in the gross estate (less value of passive one partner or shareholder if it is
assets, as mentioned in section 6166(b)(9))? . . . . . . . . . . . . . . . . . community property or held by a
2 What is the value of the gross estate (Form 706, page 3, Part 5, husband and wife as joint tenants,
line 12)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . tenants in common, or as tenants by
3 Add lines 17, 18, and 19 from Form 706, page 3, Part 5. . . . . . . . . . the entirety.
4 Subtract line 3 from line 2 to calculate the adjusted gross estate. . . . Property owned directly or indirectly
5 Divide line 1 by line 4 to calculate the value the business interest by or for a corporation, partnership,
bears to the value of the adjusted gross estate. For purposes of this estate, or trust is treated as owned
calculation, carry the decimal to the sixth place; the IRS will make this proportionately by or for its
adjustment for purposes of determining the correct amount. If this
amount is less than 0.350000, the estate does not qualify to make the
shareholders, partners, or beneficiaries.
election under section 6166. . . . . . . . . . . . . . . . . . . . . . . . . . . . . For trusts, only beneficiaries with
6 Multiply line 5 by the amount on line 16 of Form 706, page 1, Part 2. present interests are considered.
This is the maximum amount of estate tax that may be paid in The interest in a closely held farm
installments under section 6166. (Certain GST taxes may be deferred business includes the interest in the
as well; see section 6166(i) for more information.) . . . . . . . . . . . . . residential buildings and related
improvements occupied regularly by the
Part Instructions -11-
owners, lessees, and employees date, the IRS may terminate the right to Making the election. If you check
operating the farm. make installment payments and force this line to make a final election, you
Holding company stock. The an acceleration of payment of the tax must attach the notice of election
executor may elect to treat as business upon notice and demand. described in Regulations section
company stock the portion of any 20.6166-1(b). If you check this line to
Generally, if any portion of the make a protective election, you must
holding company stock that represents interest in the closely held business
direct ownership (or indirect ownership attach a notice of protective election as
which qualifies for installment payments described in Regulations section
through one or more other holding is distributed, sold, exchanged, or
companies) in a business company. A 20.6166-1(d). Regulations section
otherwise disposed of, or money and 20.6166-1(b) requires that the notice of
holding company is a corporation other property attributable to such an
holding stock in another corporation. A election is made by attaching to a
interest is withdrawn, and the timely filed estate tax return the
business company is a corporation aggregate of those events equals or
carrying on a trade or business. following information:
exceeds 50% of the value of the • The decedent’s name and taxpayer
In general, this election applies only interest, then the right to make identification number as they appear on
to stock that is not readily tradable. installment payments will be the estate tax return;
However, the election can be made if terminated, and the unpaid portion of • The amount of tax that is to be paid
the business company stock is readily the tax will be due upon notice and in installments;
tradable, as long as all of the stock of demand. See section 6166(g). • The date selected for payment of the
each holding company is not readily Interest computation. A special first installment;
tradable. interest rate applies to installment • The number of annual installments,
For purposes of the 20% voting payments. For decedents dying in including first installment, in which the
stock requirement, stock is treated as 2011, the interest rate is 2% on the tax is to be paid;
voting stock to the extent the holding lesser of: • The properties shown on the estate
company owns voting stock in the • $476,000 or tax return that are the closely held
business company. • The amount of the estate tax that is business interest (identified by
If the executor makes this election, attributable to the closely held business schedule and item number); and
the first installment payment is due and that is payable in installments. • The facts that formed the basis for
when the estate tax return is filed. The 2% portion. The 2% portion is an the executor’s conclusion that the
5-year deferral for payment of the tax, amount equal to the amount of the estate qualifies for payment of the
as discussed below under Time for tentative estate tax (on $1,000,000 plus estate tax in installments.
payment, does not apply. In addition, the applicable exclusion amount in You may also elect to pay certain
the 2% interest rate, discussed below effect) minus the applicable credit GST taxes in installments. See section
under Interest computation, will not amount in effect. However, if the 6166(i).
apply. Also, if the business company amount of estate tax extended under
stock is readily tradable, as explained section 6166 is less than the amount Line 4. Reversionary or
above, the tax must be paid in five figured above, the 2% portion is the Remainder Interests
installments. lesser amount. For details of this election, see section
Determine how much of the estate Inflation adjustment. The 6163 and the related regulations.
tax may be paid in installments $1,000,000 amount used to calculate
under section 6166. To determine the 2% portion is indexed for inflation
whether the election may be made, you for the estates of decedents dying in a Part 4—General
must calculate the adjusted gross
estate. (See Line 3 Worksheet —
calendar year after 1998. For an estate
of a decedent dying in calendar year
Information
Adjusted Gross Estate below.) To 2011, the dollar amount used to
determine the value of the adjusted determine the “2% portion” of the estate Authorization
gross estate, subtract the deductions tax payable in installments under Completing the authorization will
(Schedules J, K, and L) from the value section 6166 is $1,360,000. authorize one attorney, accountant, or
of the gross estate. enrolled agent to represent the estate
To determine over how many Computation. Interest on the and receive confidential tax information,
installments the estate tax may be paid, portion of the tax in excess of the 2% but will not authorize the representative
please refer to sections 6166(a), (b)(7), portion is figured at 45% of the annual to enter into closing agreements for the
(b)(8), and (b)(10). rate of interest on underpayments. This estate.
rate is based on the federal short-term
Time for payment. Under the rate and is announced quarterly by the Note. If you wish to represent the
installment method, the executor may IRS in the Internal Revenue Bulletin. estate, you must complete and sign the
elect to defer payment of the qualified authorization.
estate tax, but not interest, for up to 5 If you elect installment payments
If you wish to authorize persons
years from the original payment due and the estate tax due is more than the
other than attorneys, accountants, and
date. After the first installment of tax is maximum amount to which the 2%
enrolled agents, or if you wish to
paid, you must pay the remaining interest rate applies, each installment
authorize more than one person to
installments annually by the date 1 year payment is deemed to comprise both
receive confidential information or
after the due date of the preceding tax subject to the 2% interest rate and
represent the estate, you must
installment. There can be no more than tax subject to 45% of the regular
complete and attach Form 2848. You
10 installment payments. underpayment rate. The amount of
must also complete and attach Form
each installment that is subject to the
Interest on the unpaid portion of the 2848 if you wish to authorize someone
2% rate is the same as the percentage
tax is not deferred and must be paid to enter into closing agreements for the
of total tax payable in installments that
annually. Interest must be paid at the estate. Filing a completed Form 2848
is subject to the 2% rate.
same time as and as a part of each with this return may expedite
installment payment of the tax. The interest paid on installment processing of the Form 706.
Acceleration of payments. If the
estate fails to make payments of tax or
!
CAUTION
payments is not deductible as
an administrative expense of the
If you wish only to authorize
someone to inspect and/or receive
interest within 6 months of the due estate. confidential tax information (but not to
-12- Part Instructions
represent you before the IRS), not making the election under section Line 8. Insurance Not
complete and file Form 8821. 2010(c)(5); or,
• Enter “No Election under Section Included in the Gross Estate
Line 3 2010(c)(5)” across the top of the first If you answered “Yes” to either 8a or
Enter the marital status of the decedent page of Form 706. 8b, for each policy you must complete
at the time of death by checking the Alternatively, if the filing of a Form 706 and attach Schedule D, Form 712, and
appropriate box and providing the is not otherwise required for the an explanation of why the policy or its
requested information. If the decedent decedent’s estate, not filing a timely proceeds are not includible in the gross
had more than one marriage in his or and complete Form 706 will effectively estate.
her lifetime, on the Explanation line prohibit the surviving spouse’s use of
provide the name and SSN of each the decedent’s unused exemption. Line 10. Partnership
former spouse, the date(s) the marriage Interests and Stock in Close
ended, and specify whether the Line 5 Corporations
marriage ended by annulment, divorce Name. Enter the name of each If you answered “Yes” on line 10a, you
decree, or death of spouse (to the individual, trust, or estate that received must include full details for partnerships
extent the information was not already (or will receive) benefits of $5,000 or (including family limited partnerships),
provided above). Also, if the prior more from the estate directly as an heir, unincorporated businesses, and limited
marriage ended in death and the next-of-kin, devisee, or legatee; or liability companies on Schedule F
predeceased spouse died after indirectly (for example, as beneficiary of (Schedule E if the partnership interest
December 31, 2010, indicate on the an annuity or insurance policy, is jointly owned). You must also include
Explanation line whether the executor shareholder of a corporation, or partner full details for fractional interests in real
of the estate of the predeceased of a partnership that is an heir, etc.). estate on Schedule A, and full details
spouse elected to allow the decedent to for stock of inactive or close
use the deceased spouse’s unused Identifying number. Enter the SSN of
each individual beneficiary listed. If the corporations on Schedule B.
exclusion amount. If the executor of the
predeceased spouse’s estate made the number is unknown, or the individual Value these interests using the rules
election, attach to the return the has no number, please indicate of Regulations section 20.2031-2
predeceased spouse’s Form 706 and a “unknown” or “none.” For trusts and (stocks) or 20.2031-3 (other business
calculation of the deceased spousal other estates, enter the EIN. interests).
unused exclusion amount (DSUE Relationship. For each individual A close corporation is a corporation
amount). For more information, see beneficiary, enter the relationship (if whose shares are owned by a limited
section 2010(c)(4). known) to the decedent by reason of number of shareholders. Often, one
blood, marriage, or adoption. For trust family holds the entire stock issue. As a
For estates of decedents dying in or estate beneficiaries, indicate
2011, the DSUE amount equals the result, little, if any, trading of the stock
“TRUST” or “ESTATE.” takes place. There is, therefore, no
lesser of:
Amount. Enter the amount actually established market for the stock, and
1. The basic exclusion amount of those sales that do occur are at
$5,000,000, or distributed (or to be distributed) to each
beneficiary including transfers during irregular intervals and seldom reflect all
2. The basic exclusion amount of the elements of a representative
$5,000,000, MINUS the amount in line the decedent’s life from Schedule G
required to be included in the gross transaction as defined by FMV.
5, Part 2 — Tax Computation, of the last
predeceased spouse’s Form 706 (but estate. The value to be entered need
not be exact. A reasonable estimate is Line 12. Trusts
not below zero).
sufficient. For example, where precise If you answered “Yes” on either line
Note. The election to use the DSUE values cannot readily be determined, as 12a or line 12b, you must attach a copy
amount applies to the most recent with certain future interests, a of the trust instrument for each trust.
predeceased spouse of the decedent. reasonable approximation should be You must complete Schedule G if
entered. The total of these distributions you answered “Yes” on line 12a and
should approximate the amount of
Line 4 gross estate reduced by funeral and
Schedule F if you answered “Yes” on
Complete line 4 whether or not there is line 12b.
administrative expenses, debts and
a surviving spouse and whether or not mortgages, bequests to surviving Line 14. Foreign Accounts
the surviving spouse received any spouse, charitable bequests, and any
benefits from the estate. If there was no federal and state estate and GST taxes Check “Yes” on line 14 if the decedent
surviving spouse on the date of paid (or payable) relating to the benefits at the time of death had an interest in
decedent’s death, enter “None” in line received by the beneficiaries listed on or signature or other authority over a
4a and leave lines 4b and 4c blank. lines 4 and 5. financial account in a foreign country,
The value entered in line 4c need not such as a bank account, securities
be exact. See the instructions for All distributions of less than $5,000 account, an offshore trust, or other
“Amount” under line 5 below. to specific beneficiaries may be financial account.
included with distributions to
Note. The executor is considered to unascertainable beneficiaries on the
have elected to allow the surviving
spouse to use the decedent’s unused
line provided. Part 5—Recapitulation
exclusion amount by filing a timely and Line 6. Section 2044 Property
complete Form 706. If you answered “Yes,” these assets
Gross Estate
Note. If the estate chooses not to must be shown on Schedule F. Items 1 through 10. You must make
allow the surviving spouse to take into Section 2044 property is property for an entry in each of items 1 through 9.
account, for estate and gift tax which a previous section 2056(b)(7) If the gross estate does not contain
purposes, the decedent’s unused election (QTIP election) has been any assets of the type specified by a
exclusion amount, then do one of the made, or for which a similar gift tax given item, enter zero for that item.
following: election (section 2523) has been made. Entering zero for any of items 1 through
• Attach a statement to the Form 706 For more information, see the 9 is a statement by the executor, made
indicating that the decedent’s estate is instructions for Schedule F, below. under penalties of perjury, that the
Part Instructions -13-
Schedule A–Example 1
In this example, alternate valuation is not adopted; the date of death is January 1, 2011.
Item Description Alternate Alternate Value at
Number Valuation Value date of
Date death
1 House and lot, 1921 William Street, NW, Washington, DC (lot 6, square 481). Rent of $550,000
$8,100 due at the end of each quarter, February 1, May 1, August 1, and November 1.
Value based on appraisal, copy of which is attached . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent due on item 1 for quarter ending November 1, 2010, but not collected at date of 8,100
death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent accrued on Item 1 for November and December 2010 . . . . . . . . . . . . . . . . . . . . . 5,400
2 House and lot, 304 Jefferson Street, Alexandria, VA (lot 18, square 40). Rent of $1,800 375,000
payable monthly. Value based on appraisal, copy of which is attached . . . . . . . . . . . . .
Rent due on Item 2 for December 2010, but not collected at death . . . . . . . . . . . . . . . . 1,800

gross estate does not contain any • Schedule I if you answered “Yes” to Schedule A—Real Estate
includible assets covered by that item. question 15 of Part 4.
If the total gross estate contains any
Do not enter any amounts in the Exclusion real estate, you must complete
“Alternate value” column unless you Schedule A and file it with the return.
elected alternate valuation on line 1 of Item 11. Conservation easement On Schedule A, list real estate the
Part 3 — Elections by the Executor on exclusion. You must complete and decedent owned or had contracted to
page 2 of the Form 706. attach Schedule U (along with any purchase. Number each parcel in the
required attachments) to claim the left-hand column.
Which schedules to attach for items exclusion on this line.
1 through 9. You must attach: Describe the real estate in enough
• Schedule F to the return and answer Deductions detail so that the IRS can easily locate
its questions even if you report no Items 13 through 21. You must it for inspection and valuation. For each
assets on it; attach the appropriate schedules for the parcel of real estate, report the area
• Schedules A, B, and C if the gross deductions you claim. and, if the parcel is improved, describe
estate includes any (1) Real Estate, (2) Item 17. If item 16 is less than or the improvements. For city or town
Stocks and Bonds, or (3) Mortgages, equal to the value (at the time of the property, report the street and number,
Notes, and Cash, respectively; decedent’s death) of the property ward, subdivision, block and lot, etc.
• Schedule D if the gross estate subject to claims, enter the amount For rural property, report the township,
includes any life insurance or if you from item 16 on item 17. range, landmarks, etc.
answered “Yes” to question 8a of Part
4 — General Information; If the amount on item 16 is more If any item of real estate is subject to
• Schedule E if the gross estate than the value of the property subject to a mortgage for which the decedent’s
contains any jointly owned property or if claims, enter the greater of: estate is liable, that is, if the
you answered “Yes” to question 9 of • The value of the property subject to indebtedness may be charged against
Part 4; claims or other property of the estate that is not
• Schedule G if the decedent made • The amount actually paid at the time subject to that mortgage, or if the
any of the lifetime transfers to be listed the return is filed. decedent was personally liable for that
on that schedule or if you answered In no event should you enter more mortgage, you must report the full value
“Yes” to question 11 or 12a of Part 4; on item 17 than the amount on item 16. of the property in the value column.
• Schedule H if you answered “Yes” to See section 2053 and the related Enter the amount of the mortgage
question 13 of Part 4; and regulations for more information. under “Description” on this schedule.

Schedule A–Example 2

In this example, alternate valuation is adopted; the date of death is January 1, 2011
Item Description Alternate Alternate Value at
Number Valuation Value date of
Date death
1 House and lot, 1921 William Street, NW, Washington, DC (lot 6, square 481). Rent of 7/1/11 $535,000 $550,000
$8,100 due at the end of each quarter, February 1, May 1, August 1, and November
1. Value based on appraisal, copy of which is attached. Not disposed of within 6
months of date of death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent due on item 1 for quarter ending November 1, 2010, but not collected until 2/1/11 8,100 8,100
February 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent accrued on Item 1 for November and December 2010, collected on February 1, 2/1/11 5,400 5,400
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 House and lot, 304 Jefferson Street, Alexandria, VA (lot 18, square 40). Rent of 5/1/11 369,000 375,000
$1,800 payable monthly. Value based on appraisal, copy of which is attached.
Property exchanged for farm on May 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent due on Item 2 for December 2010, but not collected until February 1, 2011 . . . . 2/1/11 1,800 1,800

-14- Part Instructions

The unpaid amount of the mortgage subsequently filed. You need not interests on the Schedule R, Parts 2
may be deducted on Schedule K. complete columns B through D of lines and 3 worksheets, as appropriate. Do
If the decedent’s estate is not liable 3 and 4. You need not complete any not use Schedule R-1 as a worksheet.
for the amount of the mortgage, report other line entries on Schedule A-1. Completing the special-use value
only the value of the equity of Completing Schedule A-1 as described worksheets. On Schedule R, Parts 2
redemption (or value of the property above constitutes a Notice of Protective and 3, lines 2 through 4 and 6, enter
less the indebtedness) in the value Election as described in Regulations -0-.
column as part of the gross estate. Do section 20.2032A-8(b).
Completing the fair market value
not enter any amount less than zero. Part 2. Notice of Election worksheets.
Do not deduct the amount of • Schedule R, Parts 2 and 3, lines 2
indebtedness on Schedule K. Line 10. Because the special-use and 3, fixed taxes and other charges. If
Also list on Schedule A real property valuation election creates a potential valuing the interests at their FMV
the decedent contracted to purchase. tax liability for the recapture tax of (instead of special-use value) causes
Report the full value of the property and section 2032A(c), you must list each any of these taxes and charges to
not the equity in the value column. person who receives an interest in the increase, enter the increased amount
Deduct the unpaid part of the purchase specially valued property on Schedule (only) on these lines and attach an
price on Schedule K. A-1. If there are more than eight explanation of the increase. Otherwise,
persons who receive interests, use an enter -0-.
Report the value of real estate
without reducing it for homestead or
additional sheet that follows the format • Schedule R, Parts 2 and 3, line
of line 10. In the columns “Fair market 6 — GST exemption allocation. If you
other exemption, or the value of dower, value” and “Special-use value,” you
curtesy, or a statutory estate created completed Schedule R, Part 1, line 10,
should enter the total respective values enter on line 6 the amount shown for
instead of dower or curtesy. of all the specially valued property the skip person on the line 10
Explain how the reported values interests received by each person. special-use allocation schedule you
were determined and attach copies of attached to Schedule R. If you did not
any appraisals. GST Tax Savings complete Schedule R, Part 1, line 10,
To figure the additional GST tax due enter -0- on line 6.
Schedule A-1—Section upon disposition (or cessation of Total GST tax savings. For each skip
qualified use) of the property, each
2032A Valuation “skip person” (as defined in the
person, subtract the tax amount on line
10, Part 2 of the special-use value
The election to value certain farm and instructions to Schedule R) who worksheet from the tax amount on line
closely held business property at its receives an interest in the specially 10, Part 2 of the fair market value
special-use value is made by checking valued property must know the total worksheet. This difference is the skip
“Yes” on Form 706, Part 3 — Elections GST tax savings on all of the interests person’s total GST tax savings.
by the Executor, line 2. Schedule A-1 is in specially valued property received.
used to report the additional information This GST tax savings is the difference Part 3. Agreement to Special
that must be submitted to support this between the total GST tax that was Valuation Under Section
election. In order to make a valid imposed on all of the interests in
election, you must complete Schedule specially valued property received by 2032A
A-1 and attach all of the required the skip person valued at their The agreement to special valuation by
statements and appraisals. special-use value and the total GST tax persons with an interest in property is
For definitions and additional that would have been imposed on the required under section 2032A(a)(1)(B)
information concerning special-use same interests received by the skip and (d)(2) and must be signed by all
valuation, see section 2032A and the person had they been valued at their parties who have any interest in the
related regulations. FMV. property being valued based on its
Because the GST tax depends on qualified use as of the date of the
Part 1. Type of Election the executor’s allocation of the GST decedent’s death.
Estate and GST tax elections. If you exemption and the grandchild An interest in property is an interest
elect special-use valuation for the exclusion, the skip person who receives that, as of the date of the decedent’s
estate tax, you must also elect the interests is unable to figure this death, can be asserted under
special-use valuation for the GST tax savings. Therefore, for each applicable law so as to affect the
Generation-Skipping Transfer (GST) skip person who receives an interest in disposition of the specially valued
tax and vice versa. specially valued property, you must property by the estate. Any person who
attach worksheets showing the total at the decedent’s death has any such
You must value each specific GST tax savings attributable to all of interest in the property, whether present
property interest at the same value for that person’s interests in specially or future, or vested or contingent, must
GST tax purposes that you value it at valued property. enter into the agreement. Included are
for estate tax purposes. owners of remainder and executory
How to figure the GST tax savings.
Protective election. To make the Before figuring each skip person’s GST interests; the holders of general or
protective election described in the tax savings, you must complete special powers of appointment;
separate instructions for Part Schedules R and R-1 for the entire beneficiaries of a gift over in default of
3 — Elections by the Executor, line 2, estate (using the special-use values). exercise of any such power; joint
you must check this box, enter the tenants and holders of similar undivided
decedent’s name and social security For each skip person, you must interests when the decedent held only a
number in the spaces provided at the complete two Schedules R (Parts 2 and joint or undivided interest in the
top of Schedule A-1, and complete Part 3 only) as worksheets, one showing the property or when only an undivided
2. Notice of Election, line 1 and lines 3 interests in specially valued property interest is specially valued; and trustees
and 4, column A. For purposes of the received by the skip person at their of trusts and representatives of other
protective election, list on line 3 all of special-use value and one showing the entities holding title to, or holding any
the real property that passes to the same interests at their FMV. interests in the property. An heir who
qualified heirs even though some of the If the skip person received interests has the power under local law to
property will be shown on line 2 when in specially valued property that were challenge a will and thereby affect
the additional notice of election is shown on Schedule R-1, show these disposition of the property is not,
Part Instructions -15-
however, considered to be a person Does the notice of election include Does the notice of election include,
with an interest in property under the FMV of the real property to be for each item of specially valued
section 2032A solely by reason of that specially valued and also include its property, the name of every person
right. Likewise, creditors of an estate value based on the qualified use taking an interest in that item of
are not such persons solely by reason (determined without the adjustments specially valued property and the
of their status as creditors. provided in section 2032A(b)(3)(B))? following information about each
If any person required to enter into such person: (a) the person’s
the agreement either desires that an Does the notice of election include address, (b) the person’s taxpayer
agent act for him or her or cannot the adjusted value (as defined in identification number, (c) the
legally bind himself or herself due to section 2032A(b)(3)(B)) of (a) all person’s relationship to the
infancy or other incompetency, or due real property that both passes from decedent, and (d) the value of the
to death before the election under the decedent and is used in a property interest passing to that
section 2032A is timely exercised, a qualified use, without regard to person based on both FMV and
representative authorized by local law whether it is to be specially valued, qualified use?
to bind the person in an agreement of and (b) all real property to be
this nature may sign the agreement on specially valued? Does the notice of election include
his or her behalf. affidavits describing the activities
The IRS will contact the agent Does the notice of election include constituting material participation
designated in the agreement on all (a) the items of personal property and the identity of the material
matters relating to continued shown on the estate tax return that participants?
qualification under section 2032A of the pass from the decedent to a
specially valued real property and on all qualified heir and that are used in Does the notice of election include a
matters relating to the special lien qualified use and (b) the total value legal description of each item of
arising under section 6324B. It is the of such personal property adjusted specially valued property?
duty of the agent as attorney-in-fact for under section 2032A(b)(3)(B)?
the parties with interests in the specially (In the case of an election made for
valued property to furnish the IRS with Does the notice of election include qualified woodlands, the information
any requested information and to notify the adjusted value of the gross included in the notice of election must
the IRS of any disposition or cessation estate? (See section include the reason for entitlement to the
of qualified use of any part of the Woodlands election.)
2032A(b)(3)(A).)
property.
Does the notice of election include Any election made under section 2032A
Checklist for Section 2032A the method used to determine the will not be valid unless a properly
Election special-use value? executed agreement (Schedule A-1,
Part 3) is filed with the estate tax return.
If you are going to make the Does the notice of election include To ensure that the agreement satisfies
! special-use valuation election
CAUTION on Schedule A-1, please use
copies of written appraisals of the the requirements for a valid election,
FMV of the real property? use the following checklist:
this checklist to ensure that you are
providing everything necessary to make Does the notice of election include a Has the agreement been signed
a valid election. statement that the decedent and/or by each qualified heir having an
To have a valid special-use valuation a member of his or her family has interest in the property being
election under section 2032A, you must owned all of the specially valued specially valued?
file, in addition to the federal estate tax property for at least 5 years of the 8
return, (a) a notice of election years immediately preceding the Has every qualified heir expressed
(Schedule A-1, Part 2), and (b) a fully date of the decedent’s death? consent to personal liability under
executed agreement (Schedule A-1, section 2032A(c) in the event of
Part 3). You must include certain Does the notice of election include a
information in the notice of election. To an early disposition or early
statement as to whether there were
ensure that the notice of election any periods during the 8-year period
cessation of qualified use?
includes all of the information required preceding the decedent’s date of
for a valid election, use the following death during which the decedent or Is the agreement that is actually
checklist. The checklist is for your use a member of his or her family did signed by the qualified heirs in a
only. Do not file it with the return. not (a) own the property to be form that is binding on all of the
specially valued, (b) use it in a qualified heirs having an interest
Does the notice of election include qualified use, or (c) materially in the specially valued property?
the decedent’s name and social participate in the operation of the
security number as they appear on farm or other business? (See Does the agreement designate an
the estate tax return? section 2032A(e)(6).) agent to act for the parties to the
agreement in all dealings with the
Does the notice of election include IRS on matters arising under
the relevant qualified use of the section 2032A?
property to be specially valued?

Does the notice of election describe

Has the agreement been signed
the items of real property shown on by the designated agent and does
the estate tax return that are to be it give the address of the agent?
specially valued and identify the
property by the Form 706 schedule
and item number?

-16- Part Instructions

Schedule B—Stocks and Note. Unless specifically exempted by
an estate tax provision of the Code,
List interest and dividends on each
stock or bond on a separate line.
Bonds bonds that are exempt from federal Indicate as a separate item
income tax are not exempt from estate dividends that have not been collected
Before completing Schedule B, tax. You should list these bonds on
TIP see the examples illustrating the at death and are payable to the
Schedule B. decedent or the estate because the
alternate valuation dates being
adopted and not being adopted, below. Public housing bonds includible in decedent was a stockholder of record
the gross estate must be included at on the date of death. However, if the
their full value. stock is being traded on an exchange
If the total gross estate contains any and is selling ex-dividend on the date of
stocks or bonds, you must complete If you paid any estate, inheritance, the decedent’s death, do not include
Schedule B and file it with the return. legacy, or succession tax to a foreign the amount of the dividend as a
country on any stocks or bonds separate item. Instead, add it to the
On Schedule B, list the stocks and included in this schedule, group those ex-dividend quotation in determining
bonds included in the decedent’s gross stocks and bonds together and label the FMV of the stock on the date of the
estate. Number each item in the them “Subjected to Foreign Death decedent’s death. Dividends declared
left-hand column. Taxes.” on shares of stock before the death of

Schedule B Examples

Example showing use of Schedule B where the alternate valuation is not adopted; date of death, January 1, 2011
Description, including face amount of bonds or number of shares and par value Alternate Value at
Item
where needed for identification. Give CUSIP number. If trust, partnership, or valuation Alternate date of
number
closely held entity, give EIN. Unit value date value death
CUSIP number or
EIN, where
applicable
1 $60,000-Arkansas Railroad Co. first mortgage 4%, 20-year
bonds, due 2012. Interest payable quarterly on Feb. 1, May
1, Aug. 1, and Nov. 1; N.Y. Exchange . . . . . . . . . . . . . . . XXXXXXXXX 100 - - - - - - - $- - - - - - - $ 60,000
Interest coupons attached to bonds, item 1, due and
payable on Nov. 1, 2010, but not cashed at date of death . . ------- ------- ------- 600
Interest accrued on item 1, from Nov. 1, 2010, to Jan. 1,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ------- ------- ------- 400
2 500 shares Public Service Corp., common; N.Y. Exchange XXXXXXXXX 110 ------- ------- 55,000
Dividend on item 2 of $2 per share declared Dec. 10, 2010,
payable on Jan. 9, 2011, to holders of record on Dec. 30,
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ------- ------- ------- 1,000

Example showing use of Schedule B where the alternate valuation is adopted; date of death, January 1, 2011
Item Description, including face amount of bonds or number of shares and par value Alternate Value at
number where needed for identification. Give CUSIP number. If trust, partnership, or valuation Alternate date of
closely held entity, give EIN. Unit value date value death
CUSIP number or
EIN, where
applicable
1 $60,000-Arkansas Railroad Co. first mortgage 4%, 20-year
bonds, due 2012. Interest payable quarterly on Feb. 1, May
1, Aug. 1, and Nov. 1; N.Y. Exchange . . . . . . . . . . . . . . . . XXXXXXXXX 100 ------ $- - - - - - $ 60,000
$30,000 of item 1 distributed to legatees on Apr. 1, 2011 . . 99 4/1/11 29,700 ------
$30,000 of item 1 sold by executor on May 1, 2011 . . . . . . 98 5/1/11 29,400 ------
Interest coupons attached to bonds, item 1, due and
payable on Nov. 1, 2010, but not cashed at date of death.
Cashed by executor on Feb. 2, 2011 . . . . . . . . . . . . . . . . ------ 2/2/11 600 600
Interest accrued on item 1, from Nov. 1, 2010, to Jan. 1,
2011. Cashed by executor on Feb. 2, 2011 . . . . . . . . . . . . ------ 2/2/11 400 400
2 500 shares Public Service Corp., common; N.Y. Exchange XXXXXXXXX 110 ------ ------ 55,000
Not disposed of within 6 months following death . . . . . . . . 90 7/1/11 45,000 ------

Dividend on item 2 of $2 per share declared Dec. 10, 2010,

paid on Jan. 9, 2011, to holders of record on Dec. 30, 2010 ------ 1/9/11 1,000 1,000

Part Instructions -17-

the decedent but payable to date. Both trading dates must be letters furnishing these quotations or
stockholders of record on a date after reasonably close to the valuation date. evidence of sale.
the decedent’s death are not includible 2. Prorate the difference between
in the gross estate for federal estate tax the mean prices to the valuation date. Schedule C—Mortgages,
purposes and should not be listed here. 3. Add or subtract (whichever
applies) the prorated part of the Notes, and Cash
Description difference to or from the mean price Complete Schedule C and file it with
Stocks. For stocks, indicate: figured for the nearest trading date your return if the total gross estate
• Number of shares; before the valuation date. contains any:
• Whether common or preferred; • Mortgages,
• Issue; If no actual sales were made • Notes, or
• Par value where needed for reasonably close to the valuation date, • Cash.
identification; make the same computation using the
List on Schedule C:
• Price per share; mean between the bona fide bid and
• Mortgages and notes payable to the
• Exact name of corporation; asked prices instead of sales prices. If
decedent at the time of death.
• Principal exchange upon which sold, actual sales prices or bona fide bid and
• Cash the decedent had at the date of
if listed on an exchange; and asked prices are available within a
death.
• Nine-digit CUSIP number (defined reasonable period of time before the
below). valuation date but not after the Note. Do not list mortgages and notes
valuation date, or vice versa, use the payable by the decedent on Schedule
Bonds. For bonds, indicate: C. (If these are deductible, list them on
• Quantity and denomination; mean between the highest and lowest
sales prices or bid and asked prices as Schedule K.)
• Name of obligor;
• Date of maturity; the FMV.
• Interest rate; For example, assume that sales of List the items on Schedule C in the
• Interest due date; stock nearest the valuation date (June following order:
• Principal exchange, if listed on an 15) occurred 2 trading days before 1. Mortgages;
exchange; and (June 13) and 3 trading days after 2. Promissory notes;
• Nine-digit CUSIP number. (June 18). On those days, the mean 3. Contracts by decedent to sell
If the stock or bond is unlisted, show sale prices per share were $10 and land;
the company’s principal business office. $15, respectively. Therefore, the price 4. Cash in possession; and
of $12 is considered the FMV of a 5. Cash in banks, savings and loan
If the gross estate includes any share of stock on the valuation date. If,
interest in a trust, partnership, or associations, and other types of
however, on June 13 and 18, the mean financial organizations.
closely held entity, provide the sale prices per share were $15 and
employer identification number (EIN) of $10, respectively, the FMV of a share What to enter in the “Description”
the entity in the description column on of stock on the valuation date is $13. column:
Schedules B, E, F, G, M, and O, where For mortgages, list:
applicable. You must also provide the If only closing prices for bonds are
available, see Regulations section • Face value,
EIN of the estate (if any) in the • Unpaid balance,
description column on the above-noted 20.2031-2(b).
• Date of mortgage,
schedules, where applicable. Apply the rules in the section 2031 • Name of maker,
The CUSIP (Committee on Uniform regulations to determine the value of • Property mortgaged,
Security Identification Procedure) inactive stock and stock in close • Date of maturity,
number is a nine-digit number that is corporations. Attach to Schedule B • Interest rate, and
assigned to all stocks and bonds traded complete financial and other data used • Interest date.
on major exchanges and many unlisted to determine value, including balance
sheets (particularly the one nearest to Example to enter in “Description”
securities. Usually, the CUSIP number column: “Bond and mortgage of
is printed on the face of the stock the valuation date) and statements of
the net earnings or operating results $50,000, unpaid balance: $17,000;
certificate. If you do not have a stock dated: January 1, 1992; John Doe to
certificate, the CUSIP may be found on and dividends paid for each of the 5
years immediately before the valuation Richard Roe; premises: 22 Clinton
the broker’s or custodian’s statement or Street, Newark, NJ; due: January 1,
by contacting the company’s transfer date.
2012; interest payable at 10% a
agent. Securities reported as of no value, of year — January 1 and July 1.”
nominal value, or obsolete should be
listed last. Include the address of the For promissory notes, list in the
Valuation company and the state and date of the same way as mortgages.
List the FMV of the stocks or bonds. incorporation. Attach copies of For contracts by the decedent to sell
The FMV of a stock or bond (whether correspondence or statements used to land, list:
listed or unlisted) is the mean between determine the “no value.” • Name of purchaser,
the highest and lowest selling prices If the security was listed on more • Contract date,
quoted on the valuation date. If only the than one stock exchange, use either • Property description,
closing selling prices are available, then the records of the exchange where the • Sale price,
the FMV is the mean between the security is principally traded or the • Initial payment,
quoted closing selling price on the composite listing of combined • Amounts of installment payment,
valuation date and on the trading day exchanges, if available, in a publication • Unpaid balance of principal, and
before the valuation date. of general circulation. In valuing listed • Interest rate.
If there were no sales on the stocks and bonds, you should carefully For cash on hand, list such cash
valuation date, figure the FMV as check accurate records to obtain values separately from bank deposits.
follows: for the applicable valuation date. For cash in banks, savings and loan
1. Find the mean between the If you get quotations from brokers, or associations, and other types of
highest and lowest selling prices on the evidence of the sale of securities from financial organizations, list:
nearest trading date before and the the officers of the issuing companies, • Name and address of each financial
nearest trading date after the valuation attach to the schedule copies of the organization,
-18- Part Instructions
• Amount in each account, • The power to surrender or cancel the joint tenant with right to survivorship or
• Serial or account number, policy; as a tenant by the entirety.
• Nature of account — checking, • The power to assign the policy or to Do not list on this schedule property
savings, time deposit, etc., and revoke an assignment; that the decedent held as a tenant in
• Unpaid interest accrued from date of • The power to pledge the policy for a common, but report the value of the
last interest payment to the date of loan; interest on Schedule A if real estate, or
death. • The power to obtain from the insurer on the appropriate schedule if personal
Note. If you obtain statements from a loan against the surrender value of property. Similarly, community property
the financial organizations, keep them the policy; and held by the decedent and spouse
for IRS inspection. • A reversionary interest if the value of should be reported on the appropriate
the reversionary interest was more than Schedules A through I. The decedent’s
Schedule D—Insurance 5% of the value of the policy interest in a partnership should not be
immediately before the decedent died. entered on this schedule unless the
on the Decedent’s Life (An interest in an insurance policy is partnership interest itself is jointly
If you are required to file Form 706 and considered a reversionary interest if, for owned. Solely owned partnership
there was any insurance on the example, the proceeds become interests should be reported on
decedent’s life, whether or not included payable to the insured’s estate or Schedule F, “Other Miscellaneous
in the gross estate, you must complete payable as the insured directs if the Property Not Reportable Under Any
Schedule D and file it with the return. beneficiary dies before the insured.) Other Schedule.”
Insurance you must include on Life insurance not includible in the Part 1. Qualified joint interests held
Schedule D. Under section 2042, you gross estate under section 2042 may by decedent and spouse. Under
must include in the gross estate: be includible under some other section section 2040(b)(2), a joint interest is a
• Insurance on the decedent’s life of the Code. For example, a life qualified joint interest if the decedent
receivable by or for the benefit of the insurance policy could be transferred by and the surviving spouse held the
estate; and the decedent in such a way that it interest as:
• Insurance on the decedent’s life would be includible in the gross estate • Tenants by the entirety, or
receivable by beneficiaries other than under section 2036, 2037, or 2038. See • Joint tenants with right of
the estate, as described below. the instructions to Schedule G for a survivorship if the decedent and the
description of these sections. decedent’s spouse are the only joint
The term “insurance” refers to life
insurance of every description, Completing the Schedule tenants.
including death benefits paid by You must list every insurance policy on Interests that meet either of the two
fraternal beneficiary societies operating the life of the decedent, whether or not requirements above should be entered
under the lodge system, and death it is included in the gross estate. in Part 1. Joint interests that do not
benefits paid under no-fault automobile meet either of the two requirements
insurance policies if the no-fault insurer Under “Description,” list: above should be entered in Part 2.
was unconditionally bound to pay the • The name of the insurance company,
and Under “Description,” describe the
benefit in the event of the insured’s
death. • The number of the policy. property as required in the instructions
for Schedules A, B, C, and F for the
Insurance in favor of the estate. For every life insurance policy listed type of property involved. For example,
Include on Schedule D the full amount on the schedule, you must request a jointly held stocks and bonds should be
of the proceeds of insurance on the life statement on Form 712, Life Insurance described using the rules given in the
of the decedent receivable by the Statement, from the company that instructions to Schedule B.
executor or otherwise payable to or for issued the policy. Attach the Form 712
to the back of Schedule D. Under “Alternate value” and “Value
the benefit of the estate. Insurance in
If the policy proceeds are paid in one at date of death,” enter the full value of
favor of the estate includes insurance
sum, enter the net proceeds received the property.
used to pay the estate tax, and any
other taxes, debts, or charges that are (from Form 712, line 24) in the value Note. You cannot claim the special
enforceable against the estate. The (and alternate value) columns of treatment under section 2040(b) for
manner in which the policy is drawn is Schedule D. If the policy proceeds are property held jointly by a decedent and
immaterial as long as there is an not paid in one sum, enter the value of a surviving spouse who is not a U.S.
obligation, legally binding on the the proceeds as of the date of the citizen. You must report these joint
beneficiary, to use the proceeds to pay decedent’s death (from Form 712, line interests on Part 2 of Schedule E, not
taxes, debts, or charges. You must 25). Part 1.
include the full amount even though the If part or all of the policy proceeds Part 2. All other joint interests. All
premiums or other consideration may are not included in the gross estate, joint interests that were not entered in
have been paid by a person other than you must explain why they were not Part 1 must be entered in Part 2.
the decedent. included. For each item of property, enter the
Insurance receivable by appropriate letter A, B, C, etc., from line
beneficiaries other than the estate. Schedule E—Jointly 2a to indicate the name and address of
Include on Schedule D the proceeds of
all insurance on the life of the decedent Owned Property the surviving co-tenant.
not receivable by, or for the benefit of, If you are required to file Form 706, you Under “Description,” describe the
the decedent’s estate if the decedent must complete Schedule E and file it property as required in the instructions
possessed at death any of the following with the return if the decedent owned for Schedules A, B, C, and F for the
incidents of ownership, exercisable any joint property at the time of death, type of property involved.
either alone or in conjunction with any whether or not the decedent’s interest In the “Percentage includible”
person or entity. is includible in the gross estate. column, enter the percentage of the
Incidents of ownership in a policy Enter on this schedule all property of total value of the property that you
include: whatever kind or character, whether intend to include in the gross estate.
• The right of the insured or estate to real estate, personal property, or bank Generally, you must include the full
its economic benefits; accounts, in which the decedent held at value of the jointly owned property in
• The power to change the beneficiary; the time of death an interest either as a the gross estate. However, the full
Part Instructions -19-
value should not be included if you can Note (for single premium or paid-up Example of effective discount:
show that a part of the property policies). In certain situations, for
originally belonged to the other tenant example, where the surrender value of a Pro-rata value of limited liability
or tenants and was never received or the policy exceeds its replacement cost, company (before any
acquired by the other tenant or tenants the true economic value of the policy discounts) $100.00
from the decedent for less than will be greater than the amount shown b Minus: 10% discounts for lack
adequate and full consideration in on line 59 of Form 712. In these of control (10.00)
money or money’s worth, or unless you situations, you should report the full
can show that any part of the property economic value of the policy on c Marketable minority interest
was acquired with consideration Schedule F. See Revenue Ruling value (as if freely traded
originally belonging to the surviving joint 78-137, 1978-1 C.B. 280 for details. minority interest value) $90.00
tenant or tenants. In this case, you may • Section 2044 property (see Decedent d Minus: 15% discount for lack of
exclude from the value of the property Who Was a Surviving Spouse below); marketability (13.50)
an amount proportionate to the • Claims (including the value of the
consideration furnished by the other decedent’s interest in a claim for refund e Non-marketable minority
tenant or tenants. Relinquishing or of income taxes or the amount of the interest value $76.50
promising to relinquish dower, curtesy, refund actually received);
or statutory estate created instead of • Rights; Calculation of effective discount:
dower or curtesy, or other marital rights • Royalties;
in the decedent’s property or estate is • Leaseholds; (a minus e) divided by a = effective
not consideration in money or money’s • Judgments; discount
worth. See the Schedule A instructions • Reversionary or remainder interests; ($100.00 - $76.50) ÷ $100.00 = 23.50%
for the value to show for real property • Shares in trust funds (attach a copy
that is subject to a mortgage. of the trust instrument);
• Household goods and personal Note. The amount of discounts are
If the property was acquired by the effects, including wearing apparel; based on the factors pertaining to a
decedent and another person or • Farm products and growing crops; specific interest and those discounts
persons by gift, bequest, devise, or • Livestock; shown in the example are for
inheritance as joint tenants, and their • Farm machinery; and demonstration purposes only.
interests are not otherwise specified by • Automobiles. If you answered “Yes” to line 10b for
law, include only that part of the value any transfer(s) described in (1) through
of the property that is figured by Interests. If the decedent owned any
interest in a partnership or (5) in the Schedule G instructions (and
dividing the full value of the property by made by the decedent), attach a
the number of joint tenants. unincorporated business, attach a
statement of assets and liabilities for statement to Schedule G which lists
If you believe that less than the full the valuation date and for the 5 years the item number from that schedule
value of the entire property is includible before the valuation date. Also, attach and identifies the total accumulated
in the gross estate for tax purposes, statements of the net earnings for the discount taken (that is, XX.XX%) on
you must establish the right to include same 5 years. Be sure to include the such transfer(s).
the smaller value by attaching proof of EIN of the entity. You must account for Line 1. If the decedent owned at the
the extent, origin, and nature of the goodwill in the valuation. In general, date of death works of art or items with
decedent’s interest and the interest(s) furnish the same information and follow collectible value (for example, jewelry,
of the decedent’s co-tenant or the methods used to value close furs, silverware, books, statuary, vases,
co-tenants. corporations. See the instructions for oriental rugs, coin or stamp collections),
Schedule B. check the “Yes” box on line 1 and
In the “Includible alternate value” provide full details. If any item or
and “Includible value at date of death” All partnership interests should be
reported on Schedule F unless the collection of similar items is valued at
columns, you should enter only the more than $3,000, attach an appraisal
values that you believe are includible in partnership interest, itself, is jointly
owned. Jointly owned partnership by an expert under oath and the
the gross estate. required statement regarding the
interests should be reported on
Schedule E. appraiser’s qualifications (see
Schedule F—Other If real estate is owned by the sole
Regulations section 20.2031-6(b)).
Miscellaneous Property proprietorship, it should be reported on Decedent Who Was a
Schedule F and not on Schedule A.
You must complete Schedule Describe the real estate with the same Surviving Spouse
detail required for Schedule A. If the decedent was a surviving spouse,
F and file it with the return.
Valuation discounts. If you he or she may have received qualified
On Schedule F, list all items that must answered “Yes” to Part 4 — General terminable interest property (QTIP)
be included in the gross estate that are Information, line 10b for any interest in from the predeceased spouse for which
not reported on any other schedule, miscellaneous property not reportable the marital deduction was elected either
including: under any other schedule owned by the on the predeceased spouse’s estate
• Debts due the decedent (other than decedent at the time of death, attach a tax return or on a gift tax return, Form
notes and mortgages included on statement that lists the item number 709. The election was available for gifts
Schedule C); from Schedule F and identifies the total made and decedents dying after
• Interests in business; accumulated discount taken (that is, December 31, 1981. List such property
• Any interest in an Archer medical XX.XX%) on such interest. on Schedule F.
savings account (MSA) or health If you answered “Yes” to line 10b for If this election was made and the
savings account (HSA), unless such an interest in a limited liability company surviving spouse retained his or her
interest passes to the surviving spouse; owned by the decedent at the time of interest in the QTIP property at death,
and death, attach a statement that lists the the full value of the QTIP property is
• Insurance on the life of another item number from Schedule F and includible in his or her estate, even
(obtain and attach Form 712, for each identifies the effective discount taken though the qualifying income interest
policy). on such interest. terminated at death. It is valued as of
-20- Part Instructions
the date of the surviving spouse’s made on or before July 10, 2007, are before the decedent’s death, then the
death, or alternate valuation date, if not included in the gross estate. decedent’s right to use the property or
applicable. Do not reduce the value by Attach an explanation of how you the retained annuity, unitrust, or other
any annual exclusion that may have figured the includible gift taxes if you do interest (whether payable from income
applied to the transfer creating the not include in the gross estate the and/or principal) is the retention of the
interest. entire gift taxes shown on any Form possession or enjoyment of, or the right
The value of such property included 709 filed for gifts made within 3 years of to the income from, the property for
in the surviving spouse’s gross estate is death. Also attach copies of any purposes of section 2036. See
treated as passing from the surviving pertinent gift tax returns filed by the Regulations section 20.2036-1(c)(2).
spouse. It therefore qualifies for the decedent’s spouse for gifts made within Retained voting rights. Transfers
charitable and marital deductions on 3 years of death. with a retained life estate also include
the surviving spouse’s estate tax return 2. Other transfers within 3 years transfers of stock in a controlled
if it meets the other requirements for of death (section 2035(a)). These corporation after June 22, 1976, if the
those deductions. transfers include only the following: decedent retained or acquired voting
For additional details, see • Any transfer by the decedent with rights in the stock. If the decedent
Regulations section 20.2044-1. respect to a life insurance policy within retained direct or indirect voting rights
3 years of death; or in a controlled corporation, the
Schedule G—Transfers • Any transfer within 3 years of decedent is considered to have
death of a retained section 2036 life retained enjoyment of the transferred
During Decedent’s Life estate, section 2037 reversionary property. A corporation is a controlled
Complete Schedule G and file it with interest, or section 2038 power to corporation if the decedent owned
the return if the decedent made any of revoke, etc., if the property subject to (actually or constructively) or had the
the transfers described in (1) through the life estate, interest, or power would right (either alone or with any other
(5) below, or if you answered “Yes” to have been included in the gross estate person) to vote at least 20% of the total
question 11 or 12a of Part 4 — General had the decedent continued to possess combined voting power of all classes of
Information. the life estate, interest, or power until stock. See section 2036(b)(2). If these
death. voting rights ceased or were
Report the following types of These transfers are reported on relinquished within 3 years of the
transfers on this schedule: Schedule G, regardless of whether a decedent’s death, the corporate
IF. . . AND . . . THEN . . .
gift tax return was required to be filed interests are included in the gross
for them when they were made. estate as if the decedent had actually
the decedent at the time of for purposes of However, the amount includible and the retained the voting rights until death.
made a transfer the transfer, the sections 2035 information required to be shown for
from a trust, transfer was and 2038, treat the transfers are determined: The amount includible in the gross
from a portion the transfer as • For insurance on the life of the estate is the value of the transferred
of the trust that made directly decedent using the instructions to property at the time of the decedent’s
was owned by by the
Schedule D (attach Forms 712); death. If the decedent kept or reserved
the grantor decedent. an interest or right to only a part of the
under section • For insurance on the life of transferred property, the amount
676 (other than another using the instructions to
by reason of Schedule F (attach Forms 712); and includible in the gross estate is a
section 672(e)) • For sections 2036, 2037, and corresponding part of the entire value
by reason of a
2038 transfers, using paragraphs (3), of the property.
power in the
grantor, (4), and (5) of these instructions. A retained life estate does not have
Any such 3. Transfers with retained life to be legally enforceable. What matters
transfer within estate (section 2036). These are is that a substantial economic benefit
the annual gift transfers by the decedent in which the was retained. For example, if a mother
tax exclusion is decedent retained an interest in the transferred title to her home to her
not includible in daughter but with the informal
the gross transferred property. The transfer can
estate. be in trust or otherwise, but excludes understanding that she was to continue
bona fide sales for adequate and full living there until her death, the value of
consideration. the home would be includible in the
1. Certain gift taxes (section Interests or rights. Section 2036 mother’s estate even if the agreement
2035(b)). Enter at item A of Schedule G applies to the following retained would not have been legally
the total value of the gift taxes that interests or rights: enforceable.
were paid by the decedent or the estate • The right to income from the 4. Transfers taking effect at death
on gifts made by the decedent or the transferred property; (section 2037). A transfer that takes
decedent’s spouse within 3 years of • The right to the possession or effect at the decedent’s death is one
death. enjoyment of the property; and under which possession or enjoyment
The date of the gift, not the date of • The right, either alone or with any can be obtained only by surviving the
payment of the gift tax, determines person, to designate the persons who decedent. A transfer is not treated as
whether a gift tax paid is included in the shall receive the income from, or one that takes effect at the decedent’s
gross estate under this rule. Therefore, possess or enjoy, the property. death unless the decedent retained a
you should carefully examine the Forms Retained annuity, unitrust, and reversionary interest (defined below) in
709 filed by the decedent and the other income interests in trusts. If a the property that immediately before the
decedent’s spouse to determine what decedent transferred property into a decedent’s death had a value of more
part of the total gift taxes reported on trust and retained or reserved the right than 5% of the value of the transferred
them was attributable to gifts made to use such property, or the right to an property. If the transfer was made
within 3 years of death. annuity, unitrust, or other interest in before October 8, 1949, the
For example, if the decedent died on such trust for the property decedent so reversionary interest must have arisen
July 10, 2010, you should examine gift transferred for decedent’s life, any by the express terms of the instrument
tax returns for 2010, 2009, 2008, and period not ascertainable without of transfer.
2007. However, the gift taxes on the reference to the decedent’s death, or A reversionary interest is generally
2007 return that are attributable to gifts for a period that does not, in fact, end any right under which the transferred
Part Instructions -21-
property will or may be returned to the partnership while retaining certain 2035(a), 2036, 2037, or 2038, then only
decedent or the decedent’s estate. It distribution rights, or a liquidation, put, a corresponding part of the value of the
also includes the possibility that the call, or conversion right. property should be included in the
transferred property may become Section 2702 deals with the transfer value of the gross estate. If the
subject to a power of disposition by the of an interest in a trust while retaining transferee makes additions or
decedent. It does not matter if the right any interest other than a qualified improvements to the property, the
arises by the express terms of the interest. In general, a qualified interest increased value of the property at the
instrument of transfer or by operation of is a right to receive certain distributions valuation date should not be included
law. For this purpose, reversionary from the trust at least annually, or a on Schedule G. However, if only a part
interest does not include the possibility noncontingent remainder interest if all of the value of the property is included,
that the income alone from the property of the other interests in the trust are enter the value of the whole under the
may return to the decedent or become distribution rights specified in section column headed “Description” and
subject to the decedent’s power of 2702. explain what part was included.
disposition. Attachments. If a transfer, by trust or
5. Revocable transfers (section Section 2703 provides rules for the
valuation of property transferred to a otherwise, was made by a written
2038). The gross estate includes the instrument, attach a copy of the
value of transferred property in which family member but subject to an option,
agreement, or other right to acquire or instrument to Schedule G. If the copy of
the enjoyment of the transferred the instrument is of public record, it
property was subject at decedent’s use the property at less than FMV. It
also applies to transfers subject to should be certified; if not of public
death to any change through the record, the copy should be verified.
exercise of a power to alter, amend, restrictions on the right to sell or use
revoke, or terminate. A decedent’s the property.
power to change the beneficiaries and Finally, section 2704 provides that in Schedule H—Powers of
to hasten or increase any beneficiary’s certain cases, the lapse of a voting or
enjoyment of the property are examples liquidation right in a family-owned Appointment
of this. corporation or partnership will result in Complete Schedule H and file it with
It does not matter whether the power a deemed transfer. the return if you answered “Yes” to
was reserved at the time of the transfer, question 13 of Part 4 — General
These rules have potential Information.
whether it arose by operation of law, or consequences for the valuation of
whether it was later created or property in an estate. If the decedent On Schedule H, include in the gross
conferred. The rule applies regardless (or any member of his or her family) estate:
of the source from which the power was was involved in any such transactions, • The value of property for which the
acquired, and regardless of whether the see sections 2701 through 2704 and decedent possessed a general power
power was exercisable by the decedent the related regulations for additional of appointment (defined below) on the
alone or with any person (and details. date of his or her death and
regardless of whether that person had • The value of property for which the
a substantial adverse interest in the How To Complete Schedule decedent possessed a general power
transferred property). G of appointment that he or she exercised
The capacity in which the decedent All transfers (other than outright or released before death by disposing
could use a power has no bearing. If transfers not in trust and bona fide of it in such a way that if it were a
the decedent gave property in trust and sales) made by the decedent at any transfer of property owned by the
was the trustee with the power to time during life must be reported on decedent, the property would be
revoke the trust, the property would be Schedule G, regardless of whether you includible in the decedent’s gross
included in his or her gross estate. For believe the transfers are subject to tax. estate as a transfer with a retained life
transfers or additions to an irrevocable If the decedent made any transfers not estate, a transfer taking effect at death,
trust after October 28, 1979, the described in these instructions, the or a revocable transfer.
transferred property is includible if the transfers should not be shown on With the above exceptions, property
decedent reserved the power to remove Schedule G. Instead, attach a subject to a power of appointment is
the trustee at will and appoint another statement describing these transfers by not includible in the gross estate if the
trustee. listing: decedent released the power
If the decedent relinquished within 3 • The date of the transfer, completely and the decedent held no
years of death any of the includible • The amount or value of the interest in or control over the property.
powers described above, figure the transferred property, and
gross estate as if the decedent had • The type of transfer. If the failure to exercise a general
actually retained the powers until death. power of appointment results in a lapse
Complete the schedule for each of the power, the lapse is treated as a
Only the part of the transferred transfer that is included in the gross release only to the extent that the value
property that is subject to the estate under sections 2035(a), 2036, of the property that could have been
decedent’s power is included in the 2037, and 2038 as described in the appointed by the exercise of the lapsed
gross estate. Instructions for Schedule G. power is more than the greater of
For more detailed information on In the “Item number” column, $5,000 or 5% of the total value, at the
which transfers are includible in the number each transfer consecutively time of the lapse, of the assets out of
gross estate, see the Estate Tax beginning with “1.” In the “Description” which, or the proceeds of which, the
Regulations. column, list the name of the transferee exercise of the lapsed power could
and the date of the transfer, and give a have been satisfied.
Special Valuation Rules for complete description of the property.
Certain Lifetime Transfers
Transfers included in the gross estate Powers of Appointment
should be valued on the date of the A power of appointment determines
Sections 2701 through 2704 provide decedent’s death or, if alternate who will own or enjoy the property
rules for valuing certain transfers to valuation is adopted, according to subject to the power and when they will
family members. section 2032. own or enjoy it. The power must be
Section 2701 deals with the transfer If only part of the property created by someone other than the
of an interest in a corporation or transferred meets the terms of section decedent. It does not include a power
-22- Part Instructions
created or held on property transferred power, the second power is considered the gross estate even if the surviving
by the decedent. as created at the time of the exercise of spouse receives benefits.
A power of appointment includes all the first. An annuity or other payment that is
powers which are, in substance and Attachments not includible in the decedent’s or the
effect, powers of appointment survivor’s gross estate as an annuity
regardless of how they are identified If the decedent ever possessed a may still be includible under some other
and regardless of local property laws. power of appointment, attach a certified applicable provision of the law. For
For example, if a settlor transfers or verified copy of the instrument example, see Powers of Appointment
property in trust for the life of his wife, granting the power and a certified or and the Instructions for Schedule
with a power in the wife to appropriate verified copy of any instrument by G — Transfers During Decedent’s Life,
or consume the principal of the trust, which the power was exercised or above. See also Regulations section
the wife has a power of appointment. released. You must file these copies 20.2039-1(e).
even if you contend that the power was
Some powers do not in themselves not a general power of appointment, If the decedent retired before
constitute a power of appointment. For and that the property is not otherwise January 1, 1985, see Annuities Under
example, a power to amend only includible in the gross estate. Approved Plans, below, for rules that
administrative provisions of a trust that allow the exclusion of part or all of
cannot substantially affect the beneficial
enjoyment of the trust property or
Schedule I—Annuities certain annuities.

income is not a power of appointment. You must complete Schedule l and file Part Includible
A power to manage, invest, or control it with the return if you answered “Yes” If the decedent contributed only part of
assets, or to allocate receipts and to question 15 of Part 4 — General the purchase price of the contract or
disbursements, when exercised only in Information. agreement, include in the gross estate
a fiduciary capacity, is not a power of Enter on Schedule I every annuity only that part of the value of the annuity
appointment. that meets all of the conditions under receivable by the surviving beneficiary
General power of appointment. A General, below, and every annuity that the decedent’s contribution to the
general power of appointment is a described in paragraphs (a) through (h) purchase price of the annuity or
power that is exercisable in favor of the of Annuities Under Approved Plans, agreement bears to the total purchase
decedent, the decedent’s estate, the even if the annuities are wholly or price.
decedent’s creditors, or the creditors of partially excluded from the gross estate. For example, if the value of the
the decedent’s estate, except: For a discussion regarding the QTIP survivor’s annuity was $20,000 and the
1. A power to consume, invade, or treatment of certain joint and survivor decedent had contributed three-fourths
appropriate property for the benefit of annuities, see the Schedule M, line 3 of the purchase price of the contract,
the decedent that is limited by an instructions. the amount includible is $15,000 (3/4 ×
ascertainable standard relating to $20,000).
health, education, support, or
General Except as provided under Annuities
maintenance of the decedent. These rules apply to all types of Under Approved Plans, contributions
2. A power exercisable by the annuities, including pension plans, made by the decedent’s employer to
decedent only in conjunction with: individual retirement arrangements, the purchase price of the contract or
a. the creator of the power or purchased commercial annuities, and agreement are considered made by the
b. a person who has a substantial private annuities. decedent if they were made by the
interest in the property subject to the In general, you must include in the employer because of the decedent’s
power, which is adverse to the exercise gross estate all or part of the value of employment. For more information, see
of the power in favor of the decedent. any annuity that meets the following section 2039.
requirements:
A part of a power is considered a • It is receivable by a beneficiary Definitions
general power of appointment if the following the death of the decedent and Annuity. An annuity consists of one or
power: by reason of surviving the decedent; more payments extending over any
1. May only be exercised by the • The annuity is under a contract or period of time. The payments may be
decedent in conjunction with another agreement entered into after March 3, equal or unequal, conditional or
person and 1931; unconditional, periodic or sporadic.
2. Is also exercisable in favor of the • The annuity was payable to the Examples. The following are
other person (in addition to being decedent (or the decedent possessed examples of contracts (but not
exercisable in favor of the decedent, the right to receive the annuity) either necessarily the only forms of contracts)
the decedent’s creditors, the decedent’s alone or in conjunction with another, for for annuities that must be included in
estate, or the creditors of the the decedent’s life or for any period not the gross estate:
decedent’s estate). ascertainable without reference to the
decedent’s death or for any period that 1. A contract under which the
The part to include in the gross did not in fact end before the decedent immediately before death was
estate as a general power of decedent’s death; and receiving or was entitled to receive, for
appointment is figured by dividing the • The contract or agreement is not a the duration of life, an annuity with
value of the property by the number of policy of insurance on the life of the payments to continue after death to a
persons (including the decedent) in decedent. designated beneficiary, if surviving the
favor of whom the power is exercisable. decedent.
Note. A private annuity is an annuity 2. A contract under which the
Date power was created. Generally, issued from a party not engaged in the decedent immediately before death was
a power of appointment created by will business of writing annuity contracts, receiving or was entitled to receive,
is considered created on the date of the typically a junior generation family together with another person, an
testator’s death. member or a family trust. annuity payable to the decedent and
A power of appointment created by An annuity contract that provides the other person for their joint lives,
an inter vivos instrument is considered periodic payments to a person for life with payments to continue to the
created on the date the instrument and ceases at the person’s death is not survivor following the death of either.
takes effect. If the holder of a power includible in the gross estate. Social 3. A contract or agreement entered
exercises it by creating a second security benefits are not includible in into by the decedent and employer
Part Instructions -23-
under which the decedent immediately • Had separated from service before If the decedent made a contribution
before death and following retirement January 1, 1985, and did not change under a plan described in (a) through
was receiving, or was entitled to the form of benefit before death. (e) above toward the cost, include in
receive, an annuity payable to the The amount excluded cannot exceed the gross estate on this schedule that
decedent for life. After the decedent’s $100,000 unless either of the following proportion of the value of the annuity
death, if survived by a designated conditions is met: which the amount of the decedent’s
beneficiary, the annuity was payable to • On December 31, 1982, the contribution under the plan bears to the
the beneficiary with payments either decedent was both a participant in the total amount of all contributions under
fixed by contract or subject to an option plan and in pay status (for example, the plan. The remaining value of the
or election exercised or exercisable by had received at least one benefit annuity is excludable from the gross
the decedent. However, see Annuities payment on or before December 31, estate subject to the $100,000 limitation
Under Approved Plans, below. 1982) and the decedent irrevocably (if applicable). For the rules to
4. A contract or agreement entered elected the form of the benefit before determine whether the decedent made
into by the decedent and the January 1, 1983, or contributions to the plan, see
decedent’s employer under which at the • The decedent separated from service Regulations section 20.2039-1(c).
decedent’s death, before retirement, or before January 1, 1983, and did not IRAs and retirement bonds. The
before the expiration of a stated period change the form of benefit before following plans are approved plans for
of time, an annuity was payable to a death. the exclusion rules:
designated beneficiary, if surviving the
decedent. However, see Annuities Approved Plans f. An individual retirement account
Under Approved Plans below. described in section 408(a),
Approved plans may be separated into
5. A contract or agreement under two categories: g. An individual retirement annuity
which the decedent immediately before • Pension, profit-sharing, stock bonus, described in section 408(b), or
death was receiving, or was entitled to and other similar plans and h. A retirement bond described in
receive, an annuity for a stated period • Individual retirement arrangements section 409(a) (before its repeal by P.L.
of time, with the annuity to continue to a (IRAs), and retirement bonds. 98-369).
designated beneficiary, surviving the Different exclusion rules apply to the Exclusion rules for IRAs and
decedent, upon the decedent’s death two categories of plans. retirement bonds. These plans are
and before the expiration of that period approved plans only if they provide for
of time. Pension, etc., plans. The following
plans are approved plans for the a series of substantially equal periodic
6. An annuity contract or other payments made to a beneficiary for life,
arrangement providing for a series of exclusion rules:
or over a period of at least 36 months
substantially equal periodic payments a. An employees’ trust (or a contract after the date of the decedent’s death.
to be made to a beneficiary for life or purchased by an employees’ trust)
over a period of at least 36 months forming part of a pension, stock bonus, Subject to the $100,000 limitation, if
after the date of the decedent’s death or profit-sharing plan that met all the applicable, if an annuity under a “plan”
under an individual retirement account, requirements of section 401(a), either described in (f) through (h) above is
annuity, or bond as described in section at the time of the decedent’s separation receivable by a beneficiary other than
2039(e) (before its repeal by P.L. from employment (whether by death or the executor, the entire value of the
98-369). otherwise) or at the time of the annuity is excludable from the gross
termination of the plan (if earlier); estate even if the decedent made a
contribution under the plan.
Payable to the decedent. An annuity b. A retirement annuity contract
or other payment was payable to the purchased by the employer (but not by However, if any payment to or for an
decedent if, at the time of death, the an employees’ trust) under a plan that, account or annuity described in
decedent was in fact receiving an at the time of the decedent’s separation paragraph (f), (g), or (h) above was not
annuity or other payment, with or from employment (by death or allowable as an income tax deduction
without an enforceable right to have the otherwise), or at the time of the under section 219 (and was not a
payments continued. termination of the plan (if earlier), was a rollover contribution as described in
plan described in section 403(a); section 2039(e) before its repeal by
Right to receive an annuity. The P.L. 98-369), include in the gross
decedent had the right to receive an c. A retirement annuity contract estate on this schedule that proportion
annuity or other payment if, purchased for an employee by an of the value of the annuity which the
immediately before death, the decedent employer that is an organization amount not allowable as a deduction
had an enforceable right to receive referred to in section 170(b)(1)(A)(ii) or under section 219 and not a rollover
payments at some time in the future, (vi), or that is a religious organization contribution bears to the total amount
whether or not at the time of death the (other than a trust), and that is exempt paid to or for such account or annuity.
decedent had a present right to receive from tax under section 501(a); For more information, see Regulations
payments. d. Chapter 73 of Title 10 of the section 20.2039-5.
United States Code; or Rules applicable to all approved
Annuities Under Approved e. A bond purchase plan described plans. The following rules apply to all
Plans in section 405 (before its repeal by P.L. approved plans described in
The following rules relate to whether 98-369, effective for obligations issued paragraphs (a) through (h) above.
part or all of an otherwise includible after December 31, 1983). If any part of an annuity under a
annuity may be excluded. These rules Exclusion rules for pension, etc., “plan” described in (a) through (h)
have been repealed and apply only if plans. If an annuity under an above is receivable by the executor, it
the decedent either: “approved plan” described in (a) is generally includible in the gross
• On December 31, 1984, was both a through (e) above is receivable by a estate to the extent that it is receivable
participant in the plan and in pay status beneficiary other than the executor and by the executor in that capacity. In
(for example, had received at least one the decedent made no contributions general, the annuity is receivable by the
benefit payment on or before December under the plan toward the cost, no part executor if it is to be paid to the
31, 1984) and had irrevocably elected of the value of the annuity, subject to executor or if there is an agreement
the form of the benefit before July 18, the $100,000 limitation (if applicable), is (expressed or implied) that it will be
1984, or includible in the gross estate. applied by the beneficiary for the
-24- Part Instructions
benefit of the estate (such as in How To Complete Schedule I schedule. List them on Schedule L
discharge of the estate’s liability for instead.
death taxes or debts of the decedent, In describing an annuity, give the name
and address of the grantor of the The deduction is limited to the
etc.) or that its distribution will be
annuity. Specify if the annuity is under amount paid for these expenses that is
governed to any extent by the terms of
an approved plan. allowable under local law but may not
the decedent’s will or the laws of
exceed:
descent and distribution. IF . . . THEN . . .
1. The value of property subject to
If data available to you does not claims included in the gross estate, plus
indicate whether the plan satisfies the the annuity is under an state the ratio of the 2. The amount paid out of property
requirements of section 401(a), 403(a), approved plan, decedent’s contribution
included in the gross estate but not
408(a), 408(b), or 409(a), you may to the total purchase
price of the annuity. subject to claims. This amount must
obtain that information from the IRS actually be paid by the due date of the
office where the employer’s principal estate tax return.
place of business is located. the decedent was state the ratio of the
employed at the time of decedent’s contribution
The applicable local law under which
Line A. Lump Sum death and an annuity as
described in Definitions,
to the total purchase
price of the annuity. the estate is being administered
Distribution Election Annuity, Example 4, determines which property is and is not
above, became payable subject to claims. If under local law a
Note. The following rules have been to any beneficiary
repealed and apply only if the because the beneficiary
particular property interest included in
decedent: survived the decedent, the gross estate would bear the burden
for the payment of the expenses, then
• On December 31, 1984, was both a the property is considered property
participant in the plan and in pay status an annuity under an state the ratio of the
subject to claims.
(for example, had received at least one individual retirement amount paid for the
account or annuity individual retirement Unlike certain claims against the
benefit payment on or before December became payable to any account or annuity that
31, 1984) and had irrevocably elected beneficiary because that was not allowable as an
estate for debts of the decedent (see
the form of the benefit before July 18, beneficiary survived the income tax deduction the instructions for Schedule K), you
1984, or decedent and is payable under section 219 (other cannot deduct expenses incurred in
• Had separated from service before to the beneficiary for life than a rollover administering property subject to claims
January 1, 1985, and did not change or for at least 36 months contribution) to the total on both the estate tax return and the
following the decedent’s amount paid for the estate’s income tax return. If you
the form of benefit before death. death, account or annuity.
choose to deduct them on the estate
Generally, the entire amount of any tax return, you cannot deduct them on
lump sum distribution is included in the the annuity is payable the description should a Form 1041, U.S. Income Tax Return
decedent’s gross estate. However, out of a trust or other be sufficiently complete for Estate and Trusts, filed for the
under this special rule, all or part of a fund, to fully identify it.
estate. Funeral expenses are only
lump sum distribution from a qualified deductible on the estate tax return.
(approved) plan will be excluded if the the annuity is payable include the duration of
lump sum distribution is included in the for a term of years, the term and the date Funeral expenses. Itemize funeral
recipient’s income for income tax on which it began. expenses on line A. Deduct from the
purposes. expenses any amounts that were
the annuity is payable include the date of birth reimbursed, such as death benefits
If the decedent was born before payable by the Social Security
1936, the recipient may be eligible to for the life of a person of that person.
other than the decedent, Administration and the Veterans
elect special “10-year averaging” rules Administration.
(under repealed section 402(e)) and
capital gain treatment (under repealed the annuity is wholly or enter the amount Executors’ commissions. When you
partially excluded from excluded under file the return, you may deduct
section 402(a)(2)) in figuring the income the gross estate, “Description” and
tax on the distribution. For more explain how you figured
commissions that have actually been
information, see Pub. 575, Pension and the exclusion. paid to you or that you expect will be
Annuity Income. If this option is paid. You may not deduct commissions
available, the estate tax exclusion if none will be collected. If the amount
cannot be claimed unless the recipient of the commissions has not been fixed
elects to forego the “10-year averaging” Schedule J—Funeral by decree of the proper court, the
and capital gain treatment in figuring deduction will be allowed on the final
the income tax on the distribution. The Expenses and Expenses examination of the return, provided that:
recipient elects to forego this treatment Incurred in • The Estate and Gift Tax Territory
by treating the distribution as taxable Manager is reasonably satisfied that the
on his or her income tax return as Administering Property commissions claimed will be paid;
described in Regulations section • The amount entered as a deduction
20.2039-4(d). The election is Subject to Claims is within the amount allowable by the
irrevocable. General. You must complete and file laws of the jurisdiction where the estate
Schedule J if you claim a deduction on is being administered; and
The amount excluded from the gross
estate is the portion attributable to the item 13 of Part 5 — Recapitulation. • It is in accordance with the usually
accepted practice in that jurisdiction for
employer contributions. The portion, if
On Schedule J, itemize funeral estates of similar size and character.
any, attributable to the
employee-decedent’s contributions is expenses and expenses incurred in If you have not been paid the
always includible. Also, you may not administering property subject to commissions claimed at the time of the
figure the gross estate in accordance claims. List the names and addresses final examination of the return, you
with this election unless you check of persons to whom the expenses are must support the amount you deducted
“Yes” on line A and attach the name, payable and describe the nature of the with an affidavit or statement signed
address, and identifying number of the expense. Do not list expenses under the penalties of perjury that the
recipients of the lump sum distributions. incurred in administering property amount has been agreed upon and will
See Regulations section 20.2039-4. not subject to claims on this be paid.
Part Instructions -25-
 You may not deduct a bequest or costs, and costs of storing or claims to be deductible, all of the
devise made to you instead of maintaining assets of the estate. following conditions must be met:
commissions. If, however, the decedent
The expenses of selling assets are
• The decedent and the decedent’s
fixed by will the compensation payable spouse must have entered into a
to you for services to be rendered in the deductible only if the sale is necessary written agreement relative to their
administration of the estate, you may to pay the decedent’s debts, the marital and property rights.
deduct this amount to the extent it is expenses of administration, or taxes, or • The decedent and the spouse must
not more than the compensation to preserve the estate or carry out have been divorced before the
allowable by the local law or practice. distribution. decedent’s death and the divorce must
have occurred within the 3-year period
Do not deduct on this schedule
amounts paid as trustees’ commissions
Schedule K—Debts of beginning on the date 1 year before the
agreement was entered into. It is not
whether received by you acting in the the Decedent and required that the agreement be
capacity of a trustee or by a separate
trustee. If such amounts were paid in Mortgages and Liens approved by the divorce decree.
administering property not subject to You must complete and attach • The property or interest transferred
claims, deduct them on Schedule L. Schedule K if you claimed deductions under the agreement must be
on either item 14 or item 15 of Part transferred to the decedent’s spouse in
Note. Executors’ commissions are settlement of the spouse’s marital
taxable income to the executors. 5 — Recapitulation.
rights.
Therefore, be sure to include them as Income vs. estate tax deduction. You may not deduct a claim made
income on your individual income tax Taxes, interest, and business expenses against the estate by a remainderman
return. accrued at the date of the decedent’s relating to section 2044 property.
death are deductible both on Schedule
Attorney fees. Enter the amount of K and as deductions in respect of the
Section 2044 property is described in
attorney fees that have actually been the instructions to line 6.
decedent on the income tax return of
paid or that you reasonably expect to the estate. Include in this schedule notes
be paid. If, on the final examination of unsecured by mortgage or other lien
the return, the fees claimed have not If you choose to deduct medical and give full details, including:
been awarded by the proper court and expenses of the decedent only on the • Name of payee,
paid, the deduction will be allowed estate tax return, they are fully • Face and unpaid balance,
provided the Estate and Gift Tax deductible as claims against the estate. • Date and term of note,
Territory Manager is reasonably If, however, they are claimed on the • Interest rate, and
satisfied that the amount claimed will be decedent’s final income tax return • Date to which interest was paid
paid and that it does not exceed a under section 213(c), they may not also before death.
reasonable payment for the services be claimed on the estate tax return. In
performed, taking into account the size this case, you also may not deduct on Include the exact nature of the claim
and character of the estate and the the estate tax return any amounts that as well as the name of the creditor. If
local law and practice. If the fees were not deductible on the income tax the claim is for services performed over
claimed have not been paid at the time return because of the percentage a period of time, state the period
of final examination of the return, the limitations. covered by the claim.
amount deducted must be supported by Example. Edison Electric
an affidavit, or statement signed under Debts of the Decedent Illuminating Co., for electric service
the penalties of perjury, by the executor List under “Debts of the Decedent” only during December 2010, $150.
or the attorney stating that the amount valid debts the decedent owed at the If the amount of the claim is the
has been agreed upon and will be paid. time of death. List any indebtedness unpaid balance due on a contract for
Do not deduct attorney fees secured by a mortgage or other lien on the purchase of any property included
incidental to litigation incurred by the property of the gross estate under the in the gross estate, indicate the
beneficiaries. These expenses are heading “Mortgages and Liens.” If the schedule and item number where you
charged against the beneficiaries amount of the debt is disputed or the reported the property. If the claim
personally and are not administration subject of litigation, deduct only the represents a joint and separate liability,
expenses authorized by the Code. amount the estate concedes to be a give full facts and explain the financial
valid claim. Enter the amount in contest responsibility of the co-obligor.
Interest expense. Interest expenses in the column provided.
incurred after the decedent’s death are Property and income taxes. The
generally allowed as a deduction if they Generally, if the claim against the deduction for property taxes is limited to
are reasonable, necessary to the estate is based on a promise or the taxes accrued before the date of
administration of the estate, and agreement, the deduction is limited to the decedent’s death. Federal taxes on
allowable under local law. the extent that the liability was income received during the decedent’s
contracted bona fide and for an lifetime are deductible, but taxes on
Interest incurred as the result of a adequate and full consideration in income received after death are not
federal estate tax deficiency is a money or money’s worth. However, any deductible.
deductible administrative expense. enforceable claim based on a promise
Penalties are not deductible even if Keep all vouchers or original records
or agreement of the decedent to make for inspection by the IRS.
they are allowable under local law. a contribution or gift (such as a pledge
Note. If you elect to pay the tax in Allowable death taxes. If you elect to
or a subscription) to or for the use of a
installments under section 6166, you take a deduction for foreign death taxes
charitable, public, religious, etc.,
may not deduct the interest payable on under section 2053(d) rather than a
organization is deductible to the extent
the installments. credit under section 2014, the
that the deduction would be allowed as
deduction is subject to the limitations
a bequest under the statute that
Miscellaneous expenses. described in section 2053(d) and its
applies.
Miscellaneous administration expenses regulations. If you have difficulty
necessarily incurred in preserving and Certain claims of a former spouse figuring the deduction, you may request
distributing the estate are deductible. against the estate based on the a computation of it. Send your request
These expenses include appraiser’s relinquishment of marital rights are within a reasonable amount of time
and accountant’s fees, certain court deductible on Schedule K. For these before the due date of the return to:
-26- Part Instructions
 Department of the Treasury Net Losses During limitations for assessment (referred to
Commissioner of Internal Revenue above) expires. Keep all vouchers and
Washington, DC 20224. Administration receipts for inspection by the IRS.
You may deduct only those losses from

Attach to your request a copy of the

thefts, fires, storms, shipwrecks, or
other casualties that occurred during
Schedule M—Bequests,
will and relevant documents, a the settlement of the estate. You may etc., to Surviving Spouse
statement showing the distribution of deduct only the amount not reimbursed
the estate under the decedent’s will, by insurance or otherwise. (Marital Deduction)
and a computation of the state or Describe in detail the loss sustained
foreign death tax showing any amount and the cause. If you received General
payable by a charitable organization. insurance or other compensation for the You must complete Schedule M and file
loss, state the amount collected. it with the return if you claim a
Mortgages and Liens Identify the property for which you are deduction on Part 5 — Recapitulation,
List under “Mortgages and Liens” only claiming the loss by indicating the item 20.
obligations secured by mortgages or particular schedule and item number The marital deduction is authorized
other liens on property that you where the property is included in the by section 2056 for certain property
included in the gross estate at its full gross estate. interests that pass from the decedent to
value or at a value that was If you elect alternate valuation, do the surviving spouse. You may claim
undiminished by the amount of the not deduct the amount by which you the deduction only for property interests
mortgage or lien. If the debt is reduced the value of an item to include that are included in the decedent’s
enforceable against other property of it in the gross estate. gross estate (Schedules A through I).
the estate not subject to the mortgage
Do not deduct losses claimed as a Note. The marital deduction is
or lien, or if the decedent was
deduction on a federal income tax generally not allowed if the surviving
personally liable for the debt, you must
return or depreciation in the value of spouse is not a U.S. citizen. The marital
include the full value of the property
securities or other property. deduction is allowed for property
subject to the mortgage or lien in the
passing to such a surviving spouse in a
gross estate under the appropriate Expenses Incurred in qualified domestic trust (QDOT) or if
schedule and may deduct the mortgage
or lien on the property on this schedule. Administering Property Not such property is transferred or
Subject to Claims irrevocably assigned to such a trust
However, if the decedent’s estate is before the estate tax return is filed. The
not liable, include in the gross estate You may deduct expenses incurred in executor must elect QDOT status on
only the value of the equity of administering property that is included the return. See the instructions that
redemption (or the value of the property in the gross estate but that is not follow for details on the election.
less the amount of the debt), and do subject to claims. You may only deduct
not deduct any portion of the these expenses if they were paid Property Interests That You
before the section 6501 period of
indebtedness on this schedule.
limitations for assessment expired. May List on Schedule M
Notes and other obligations secured The expenses deductible on this Generally, you may list on Schedule M
by the deposit of collateral, such as schedule are usually expenses incurred all property interests that pass from the
stocks, bonds, etc., also should be in the administration of a trust decedent to the surviving spouse and
listed under “Mortgages and Liens.” established by the decedent before are included in the gross estate.
death. They may also be incurred in the However, you should not list any
Description collection of other assets or the transfer nondeductible terminable interests
or clearance of title to other property (described below) on Schedule M
Include under the “Description” column unless you are making a QTIP election.
the particular schedule and item included in the decedent’s gross estate
for estate tax purposes, but not The property for which you make this
number where the property subject to election must be included on Schedule
the mortgage or lien is reported in the included in the decedent’s probate
estate. M. See Qualified terminable interest
gross estate. property, below.
Include the name and address of the The expenses deductible on this
schedule are limited to those that are For the rules on common disaster
mortgagee, payee, or obligee, and the and survival for a limited period, see
date and term of the mortgage, note, or the result of settling the decedent’s
interest in the property or of vesting section 2056(b)(3).
other agreement by which the debt was
established. Also include the face good title to the property in the You may list on Schedule M only
amount, the unpaid balance, the rate of beneficiaries. Expenses incurred on those interests that the surviving
interest, and date to which the interest behalf of the transferees (except those spouse takes:
was paid before the decedent’s death. described above) are not deductible. 1. As the decedent’s legatee,
Examples of deductible and devisee, heir, or donee;
nondeductible expenses are provided in 2. As the decedent’s surviving
Schedule L—Net Losses Regulations section 20.2053-8(d). tenant by the entirety or joint tenant;
During Administration List the names and addresses of the 3. As an appointee under the
persons to whom each expense was decedent’s exercise of a power or as a
and Expenses Incurred payable and the nature of the expense. taker in default at the decedent’s
in Administering Identify the property for which the
expense was incurred by indicating the
nonexercise of a power;
4. As a beneficiary of insurance on
Property Not Subject to schedule and item number where the the decedent’s life;
property is included in the gross estate. 5. As the surviving spouse taking
Claims If you do not know the exact amount of under dower or curtesy (or similar
You must complete Schedule L and the expense, you may deduct an statutory interest); and
file it with the return if you claim estimate, provided that the amount may 6. As a transferee of a transfer
deductions on either item 18 or item 19 be verified with reasonable certainty made by the decedent at any time.
of Part 5 — Recapitulation. and will be paid before the period of
Part Instructions -27-
Example—Listing Property
Interests on Schedule M

Item Description of property interests passing to surviving spouse.

Amount
number For securities, give CUSIP number. If trust, partnership, or closely held entity, give EIN.
All other property:
B1 One-half the value of a house and lot, 256 South West Street, held by decedent and surviving spouse as
joint tenants with right of survivorship under deed dated July 15, 1975 (Schedule E, Part I, item 1) . . . . . . $182,500
B2 Proceeds of Metropolitan Life Insurance Company policy No. 104729, payable in one sum to surviving
spouse (Schedule D, item 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
B3 Cash bequest under Paragraph Six of will . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000

Property Interests That You This rule applies even though the If any property interest passing from
interest that passes from the decedent the decedent to the surviving spouse
May Not List on Schedule M to a person other than the surviving may be paid or otherwise satisfied out
You should not list on Schedule M: spouse is not included in the gross of any of a group of assets, the value of
1. The value of any property that estate, and regardless of when the the property interest is, for the entry on
does not pass from the decedent to the interest passes. The rule also applies Schedule M, reduced by the value of
surviving spouse; regardless of whether the surviving any asset or assets that, if passing from
2. Property interests that are not spouse’s interest and the other the decedent to the surviving spouse,
included in the decedent’s gross estate; person’s interest pass from the would be nondeductible terminable
3. The full value of a property decedent at the same time. interests. Examples of property
interest for which a deduction was Property interests that are interests that may be paid or otherwise
claimed on Schedules J through L. The considered to pass to a person other satisfied out of any of a group of assets
value of the property interest should be than the surviving spouse are any are a bequest of the residue of the
reduced by the deductions claimed with property interest that: (a) passes under decedent’s estate, or of a share of the
respect to it; a decedent’s will or intestacy; (b) was residue, and a cash legacy payable out
4. The full value of a property transferred by a decedent during life; or of the general estate.
interest that passes to the surviving (c) is held by or passed on to any Example. A decedent bequeathed
spouse subject to a mortgage or other person as a decedent’s joint tenant, as $100,000 to the surviving spouse. The
encumbrance or an obligation of the appointee under a decedent’s exercise general estate includes a term for years
surviving spouse. Include on Schedule of a power, as taker in default at a (valued at $10,000 in determining the
M only the net value of the interest after decedent’s release or nonexercise of a value of the gross estate) in an office
reducing it by the amount of the power, or as a beneficiary of insurance building, which interest was retained by
mortgage or other debt; on the decedent’s life. the decedent under a deed of the
5. Nondeductible terminable building by gift to a son. Accordingly,
interests (described below); or For example, a decedent devised the value of the specific bequest
6. Any property interest disclaimed real property to his wife for life, with entered on Schedule M is $90,000.
by the surviving spouse. remainder to his children. The life
interest that passed to the wife does Life estate with power of
not qualify for the marital deduction appointment in the surviving
Terminable Interests because it will terminate at her death spouse. A property interest, whether
Certain interests in property passing and the children will thereafter possess or not in trust, will be treated as passing
from a decedent to a surviving spouse or enjoy the property. to the surviving spouse, and will not be
are referred to as terminable interests. treated as a nondeductible terminable
These are interests that will terminate However, if the decedent purchased interest if: (a) the surviving spouse is
or fail after the passage of time, or on a joint and survivor annuity for himself entitled for life to all of the income from
the occurrence or nonoccurrence of a and his wife who survived him, the the entire interest; (b) the income is
designated event. Examples are: life value of the survivor’s annuity, to the payable annually or at more frequent
estates, annuities, estates for terms of extent that it is included in the gross intervals; (c) the surviving spouse has
years, and patents. estate, qualifies for the marital the power, exercisable in favor of the
deduction because even though the surviving spouse or the estate of the
The ownership of a bond, note, or interest will terminate on the wife’s surviving spouse, to appoint the entire
other contractual obligation, which death, no one else will possess or interest; (d) the power is exercisable by
when discharged would not have the enjoy any part of the property. the surviving spouse alone and
effect of an annuity for life or for a term, (whether exercisable by will or during
is not considered a terminable interest. The marital deduction is not allowed
for an interest that the decedent life) is exercisable by the surviving
Nondeductible terminable interests. directed the executor or a trustee to spouse in all events; and (e) no part of
A terminable interest is nondeductible. convert, after death, into a terminable the entire interest is subject to a power
Unless you are making a QTIP election, interest for the surviving spouse. The in any other person to appoint any part
a terminable interest should not be marital deduction is not allowed for to any person other than the surviving
entered on Schedule M if: such an interest even if there was no spouse (or the surviving spouse’s legal
1. Another interest in the same interest in the property passing to representative or relative if the surviving
property passed from the decedent to another person and even if the spouse is disabled. See Revenue
some other person for less than terminable interest would otherwise Ruling 85-35, 1985-1 C.B. 328). If
adequate and full consideration in have been deductible under the these five conditions are satisfied only
money or money’s worth; and exceptions described below for life for a specific portion of the entire
2. By reason of its passing, the estates, life insurance, and annuity interest, see the section 2056(b)
other person or that person’s heirs may payments with powers of appointment. regulations to determine the amount of
enjoy part of the property after the For more information, see Regulations the marital deduction.
termination of the surviving spouse’s sections 20.2056(b)-1(f) and Life insurance, endowment, or
interest. 20.2056(b)-1(g), Example (7). annuity payments, with power of
-28- Part Instructions
appointment in surviving spouse. A If you file a Form 706 in which you qualified terminable interest property
property interest consisting of the entire do not make this election, you may not under section 2056(b)(7), and
proceeds under a life insurance, file an amended return to make the
a. The trust or other property is listed
endowment, or annuity contract is election unless you file the amended
on Schedule M and
treated as passing from the decedent to return on or before the due date for
the surviving spouse, and will not be filing the original Form 706. b. The value of the trust (or other
treated as a nondeductible terminable The effect of the election is that the property) is entered in whole or in part
interest if: (a) the surviving spouse is property (interest) will be treated as as a deduction on Schedule M,
entitled to receive the proceeds in passing to the surviving spouse and will then unless the executor specifically
installments, or is entitled to interest on not be treated as a nondeductible identifies the trust (all or a fractional
them, with all amounts payable during terminable interest. All of the other portion or percentage) or other property
the life of the spouse, payable only to marital deduction requirements must to be excluded from the election, the
the surviving spouse; (b) the installment still be satisfied before you may make executor shall be deemed to have
or interest payments are payable this election. For example, you may not made an election to have such trust (or
annually, or more frequently, beginning make this election for property or other property) treated as qualified
not later than 13 months after the property interests that are not included terminable interest property under
decedent’s death; (c) the surviving in the decedent’s gross estate. section 2056(b)(7).
spouse has the power, exercisable in
favor of the surviving spouse or of the Qualified terminable interest If less than the entire value of the
estate of the surviving spouse, to property. Qualified terminable interest trust (or other property) that the
appoint all amounts payable under the property is property (a) that passes executor has included in the gross
contract; (d) the power is exercisable by from the decedent, and (b) in which the estate is entered as a deduction on
the surviving spouse alone and surviving spouse has a qualifying Schedule M, the executor shall be
(whether exercisable by will or during income interest for life. considered to have made an election
life) is exercisable by the surviving The surviving spouse has a only as to a fraction of the trust (or
spouse in all events; and (e) no part of qualifying income interest for life if the other property). The numerator of this
the amount payable under the contract surviving spouse is entitled to all of the fraction is equal to the amount of the
is subject to a power in any other income from the property payable trust (or other property) deducted on
person to appoint any part to any annually or at more frequent intervals, Schedule M. The denominator is equal
person other than the surviving spouse. or has a usufruct interest for life in the to the total value of the trust (or other
If these five conditions are satisfied property, and during the surviving property).
only for a specific portion of the spouse’s lifetime no person has a
proceeds, see the section 2056(b) power to appoint any part of the Qualified Domestic Trust
regulations to determine the amount of property to any person other than the Election (QDOT)
the marital deduction. surviving spouse. An annuity is treated The marital deduction is allowed for
as an income interest regardless of transfers to a surviving spouse who is
Charitable remainder trusts. An whether the property from which the
interest in a charitable remainder trust not a U.S. citizen only if the property
annuity is payable can be separately passes to the surviving spouse in a
will not be treated as a nondeductible identified.
terminable interest if: qualified domestic trust (QDOT) or if
Amendments to Regulations such property is transferred or
1. The interest in the trust passes irrevocably assigned to a QDOT before
from the decedent to the surviving sections 20.2044-1, 20.2056(b)-7, and
20.2056(b)-10 clarify that an interest in the decedent’s estate tax return is filed.
spouse, and
property is eligible for QTIP treatment if A QDOT is any trust:
2. The surviving spouse is the only the income interest is contingent upon
beneficiary of the trust other than 1. That requires at least one trustee
the executor’s election even if that to be either an individual who is a
charitable organizations described in portion of the property for which no
section 170(c). citizen of the United States or a
election is made will pass to or for the domestic corporation;
benefit of beneficiaries other than the 2. That requires that no distribution
A charitable remainder trust is either surviving spouse. of corpus from the trust can be made
a charitable remainder annuity trust or a
The QTIP election may be made for unless such a trustee has the right to
charitable remainder unitrust. (See
all or any part of qualified terminable withhold from the distribution the tax
section 664 for descriptions of these
interest property. A partial election must imposed on the QDOT;
trusts.)
relate to a fractional or percentile share 3. That meets the requirements of
of the property so that the elective part any applicable regulations; and
Election To Deduct Qualified will reflect its proportionate share of the 4. For which the executor has made
Terminable Interests (QTIP) increase or decline in the whole of the an election on the estate tax return of
You may elect to claim a marital property when applying section 2044 or the decedent.
deduction for qualified terminable 2519. Thus, if the interest of the
interest property or property interests. surviving spouse in a trust (or other Note. For trusts created by an
You make the QTIP election simply by property in which the spouse has a instrument executed before November
listing the qualified terminable interest qualified life estate) is qualified 5, 1990, paragraphs 1 and 2 above will
property on Schedule M and inserting terminable interest property, you may be treated as met if the trust instrument
its value. You are presumed to have make an election for a part of the trust requires that all trustees be individuals
made the QTIP election if you list the (or other property) only if the election who are citizens of the United States or
property and insert its value on relates to a defined fraction or domestic corporations.
Schedule M. If you make this election, percentage of the entire trust (or other You make the QDOT election simply
the surviving spouse’s gross estate will property). The fraction or percentage by listing the qualified domestic trust or
include the value of the qualified may be defined by means of a formula. the entire value of the trust property on
terminable interest property. See the Election to Deduct Qualified Schedule M and deducting its value.
instructions for Part 4 — General Terminable Interest Property Under You are presumed to have made the
Information, line 6, for more details. Section 2056(b)(7). If a trust (or other QDOT election if you list the trust or
The election is irrevocable. property) meets the requirements of trust property and insert its value on
Part Instructions -29-
Schedule M. Once made, the election annuity, you are not required to make Lines 5a, 5b, and 5c. The total of the
is irrevocable. the election for all of them. values listed on Schedule M must be
If an election is made to deduct If you make the election out of QTIP reduced by the amount of the federal
qualified domestic trust property under treatment by checking “Yes” on line 3, estate tax, the federal GST tax, and the
section 2056A(d), provide the following you cannot deduct the amount of the amount of state or other death and
information for each qualified domestic annuity on Schedule M. If you do not GST taxes paid out of the property
trust on an attachment to this schedule: elect out, you must list the joint and interest involved. If you enter an
survivor annuities on Schedule M. amount for state or other death or GST
1. The name and address of every taxes on line 5b or 5c, identify the taxes
trustee; Listing Property Interests on and attach your computation of them.
2. A description of each transfer
passing from the decedent that is the Schedule M Attachments. If you list property
source of the property to be placed in List each property interest included in interests passing by the decedent’s will
trust; and the gross estate that passes from the on Schedule M, attach a certified copy
3. The employer identification decedent to the surviving spouse and of the order admitting the will to
number (EIN) for the trust. for which a marital deduction is probate. If, when you file the return, the
claimed. This includes otherwise court of probate jurisdiction has entered
The election must be made for an nondeductible terminable interest any decree interpreting the will or any
entire QDOT trust. In listing a trust for property for which you are making a of its provisions affecting any of the
which you are making a QDOT election, QTIP election. Number each item in interests listed on Schedule M, or has
unless you specifically identify the sequence and describe each item in entered any order of distribution, attach
trust as not subject to the election, detail. Describe the instrument a copy of the decree or order. In
the election will be considered made (including any clause or paragraph addition, the IRS may request other
for the entire trust. number) or provision of law under evidence to support the marital
which each item passed to the surviving deduction claimed.
The determination of whether a trust spouse. If possible, show where each
qualifies as a QDOT will be made as of
the date the decedent’s Form 706 is
item appears (number and schedule) Schedule O—Charitable,
on Schedules A through I.
filed. If, however, judicial proceedings Public, and Similar Gifts
are brought before the Form 706’s due In listing otherwise nondeductible
date (including extensions) to have the property for which you are making a and Bequests
trust revised to meet the QDOT QTIP election, unless you specifically
requirements, then the determination identify a fractional portion of the trust General
will not be made until the court-ordered or other property as not subject to the You must complete Schedule O and file
changes to the trust are made. election, the election will be considered it with the return if you claim a
made for all of the trust or other deduction on item 21 of Part
Election to Deduct Qualified property. 5 — Recapitulation.
Domestic Trust Property Under
Section 2056A. If a trust meets the Enter the value of each interest You can claim the charitable
requirement of a qualified domestic before taking into account the federal deduction allowed under section 2055
trust under section 2056A(a), the return estate tax or any other death tax. The for the value of property in the
is filed no later than 1 year after the valuation dates used in determining the decedent’s gross estate that was
time prescribed by law (including value of the gross estate apply also on transferred by the decedent during life
extensions), and the entire value of the Schedule M. or by will to or for the use of any of the
trust or trust property is listed and If Schedule M includes a bequest of following:
entered as a deduction on Schedule M, the residue or a part of the residue of • The United States, a state, a political
then unless the executor specifically the decedent’s estate, attach a copy of subdivision of a state, or the District of
identifies the trust to be excluded from the computation showing how the value Columbia, for exclusively public
the election, the executor shall be of the residue was determined. Include purposes;
deemed to have made an election to a statement showing: • Any corporation or association
have the entire trust treated as qualified • The value of all property that is organized and operated exclusively for
domestic trust property. included in the decedent’s gross estate religious, charitable, scientific, literary,
(Schedules A through I) but is not a or educational purposes, including the
Line 1 part of the decedent’s probate estate, encouragement of art, or to foster
If property passes to the surviving such as lifetime transfers, jointly owned national or international amateur sports
spouse as the result of a qualified property that passed to the survivor on competition (but only if none of its
disclaimer, check “Yes” and attach a decedent’s death, and the insurance activities involve providing athletic
copy of the written disclaimer required payable to specific beneficiaries; facilities or equipment, unless the
by section 2518(b). • The values of all specific and general organization is a qualified amateur
legacies or devises, with reference to sports organization) and the prevention
Line 3 the applicable clause or paragraph of of cruelty to children and animals, as
the decedent’s will or codicil. (If long as no part of the net earnings
Section 2056(b)(7) creates an legacies are made to each member of a benefits any private individual and no
automatic QTIP election for certain joint class, for example, $1,000 to each of substantial activity is undertaken to
and survivor annuities that are decedent’s employees, only the number carry on propaganda, or otherwise
includible in the estate under section in each class and the total value of attempt to influence legislation or
2039. To qualify, only the surviving property received by them need be participate in any political campaign on
spouse can have the right to receive furnished); behalf of any candidate for public office;
payments before the death of the • The date of birth of all persons, the • A trustee or a fraternal society, order
surviving spouse. length of whose lives may affect the or association operating under the
The executor can elect out of QTIP value of the residuary interest passing lodge system, if the transferred property
treatment, however, by checking the to the surviving spouse; and is to be used exclusively for religious,
“Yes” box on line 3. Once made, the • Any other important information such charitable, scientific, literary, or
election is irrevocable. If there is as that relating to any claim to any part educational purposes, or for the
more than one such joint and survivor of the estate not arising under the will. prevention of cruelty to children or
-30- Part Instructions
animals, and no substantial activity is
undertaken to carry on propaganda or
If you are deducting the value of the
residue or a part of the residue passing
Schedule P—Credit for
otherwise attempt to influence to charity under the decedent’s will, Foreign Death Taxes
legislation, or participate in any political attach a copy of the computation
campaign on behalf of any candidate showing how you determined the value, General
for public office; including any reduction for the taxes If you claim a credit on line 13 of Part
• Any veterans organization described above. 2 — Tax Computation, you must
incorporated by an Act of Congress or complete Schedule P and file it with the
any of its departments, local chapters, Also include: return. You must attach Form(s)
or posts, for which none of the net • A statement that shows the values of 706-CE to support any credit you claim.
earnings benefits any private individual; all specific and general legacies or
or devises for both charitable and If the foreign government refuses to
• A foreign government or its political noncharitable uses. For each legacy or certify Form 706-CE, you must file it
subdivision when the use of such devise, indicate the paragraph or directly with the IRS as instructed on
property is limited exclusively to section of the decedent’s will or codicil the Form 706-CE. See Form 706-CE
charitable purposes. that applies. If legacies are made to for instructions on how to complete the
each member of a class (for example, form and for a description of the items
For this purpose, certain Indian tribal that must be attached to the form when
governments are treated as states and $1,000 to each of the decedent’s
employees), show only the number of the foreign government refuses to
transfers to them qualify as deductible certify it.
charitable contributions. See Revenue each class and the total value of
Procedure 2008-55, on page 768 of property they received; The credit for foreign death taxes is
2008-39 I.R.B., www.irs.gov/pub/ • The date of birth of all life tenants or allowable only if the decedent was a
irs-irbs/irb08-39.pdf, as modified and annuitants, the length of whose lives citizen or resident of the United States.
supplemented by subsequent revenue may affect the value of the interest However, see section 2053(d) and the
procedures, for a list of qualifying passing to charity under the decedent’s related regulations for exceptions and
Indian tribal governments. will; limitations if the executor has elected,
You may also claim a charitable • A statement showing the value of all in certain cases, to deduct these taxes
contribution deduction for a qualifying property that is included in the from the value of the gross estate. For
conservation easement granted after decedent’s gross estate but does not a resident, not a citizen, who was a
the decedent’s death under the pass under the will, such as transfers, citizen or subject of a foreign country
provisions of section 2031(c)(9). jointly owned property that passed to for which the President has issued a
proclamation under section 2014(h), the
The charitable deduction is allowed the survivor on decedent’s death, and
credit is allowable only if the country of
for amounts that are transferred to insurance payable to specific
which the decedent was a national
charitable organizations as a result of beneficiaries; and
allows a similar credit to decedents who
either a qualified disclaimer (see Line 2. • Any other important information such were U.S. citizens residing in that
Qualified Disclaimer below) or the as that relating to any claim, not arising country.
complete termination of a power to under the will, to any part of the estate
consume, invade, or appropriate (that is, a spouse claiming dower or The credit is authorized either by
property for the benefit of an individual. curtesy, or similar rights). statute or by treaty. If a credit is
It does not matter whether termination authorized by a treaty, whichever of the
occurs because of the death of the following is the most beneficial to the
Line 2. Qualified Disclaimer estate is allowed:
individual or in any other way. The
termination must occur within the period The charitable deduction is allowed for • The credit figured under the treaty;
of time (including extensions) for filing amounts that are transferred to • The credit figured under the statute;
the decedent’s estate tax return and charitable organizations as a result of a or
before the power has been exercised. qualified disclaimer. To be a qualified • The credit figured under the treaty,
disclaimer, a refusal to accept an plus the credit figured under the statute
The deduction is limited to the interest in property must meet the for death taxes paid to each political
amount actually available for charitable conditions of section 2518. These are subdivision or possession of the treaty
uses. Therefore, if under the terms of a explained in Regulations sections country that are not directly or indirectly
will or the provisions of local law, or for 25.2518-1 through 25.2518-3. If creditable under the treaty.
any other reason, the federal estate property passes to a charitable
tax, the federal GST tax, or any other Under the statute, the credit is
beneficiary as the result of a qualified
estate, GST, succession, legacy, or authorized for all death taxes (national
disclaimer, check the “Yes” box on line
inheritance tax is payable in whole or in and local) imposed in the foreign
2 and attach a copy of the written
part out of any bequest, legacy, or country. Whether local taxes are the
disclaimer required by section 2518(b).
devise that would otherwise be allowed basis for a credit under a treaty
as a charitable deduction, the amount depends upon the provisions of the
you may deduct is the amount of the Attachments particular treaty.
bequest, legacy, or devise reduced by If the charitable transfer was made by If a credit for death taxes paid in
the total amount of the taxes. will, attach a certified copy of the order more than one foreign country is
If you elected to make installment admitting the will to probate, in addition allowable, a separate computation of
payments of the estate tax, and the to the copy of the will. If the charitable the credit must be made for each
interest is payable out of property transfer was made by any other written foreign country. The copies of Schedule
transferred to charity, you must reduce instrument, attach a copy. If the P on which the additional computations
the charitable deduction by an estimate instrument is of record, the copy should are made should be attached to the
of the maximum amount of interest that be certified; if not, the copy should be copy of Schedule P provided in the
will be paid on the deferred tax. verified. return.
For split-interest trusts (or pooled The total credit allowable for any
income funds), enter in the “Amount” Value property, whether subjected to tax by
column the amount treated as passing The valuation dates used in one or more than one foreign country,
to the charity. Do not enter the entire determining the value of the gross is limited to the amount of the federal
amount that passes to the trust (fund). estate apply also on Schedule O. estate tax attributable to the property.
Part Instructions -31-
The anticipated amount of the credit Item 3. Enter the value of the property both countries or deemed situated
may be figured on the return, but the situated in the foreign country that is within both countries. See the
credit cannot finally be allowed until the subjected to the foreign taxes and appropriate treaty for details.
foreign tax has been paid and a Form included in the gross estate, less those
706-CE evidencing payment is filed. portions of the deductions taken on Schedule Q—Credit for
Section 2014(g) provides that for Schedules M and O that are
credits for foreign death taxes, each attributable to the property. Tax on Prior Transfers
U.S. possession is deemed a foreign Item 4. Subtract any credit claimed on
country. line 15 for federal gift taxes on General
Convert death taxes paid to the pre-1977 gifts (section 2012) from line You must complete Schedule Q and file
foreign country into U.S. dollars by 12 of Part 2 — Tax Computation, and it with the return if you claim a credit on
using the rate of exchange in effect at enter the balance at item 4 of Part 2 — Tax Computation, line 14.
the time each payment of foreign tax is Schedule P. The term “transferee” means the
made. decedent for whose estate this return is
If a credit is claimed for any foreign Credit Under Treaties filed. If the transferee received property
death tax that is later recovered, see If you are reporting any items on this from a transferor who died within 10
Regulations section 20.2016-1 for the return based on the provisions of a years before, or 2 years after, the
notice required within 30 days. death tax treaty, you may have to transferee, a credit is allowable on this
attach a statement to this return return for all or part of the federal estate
Limitation Period disclosing the return position that is tax paid by the transferor’s estate for
The credit for foreign death taxes is treaty based. See Regulations section the transfer. There is no requirement
limited to those taxes that were actually 301.6114-1 for details. that the property be identified in the
paid and for which a credit was claimed In general. If the provisions of a treaty estate of the transferee or that it exist
within the later of the 4 years after the apply to the estate of a U.S. citizen or on the date of the transferee’s death. It
filing of the estate tax return, or before resident, a credit is authorized for is sufficient for the allowance of the
the date of expiration of any extension payment of the foreign death tax or credit that the transfer of the property
of time for payment of the federal taxes specified in the treaty. Treaties was subjected to federal estate tax in
estate tax, or 60 days after a final with death tax conventions are in effect the estate of the transferor and that the
decision of the Tax Court on a timely with the following countries: Australia, specified period of time has not
filed petition for a redetermination of a Austria, Canada, Denmark, Finland, elapsed. A credit may be allowed for
deficiency. France, Germany, Greece, Ireland, property received as the result of the
Italy, Japan, Netherlands, Norway, exercise or nonexercise of a power of
Credit Under the Statute South Africa, Switzerland, and the appointment when the property is
For the credit allowed by the statute, United Kingdom. included in the gross estate of the
the question of whether particular donee of the power.
A credit claimed under a treaty is in
property is situated in the foreign If the transferee was the transferor’s
general figured on Schedule P in the
country imposing the tax is determined surviving spouse, no credit is allowed
same manner as the credit is figured
by the same principles that would apply for property received from the transferor
under the statute with the following
in determining whether similar property to the extent that a marital deduction
principal exceptions:
of a nonresident not a U.S. citizen is was allowed to the transferor’s estate
situated within the United States for
• The situs rules contained in the treaty
apply in determining whether property for the property. There is no credit for
purposes of the federal estate tax. See tax on prior transfers for federal gift
was situated in the foreign country;
the instructions for Form 706-NA. taxes paid in connection with the
• The credit may be allowed only for
payment of the death tax or taxes transfer of the property to the
Computation of Credit Under transferee.
specified in the treaty (but see the
the Statute instructions above for credit under the If you are claiming a credit for tax on
Item 1. Enter the amount of the estate, statute for death taxes paid to each prior transfers on Form 706-NA, you
inheritance, legacy, and succession political subdivision or possession of should first complete and attach Part
taxes paid to the foreign country and its the treaty country that are not directly 5 — Recapitulation from Form 706
possessions or political subdivisions, or indirectly creditable under the treaty); before figuring the credit on Schedule
attributable to property that is: • If specifically provided, the credit is Q from Form 706.
• Situated in that country, proportionately shared for the tax Section 2056(d)(3) contains specific
• Subjected to these taxes, and applicable to property situated outside rules for allowing a credit for certain
• Included in the gross estate. both countries, or that was deemed in transfers to a spouse who was not a
The amount entered at item 1 should some instances situated within both U.S. citizen where the property passed
not include any tax paid to the foreign countries; and outright to the spouse, or to a qualified
country for property not situated in that • The amount entered at item 4 of domestic trust.
country and should not include any tax Schedule P is the amount shown on
paid to the foreign country for property line 12 of Part 2 — Tax Computation, Property
not included in the gross estate. If only less the total of the credits claimed for The term “property” includes any
a part of the property subjected to federal gift taxes on pre-1977 gifts interest (legal or equitable) of which the
foreign taxes is both situated in the (section 2012) and for tax on prior transferee received the beneficial
foreign country and included in the transfers (line 14 of Part 2 — Tax ownership. The transferee is
gross estate, it will be necessary to Computation). (If a credit is claimed for considered the beneficial owner of
determine the portion of the taxes tax on prior transfers, it will be property over which the transferee
attributable to that part of the property. necessary to complete Schedule Q received a general power of
Also, attach the computation of the before completing Schedule P.) For appointment. Property does not include
amount entered at item 1. examples of computation of credits interests to which the transferee
Item 2. Enter the value of the gross under the treaties, see the applicable received only a bare legal title, such as
estate, less the total of the deductions regulations. that of a trustee. Neither does it include
on items 20 and 21 of Part Computation of credit in cases an interest in property over which the
5 — Recapitulation. where property is situated outside transferee received a power of
-32- Part Instructions
 Worksheet for Schedule Q—Credit for Tax on Prior Transfers
Part I Transferor’s tax on prior transfers
Total for all transfers
Transferor (From Schedule Q)
Item (line 8 only)
A B C
1. Gross value of prior transfer to this transferee
2. Death taxes payable from prior transfer
3. Encumbrances allocable to prior transfer
4. Obligations allocable to prior transfer
5. Marital deduction applicable to line 1 above,
as shown on transferor’s Form 706
6. TOTAL. Add lines 2, 3, 4, and 5
7. Net value of transfers. Subtract
line 6 from line 1
8. Net value of transfers. Add columns
A, B, and C of line 7
9. Transferor’s taxable estate
10. Federal estate tax paid
11. State death taxes paid
12. Foreign death taxes paid
13. Other death taxes paid
14. TOTAL taxes paid. Add lines 10, 11, 12, and 13
15. Value of transferor’s estate. Subtract
line 14 from line 9
16. Net federal estate tax paid on transferor’s
estate
17. Credit for gift tax paid on transferor’s estate
with respect to pre-1977 gifts (section 2012)

18. Credit allowed transferor’s estate for tax on

prior transfers from prior transferor(s) who died
within 10 years before death of decedent
19. Tax on transferor’s estate. Add lines 16, 17, and 18
20. Transferor’s tax on prior transfers ((line 7
line 15)  line 19 of respective estates)
Part II Transferee’s tax on prior transfers
Item Amount
21. Transferee’s actual tax before allowance of credit for prior transfers (see instructions) 21
22. Total gross estate of transferee from line 1 of the Tax Computation, page 1, Form 706 22
23. Net value of all transfers from line 8 of this worksheet 23
24. Transferee’s reduced gross estate. Subtract line 23 from line 22 24

25. Total debts and deductions (not including marital and charitable deductions)
(line 3b of Part 2—Tax Computation, page 1 and items 17, 18, and 19 of
the Recapitulation, page 3, Form 706) 25

26. Marital deduction from item 20, Recapitulation, page 3, Form 706
(see instructions) 26
27. Charitable bequests from item 21, Recapitulation, page 3, Form 706 27
28. Charitable deduction proportion ( [ line 23  (line 22 – line 25) ]  line 27 ) 28
29. Reduced charitable deduction. Subtract line 28 from line 27 29
30. Transferee’s deduction as adjusted. Add lines 25, 26, and 29 30
31. (a) Transferee’s reduced taxable estate. Subtract line 30 from line 24 31(a)
(b) Adjusted taxable gifts 31(b)
(c) Total reduced taxable estate. Add lines 31(a) and 31(b) 31(c)
32. Tentative tax on reduced taxable estate 32
33. (a) Post-1976 gift taxes paid 33(a)
(b) Unified credit (applicable credit amount) 33(b)
(c) Section 2012 gift tax credit 33(c)
(d) Section 2014 foreign death tax credit 33(d)
(e) Total credits. Add lines 33(a) through 33(d) 33(e)
34. Net tax on reduced taxable estate. Subtract line 33(e) from line 32 34
35. Transferee’s tax on prior transfers. Subtract line 34 from line 21 35

appointment that is not a general power allowed for annuities, life estates, terms ownership of the property, to the extent
of appointment. In addition to interests for years, remainder interests (whether that the transferee became the
in which the transferee received the contingent or vested), and any other beneficial owner of the interest.
complete ownership, the credit may be interest that is less than the complete

Part Instructions -33-

Maximum Amount of the Section 2032A additional tax. If the
transferor’s estate elected special-use
Schedules R and
Credit valuation and the additional estate tax R-1—Generation-Skipping
The maximum amount of the credit is of section 2032A(c) was imposed at
the smaller of: any time up to 2 years after the death
Transfer Tax
1. The amount of the estate tax of of the decedent for whom you are filing
the transferor’s estate attributable to the this return, check the box on Schedule Introduction and Overview
transferred property or Q. On lines 1 and 9 of the worksheet, Schedule R is used to figure the
2. The amount by which: include the property subject to the generation-skipping transfer (GST) tax
a. An estate tax on the transferee’s additional estate tax at its FMV rather that is payable by the estate. Schedule
estate determined without the credit for than its special-use value. On line 10 of R-1 is used to figure the GST tax that is
tax on prior transfers exceeds the worksheet, include the additional payable by certain trusts that are
b. An estate tax on the transferee’s estate tax paid as a federal estate tax includible in the gross estate.
estate determined by excluding from paid. The GST tax that is to be reported
the gross estate the net value of the on Form 706 is imposed only on “direct
transfer. skips occurring at death.” Unlike the
If credit for a particular foreign death
How To Complete the estate tax, which is imposed on the
tax may be taken under either the Schedule Q Worksheet value of the entire taxable estate
statute or a death duty convention, and Most of the information to complete regardless of who receives it, the GST
on this return the credit actually is taken Part I of the worksheet should be tax is imposed only on the value of
under the convention, then no credit for obtained from the transferor’s Form interests in property, wherever located,
that foreign death tax may be taken into 706. that actually pass to certain transferees,
consideration in figuring estate tax (a) who are referred to as “skip persons.”
or estate tax (b), above. Line 5. Enter on line 5 the applicable For purposes of Form 706, the
marital deduction claimed for the property interests transferred must be
Percent Allowable transferor’s estate (from the transferor’s includible in the gross estate before
Form 706). they are subject to the GST tax.
Where transferee predeceased the Therefore, the first step in figuring the
transferor. If not more than 2 years GST tax liability is to determine the
elapsed between the dates of death, Lines 10 through 18. Enter on these property interests includible in the gross
the credit allowed is 100% of the lines the appropriate taxes paid by the estate by completing Schedules A
maximum amount. If more than 2 years transferor’s estate. through I of Form 706.
elapsed between the dates of death, no
credit is allowed. The second step is to determine who
If the transferor’s estate elected to the skip persons are. To do this, assign
Where transferor predeceased the pay the federal estate tax in each transferee to a generation and
transferee. The percent of the installments, enter on line 10 only the determine whether each transferee is a
maximum amount that is allowed as a total of the installments that have “natural person” or a “trust” for GST
credit depends on the number of years actually been paid at the time you file purposes.
that elapsed between dates of death. It this Form 706. See Revenue Ruling
83-15, 1983-1 C.B. 224, for more The third step is to determine which
is determined using the following table: skip persons are transferees of
details. Do not include as estate tax
Period of any tax attributable to section 4980A, “interests in property.” If the skip person
Time Not Percent before its repeal by the Taxpayer Relief is a natural person, anything transferred
Exceeding Exceeding Allowable is an interest in property. If the skip
Act of 1997.
person is a trust, make this
----- 2 years 100 determination using the rules under
2 years 4 years 80 Line 21. Add lines 11 (allowable Interest in property below. These first
4 years 6 years 60 unified credit) and 13 (foreign death three steps are described in detail
6 years 8 years 40 taxes credit) of Part 2 — Tax under the main heading, Determining
8 years 10 years 20 Computation to the amount of any
10 years ----- none
Which Transfers Are Direct Skips
credit taken (on line 15) for federal gift below.
taxes on pre-1977 gifts (section 2012). The fourth step is to determine
Subtract this total from Part 2 — Tax whether to enter the transfer on
How To Figure the Credit Computation, line 8. Enter the result on Schedule R or on Schedule R-1. See
A worksheet for Schedule Q is provided line 21 of the worksheet. the rules under the main heading,
to allow you to figure the limits before Dividing Direct Skips Between
completing Schedule Q. Transfer the Line 26. If you figured the marital Schedules R and R-1.
appropriate amounts from the deduction using the unlimited marital
worksheet to Schedule Q as indicated The fifth step is to complete
deduction in effect for decedents dying Schedules R and R-1 using the How To
on the schedule. You do not need to file after 1981, for purposes of determining
the worksheet with your Form 706, but Complete instructions for each
the marital deduction for the reduced schedule.
you should keep it for your records. gross estate, see Revenue Ruling 90-2,
Cases involving transfers from two 1990-1 C.B. 169. To determine the Determining Which Transfers
or more transferors. Part I of the “reduced adjusted gross estate,” Are Direct Skips
worksheet and Schedule Q enable you subtract the amount on line 25 of the
to figure the credit for as many as three Schedule Q Worksheet from the Effective dates. The rules below
transferors. The number of transferors amount on line 24 of the worksheet. If apply only for the purpose of
is irrelevant to Part II of the worksheet. community property is included in the determining if a transfer is a direct skip
If you are figuring the credit for more amount on line 24 of the worksheet, that should be reported on Schedule R
than three transferors, use more than figure the reduced adjusted gross or R-1 of Form 706.
one worksheet and Schedule Q, Part I, estate using the rules of Regulations In general. The GST tax is
and combine the totals for the section 20.2056(c)-2 and Revenue effective for the estates of decedents
appropriate lines. Ruling 76-311, 1976-2 C.B. 261. dying after October 22, 1986.
-34- Part Instructions
 Irrevocable trusts. The GST tax transferee is a natural person or a trust 2. Where the beneficiary is a lineal
will not apply to any transfer under a as defined below. descendant of a grandparent of a
trust that was irrevocable on September Trust. For purposes of the GST tax, a spouse (or former spouse) of the
25, 1985, but only to the extent that the trust includes not only an ordinary trust decedent, the number of generations
transfer was not made out of corpus (as defined in Special rule for trusts between the decedent and the
added to the trust after September 25, other than ordinary trusts), but also any beneficiary is determined by subtracting
1985. An addition to the corpus after other arrangement (other than an the number of generations between the
that date will cause a proportionate part estate) which, although not explicitly a grandparent and the spouse (or former
of future income and appreciation to be trust, has substantially the same effect spouse) from the number of
subject to the GST tax. For more as a trust. For example, a trust includes generations between the grandparent
information, see Regulations section life estates with remainders, terms for and the beneficiary.
26.2601-1(b)(1)(ii). years, and insurance and annuity 3. A person who at any time was
contracts. married to a person described in (1) or
Mental disability. If, on October
(2) above is assigned to the generation
22, 1986, the decedent was under a Substantially separate and of that person. A person who at any
mental disability to change the independent shares of different time was married to the decedent is
disposition of his or her property and beneficiaries in a trust are treated as assigned to the decedent’s generation.
did not regain the competence to separate trusts. 4. A relationship by adoption or
dispose of property before death, the
Interest in property. If a transfer is half-blood is treated as a relationship
GST tax will not apply to any property
made to a natural person, it is always by whole-blood.
included in the gross estate (other than
considered a transfer of an interest in 5. A person who is not assigned to
property transferred on behalf of the
property for purposes of the GST tax. a generation according to (1), (2), (3),
decedent during life and after October
or (4) above is assigned to a generation
21, 1986). The GST tax will also not If a transfer is made to a trust, a
based on his or her birth date, as
apply to any transfer under a trust to person will have an interest in the
follows:
the extent that the trust consists of property transferred to the trust if that
a. A person who was born not more
property included in the gross estate person either has a present right to
than 121/2 years after the decedent is in
(other than property transferred on receive income or corpus from the trust
the decedent’s generation.
behalf of the decedent during life and (such as an income interest for life) or
b. A person born more than 121/2
after October 21, 1986). is a permissible current recipient of
years, but not more than 371/2 years,
income or corpus from the trust (that is,
Under a mental disability means the after the decedent is in the first
may receive income or corpus at the
decedent lacked the cognitive ability or generation younger than the decedent.
discretion of the trustee).
competence to execute an instrument c. A similar rule applies for a new
governing the disposition of his or her Skip person. A transferee who is a generation every 25 years.
property, regardless of whether there natural person is a skip person if that
was an adjudication of incompetence or transferee is assigned to a generation If more than one of the rules for
an appointment of any other person that is two or more generations below assigning generations applies to a
charged with the care of the person or the generation assignment of the transferee, that transferee is generally
property of the transferor. decedent. See Determining the assigned to the youngest of the
generation of a transferee below. generations that would apply.
If the decedent had been adjudged
A transferee who is a trust is a skip If an estate, trust, partnership,
mentally incompetent, a copy of the
person if all the interests in the property corporation, or other entity (other than
judgment or decree must be filed with
(as defined above) transferred to the certain charitable organizations and
this return.
trust are held by skip persons. Thus, trusts described in sections 511(a)(2)
If the decedent had not been whenever a non-skip person has an and 511(b)(2)) is a transferee, then
adjudged mentally incompetent, the interest in a trust, the trust will not be a each person who indirectly receives the
executor must file with the return a skip person even though a skip person property interests through the entity is
certification from a qualified physician also has an interest in the trust. treated as a transferee and is assigned
stating that in his opinion the decedent to a generation as explained in the
had been mentally incompetent at all A trust will also be a skip person if above rules. However, this look-through
times on and after October 22, 1986, there are no interests in the property rule does not apply for the purpose of
and that the decedent had not regained transferred to the trust held by any determining whether a transfer to a
the competence to modify or revoke the person, and future distributions or trust is a direct skip.
terms of the trust or will prior to his terminations from the trust can be made
only to skip persons. Generation assignment where
death or a statement as to why no such intervening parent is deceased. A
certification may be obtained from a Non-skip person. A non-skip person special rule may apply in the case of
physician. is any transferee who is not a skip the death of a parent of the transferee.
person. For terminations, distributions, and
Direct skip. The GST tax reported on
Form 706 and Schedule R-1 is imposed Determining the generation of a transfers after December 31, 1997, the
only on direct skips. For purposes of transferee. Generally, a generation is existing rule that applied to
Form 706, a direct skip is a transfer that determined along family lines as grandchildren of the decedent has been
is: follows: extended to apply to other lineal
• Subject to the estate tax, 1. Where the beneficiary is a lineal descendants.
• Of an interest in property, and descendant of a grandparent of the If property is transferred to an
• To a skip person (defined below). decedent (that is, the decedent’s individual who is a descendant of a
All three requirements must be met cousin, niece, nephew, etc.), the parent of the transferor, and that
before the transfer is subject to the number of generations between the individual’s parent (who is a lineal
GST tax. A transfer is subject to the decedent and the beneficiary is descendant of the parent of the
estate tax if you are required to list it on determined by subtracting the number transferor) is deceased at the time the
any of Schedules A through I of Form of generations between the transfer is subject to gift or estate tax,
706. To determine if a transfer is of an grandparent and the decedent from the then for purposes of generation
interest in property and to a skip number of generations between the assignment, the individual is treated as
person, you must first determine if the grandparent and the beneficiary. if he or she is a member of the
Part Instructions -35-
generation that is one generation below 3. The will establishes a trust that is included in the decedent’s gross estate
the lower of: required to accumulate income for 10 under section 2035, 2036, 2037, 2038,
• The transferor’s generation or years and then pay its income to the 2039, 2041, or 2042 and such property
• The generation assignment of the decedent’s grandchildren for the rest of is, by reason of the decedent’s death,
youngest living ancestor of the their lives and, upon their deaths, transferred to skip persons, the
individual, who is also a descendant of distribute the corpus to the decedent’s transfers are direct skips required to be
the parent of the transferor. great-grandchildren. Because the trust reported on Schedule R-1.
The same rules apply to the has no current beneficiaries, there are
no present interests in the property Special rule for trusts other than
generation assignment of any ordinary trusts. An ordinary trust is a
descendant of the individual. transferred to the trust. All of the
persons to whom the trust can make trust as defined in Regulations section
This rule does not apply to a transfer future distributions (including 301.7701-4(a) as “an arrangement
to an individual who is not a lineal distributions upon the termination of created by a will or by an inter vivos
descendant of the transferor if the interests in property held in trust) are declaration whereby trustees take title
transferor has any living lineal skip persons (for example, the to property for the purpose of protecting
descendants. decedent’s grandchildren and or conserving it for the beneficiaries
If any transfer of property to a trust great-grandchildren). Therefore, the under the ordinary rules applied in
would have been a direct skip except trust itself is a skip person and you chancery or probate courts.” Direct
for this generation assignment rule, should show the transfer on skips from ordinary trusts are required
then the rule also applies to transfers Schedule R. to be reported on Schedule R-1
from the trust attributable to such 4. The will establishes a trust that is regardless of their size unless the
property. to pay all of its income to the executor is also a trustee (see Executor
decedent’s grandchildren for 10 years. as trustee, below).
Ninety-day rule. For purposes of
determining if an individual’s parent is At the end of 10 years, the corpus is to
be distributed to the decedent’s Direct skips from trusts that are
deceased at the time of a testamentary trusts for GST tax purposes but are not
transfer, an individual’s parent who dies children. All of the present interests in
this trust are held by skip persons. ordinary trusts are to be shown on
no later than 90 days after a transfer Schedule R-1 only if the total of all
occurring by reason of the death of the Therefore, the trust is a skip person
and you should show this transfer on tentative maximum direct skips from the
transferor is treated as having entity is $250,000 or more. If this total
predeceased the transferor. The 90-day Schedule R. You should show the
estate tax value of all the property is less than $250,000, the skips should
rule applies to transfers occurring on or be shown on Schedule R. For purposes
after July 18, 2005. See Regulations transferred to the trust even though the
trust has some ultimate beneficiaries of the $250,000 limit, “tentative
section 26.2651-1, for more maximum direct skips” is the amount
information. who are non-skip persons.
you would enter on line 5 of Schedule
Charitable organizations. R-1 if you were to file that schedule.
Charitable organizations and trusts Dividing Direct Skips
described in sections 511(a)(2) and Between Schedules R and A liquidating trust (such as a
511(b)(2) are assigned to the bankruptcy trust) under Regulations
decedent’s generation. Transfers to R-1 section 301.7701-4(d) is not treated as
such organizations are therefore not an ordinary trust for the purposes of
subject to the GST tax. Report all generation-skipping this special rule.
TIP transfers on Schedule R unless
Charitable remainder trusts. the rules below specifically If the proceeds of a life insurance
Transfers to or in the form of charitable provide that they are to be reported on policy are includible in the gross estate
remainder annuity trusts, charitable Schedule R-1. and are payable to a beneficiary who is
remainder unitrusts, and pooled income a skip person, the transfer is a direct
funds are not considered made to skip Under section 2603(a)(2), the GST
skip from a trust that is not an ordinary
persons and, therefore, are not direct tax on direct skips from a trust (as
trust. It should be reported on Schedule
skips even if all of the life beneficiaries defined for GST tax purposes) is to be
R-1 if the total of all the tentative
are skip persons. paid by the trustee and not by the
maximum direct skips from the
estate. Schedule R-1 serves as a
Estate tax value. Estate tax value is company is $250,000 or more.
notification from the executor to the
the value shown on Schedules A Otherwise, it should be reported on
trustee that a GST tax is due.
through I of this Form 706. Schedule R.
Examples. The rules above can be For a direct skip to be reportable on
illustrated by the following examples: Schedule R-1, the trust must be Similarly, if an annuity is includible
includible in the decedent’s gross on Schedule I and its survivor benefits
1. Under the will, the decedent’s estate. are payable to a beneficiary who is a
house is transferred to the decedent’s skip person, then the estate tax value
daughter for her life with the remainder If the decedent was the surviving of the annuity should be reported as a
passing to her children. This transfer is spouse life beneficiary of a marital direct skip on Schedule R-1 if the total
made to a “trust” even though there is deduction power of appointment (or tentative maximum direct skips from the
no explicit trust instrument. The interest QTIP) trust created by the decedent’s entity paying the annuity is $250,000 or
in the property transferred (the present spouse, then transfers caused by more.
right to use the house) is transferred to reason of the decedent’s death from
a non-skip person (the decedent’s that trust to skip persons are direct Executor as trustee. If any of the
daughter). Therefore, the trust is not a skips required to be reported on executors of the decedent’s estate are
skip person because there is an Schedule R-1. trustees of the trust, then all direct skips
interest in the transferred property that for that trust must be shown on
If a direct skip is made “from a trust”
is held by a non-skip person. The Schedule R and not on Schedule R-1
under these rules, it is reportable on
transfer is not a direct skip. even if they would otherwise have been
Schedule R-1 even if it is also made “to
2. The will bequeaths $100,000 to required to be shown on Schedule R-1.
a trust” rather than to an individual.
the decedent’s grandchild. This transfer This rule applies even if the trust has
is a direct skip that is not made in trust Similarly, if property in a trust (as other trustees who are not executors of
and should be shown on Schedule R. defined for GST tax purposes) is the decedent’s estate.
-36- Part Instructions
How To Complete Schedules allowed to the decedent’s estate under remaining unused GST exemption, first
section 2056(b)(7) (QTIP election), to property that is the subject of a direct
R and R-1 section 2652(a)(3) allows you to treat skip occurring at the decedent’s death,
Valuation. Enter on Schedules R and such property for purposes of the GST and then to trusts as to which the
R-1 the estate tax value of the property tax as if the election to be treated as decedent is the transferor. If you wish
interests subject to the direct skips. If qualified terminable interest property to avoid the application of the deemed
you elected alternate valuation (section had not been made. allocation rules, you should enter on
2032) and/or special-use valuation The 2652(a)(3) election must include line 9 every trust (except certain trusts
(section 2032A), you must use the the value of all property in the trust for entered on Schedule R-1, as described
alternate and/or special-use values on which a QTIP election was allowed below) to which you wish to allocate
Schedules R and R-1. under section 2056(b)(7). any part of the decedent’s GST
exemption. Unless you enter a trust on
How To Complete Schedule If a section 2652(a)(3) election is line 9, the unused GST exemption will
made, then the decedent will, for GST
R tax purposes, be treated as the
be allocated to it under the deemed
allocation rules.
transferor of all the property in the trust
Part 1. GST Exemption for which a marital deduction was If a trust is entered on Schedule R-1,
Reconciliation allowed to the decedent’s estate under the amount you entered on line 4 of
Part 1, line 6 of both Parts 2 and 3, and section 2056(b)(7). In this case, the Schedule R-1 serves as a Notice of
line 4 of Schedule R-1 are used to executor of the decedent’s estate may Allocation and you need not enter the
allocate the decedent’s GST allocate part or all of the decedent’s trust on line 9 unless you wish to
exemption. This allocation is made by GST exemption to the property. allocate more than the Schedule R-1,
filing Form 706 and attaching a line 4 amount to the trust. However,
You make the election simply by you must enter the trust on line 9 if you
completed Schedule R and/or R-1. listing qualifying property on line 9 of
Once made, the allocation is wish to allocate any of the unused GST
Part 1. exemption amount to it. Such an
irrevocable. You are not required to
allocate all of the decedent’s GST Line 2. These allocations will have additional allocation would not ordinarily
exemption. However, the portion of the been made either on Forms 709 filed be appropriate in the case of a trust
exemption that you do not allocate will by the decedent or on Notices of entered on Schedule R-1 when the
be allocated by the IRS under the Allocation made by the decedent for trust property passes outright (rather
deemed allocation at death rules of inter vivos transfers that were not direct than to another trust) at the decedent’s
section 2632(e). skips but to which the decedent death. However, where section 2032A
allocated the GST exemption. These property is involved, it may be
For transfers made through 1998, allocations by the decedent are appropriate to allocate additional
the GST exemption was $1 million. The irrevocable. exemption amounts to the property.
current GST exemption is $5,000,000. Also include on this line allocations See the instructions for line 10 below.
The exemption amounts for 1999 deemed to have been made by the
through 2010 are as follows: To avoid application of the
decedent under the rules of section
2632. Unless the decedent elected out ! deemed allocation rules, Form
CAUTION 706 and Schedule R should be
Year of transfer GST exemption of the deemed allocation rules,
1999 1,010,000 filed to allocate the exemption to trusts
allocations are deemed to have been that may later have taxable
2000 1,030,000 made in the following order:
2001 1,060,000 terminations or distributions under
2002 1,100,000 1. To inter vivos direct skips and section 2612 even if the form is not
2003 1,120,000 2. Beginning with transfers made required to be filed to report estate or
2004 and 2005 1,500,000 after December 31, 2000, to lifetime GST tax.
2006, 2007, and 2008 2,000,000 transfers to certain trusts, by the Line 9, column C. Enter the GST
2009 3,500,000 decedent, that constituted indirect skips exemption included on lines 2 through
2010 5,000,000 that were subject to the gift tax. 6 of Part 1 of Schedule R, and
For more information, see section discussed above, that was allocated to
The amount of each increase can the trust.
only be allocated to transfers made (or 2632.
Line 3. Make an entry on this line if Line 9, column D. Allocate the
appreciation that occurred) during or amount on line 8 of Part 1 of Schedule
after the year of the increase. The you are filing Form(s) 709 for the
decedent and wish to allocate any R in line 9, column D. This amount may
following example shows the be allocated to transfers into trusts that
application of this rule: exemption.
are not otherwise reported on Form
Example. In 2003, G made a direct Lines 4, 5, and 6. These lines 706. For example, the line 8 amount
skip of $1,120,000 and applied her full represent your allocation of the GST may be allocated to an inter vivos trust
$1,120,000 of GST exemption to the exemption to direct skips made by established by the decedent during his
transfer. G made a $450,000 taxable reason of the decedent’s death. or her lifetime and not included in the
direct skip in 2004 and another of Complete Parts 2 and 3 and Schedule gross estate. This allocation is made by
$90,000 in 2006. For 2004, G can only R-1 before completing these lines. identifying the trust on line 9 and
apply $380,000 of exemption ($380,000 Line 9. Line 9 is used to allocate the making an allocation to it using column
inflation adjustment from 2004) to the remaining unused GST exemption D. If the trust is not included in the
$450,000 transfer in 2004. For 2006, G (from line 8) and to help you figure the gross estate, value the trust as of the
can apply $90,000 of exemption to the trust’s inclusion ratio. Line 9 is a Notice date of death. You should inform the
2006 transfer, but nothing to the of Allocation for allocating the GST trustee of each trust listed on line 9 of
transfer made in 2004. At the end of exemption to trusts as to which the the total GST exemption you allocated
2006, G would have $410,000 of decedent is the transferor and from to the trust. The trustee will need this
unused exemption that she can apply which a generation-skipping transfer information to figure the GST tax on
to future transfers (or appreciation) could occur after the decedent’s death. future distributions and terminations.
starting in 2007. If line 9 is not completed, the Line 9, column E. Trust’s
Special QTIP election. In the case of deemed allocation at death rules will inclusion ratio. The trustee must
property for which a marital deduction is apply to allocate the decedent’s know the trust’s inclusion ratio to figure
Part Instructions -37-
the trust’s GST tax for future circumstances, post-death events may Filing Schedule R-1. Attach to Form
distributions and terminations. You are cause the decedent to be treated as a 706 one copy of each Schedule R-1
not required to inform the trustee of the transferor for purposes of Chapter 13. that you prepare. Send two copies of
inclusion ratio and may not have Line 10 may be used to set aside an each Schedule R-1 to the fiduciary.
enough information to figure it. exemption amount for such an event.
Therefore, you are not required to You must attach a schedule listing each Schedule U—Qualified
make an entry in column E. However, such event and the amount of
column E and the worksheet below are exemption allocated to that event. Conservation Easement
provided to assist you in figuring the
inclusion ratio for the trustee if you wish Parts 2 and 3 Exclusion
to do so. Use Part 2 to figure the GST tax on If at the time of the contribution
You should inform the trustee of the transfers in which the property interests
amount of the GST exemption you transferred are to bear the GST tax on ! of the conservation easement,
CAUTION the value of the easement, the

allocated to the trust. Line 9, columns C the transfers. Use Part 3 to report the value of the land subject to the
and D may be used to figure this GST tax on transfers in which the easement, or the value of any retained
amount for each trust. property interests transferred do not development right was different than
bear the GST tax on the transfers. the estate tax value, you must complete
Note. This worksheet will figure an
accurate inclusion ratio only if the Section 2603(b) requires that unless a separate computation in addition to
decedent was the only settlor of the the governing instrument provides completing Schedule U.
trust. You should use a separate otherwise, the GST tax is to be charged Use a copy of Schedule U as a
worksheet for each trust (or separate to the property constituting the transfer. worksheet for this separate
share of a trust that is treated as a Therefore, you will usually enter all of computation. Complete lines 4 through
separate trust). the direct skips on Part 2. 14 of the worksheet Schedule U.
You may enter a transfer on Part 3 However, the value you use on lines 4,
WORKSHEET (inclusion ratio): only if the will or trust instrument 5, 7, and 10 of the worksheet is the
directs, by specific reference, that the value for these items as of the date of
1 Total estate and gift tax value of GST tax is not to be paid from the the contribution of the easement, not
all of the property interests that transferred property interests. the estate tax value. If the date of
passed to the trust . . . . . . . . . . contribution and the estate tax values
2 Estate taxes, state death taxes, Part 2, Line 3. Enter zero on this line
unless the will or trust instrument are the same, you do not need to do a
and other charges actually
recovered from the trust . . . . . . specifies that the GST taxes will be separate computation.
3 GST taxes imposed on direct paid by property other than that After completing the worksheet,
skips to skip persons other than constituting the transfer (as described enter the amount from line 14 of the
this trust and borne by the above). Enter on line 3 the total of the worksheet on line 14 of Schedule U.
property transferred to this trust GST taxes shown on Part 3 and Finish completing Schedule U by
4 GST taxes actually recovered Schedule(s) R-1 that are payable out of entering amounts on lines 4, 7, and 15
from this trust (from Schedule R, the property interests shown on Part 2,
Part 2, line 8 or Schedule R-1,
through 20, following the instructions
line 6) . . . . . . . . . . . . . . . . . . .
line 1. below for those lines. At the top of
5 Add lines 2 through 4 . . . . . . . . Part 2, Line 6. Do not enter more than Schedule U, enter ‘‘worksheet
6 Subtract line 5 from line 1 . . . . . the amount on line 5. Additional attached.’’ Attach the worksheet to the
7 Add columns C and D of line 9 . . allocations may be made using Part 1. return.
8 Divide line 7 by line 6 . . . . . . . . Part 3, Line 3. See the instructions to Under section 2031(c), you may
9 Trust’s inclusion ratio. Subtract Part 2, line 3 above. Enter only the total elect to exclude a portion of the value
line 8 from 1.000 . . . . . . . . . . . of the GST taxes shown on of land that is subject to a qualified
Schedule(s) R-1 that are payable out of conservation easement. You make the
Line 10. Special-use allocation. For the property interests shown on Part 3, election by filing Schedule U with all of
skip persons who receive an interest in line 1. the required information and excluding
section 2032A special-use property, Part 3, Line 6. See the instructions to the applicable value of the land that is
you may allocate more GST exemption Part 2, line 6 above. subject to the easement on Part
than the direct skip amount to reduce 5 — Recapitulation, page 3, at item 11.
the additional GST tax that would be How To Complete Schedule To elect the exclusion, you must
due when the interest is later disposed include on Schedule A, B, E, F, G, or H,
of or qualified use ceases. See
R-1 as appropriate, the decedent’s interest
Schedule A-1, above, for more details Filing due date. Enter the due date of in the land that is subject to the
about this additional GST tax. Form 706. You must send the copies of exclusion. You must make the election
Schedule R-1 to the fiduciary before on a timely filed Form 706, including
Enter on line 10 the total additional
this date. extensions.
GST exemption available to allocate to
all skip persons who received any Line 4. Do not enter more than the The exclusion is the lesser of:
interest in section 2032A property. amount on line 3. If you wish to allocate • The applicable percentage of the
Attach a special-use allocation an additional GST exemption, you must value of land (after certain reductions)
schedule listing each such skip person use Schedule R, Part 1. Making an subject to a qualified conservation
and the amount of the GST exemption entry on line 4 constitutes a Notice of easement or
allocated to that person. Allocation of the decedent’s GST • $500,000.
exemption to the trust. Once made, the election is
If you do not allocate the GST
exemption, it will be automatically Line 6. If the property interests irrevocable.
allocated under the deemed allocation entered on line 1 will not bear the GST
at death rules. To the extent any tax, multiply line 6 by 35% (0.35). General Requirements
amount is not so allocated, it will be Signature. The executor(s) must sign
automatically allocated to the earliest Schedule R-1 in the same manner as Qualified Land
disposition or cessation that is subject Form 706. See Signature and Land may qualify for the exclusion if all
to the GST tax. Under certain Verification. of the following requirements are met:
-38- Part Instructions
• The decedent or a member of the purposes, or to foster national or Line 5
decedent’s family must have owned the international amateur sports The amount on line 5 should be the
land for the 3-year period ending on the competition, or for the prevention of date of death value of any qualifying
date of the decedent’s death. cruelty to children or animals, without conservation easements granted prior
• No later than the date the election is net earnings benefitting any individual to the decedent’s death, whether
made, a qualified conservation shareholder and without activity with granted by the decedent or someone
easement on the land has been made the purpose of influencing legislation or other than the decedent, for which the
by the decedent, a member of the political campaigning, which exclusion is being elected.
decedent’s family, the executor of the a. Receives more than one-third of
decedent’s estate, or the trustee of a Note. If the value of the easement
its support from gifts, contributions, reported on line 5 was different at the
trust that holds the land. membership fees, or receipts from
• The land is located in the United time the easement was contributed
sales, admissions fees, or performance than at the date of death, see the
States or one of its possessions. of services, or Caution at the beginning of the
Member of Family b. Is controlled by such an Schedule U Instructions.
Members of the decedent’s family organization.
• Any entity that qualifies under section Line 7
include the decedent’s spouse;
ancestors; lineal descendants of the 170(b)(1)(A)(v) or (vi). You must reduce the land value by the
decedent, of the decedent’s spouse, value of any development rights
Conservation purpose. An easement retained by the donor in the
and of the parents of the decedent; and has a conservation purpose if it is for:
the spouse of any lineal descendant. A conveyance of the easement. A
• The preservation of land areas for development right is any right to use
legally adopted child of an individual is outdoor recreation by, or for the
considered a child of the individual by the land for any commercial purpose
education of, the public; that is not subordinate to and directly
blood. • The protection of a relatively natural supportive of the use of the land as a
Indirect Ownership of Land habitat of fish, wildlife, or plants, or a farm for farming purposes.
similar ecosystem; or
The qualified conservation easement Note. If the value of the retained
exclusion applies if the land is owned • The preservation of open space development rights reported on line 7
indirectly through a partnership, (including farmland and forest land)
was different at the time the easement
corporation, or trust, if the decedent where such preservation is for the
was contributed than at the date of
owned (directly or indirectly) at least scenic enjoyment of the general public,
death, see the Caution at the beginning
30% of the entity. For the rules on or under a clearly delineated federal,
of the Schedule U Instructions.
determining ownership of an entity, see state, or local conservation policy and
will yield a significant public benefit. You do not have to make this
Ownership rules below. reduction if everyone with an interest in
Ownership rules. An interest in Specific Instructions the land (regardless of whether in
property owned, directly or indirectly, by possession) agrees to permanently
or for a corporation, partnership, or trust Line 1 extinguish the retained development
is considered proportionately owned by right. The agreement must be filed with
or for the entity’s shareholders, If the land is reported as one or more this return and must include the
partners, or beneficiaries. A person is item numbers on a Form 706 schedule, following information and terms:
the beneficiary of a trust only if he or simply list the schedule and item
numbers. If the land subject to the 1. A statement that the agreement
she has a present interest in the trust. is made under section 2031(c)(5);
For additional information, see the easement is only part of an item,
however, list the schedule and item 2. A list of all persons in being
ownership rules in section 2057(e)(3). holding an interest in the land that is
number and describe the part subject to
Qualified Conservation the easement. See the Instructions for subject to the qualified conservation
Easement Schedule A — Real Estate for easement. Include each person’s
information on how to describe the name, address, tax identifying number,
A qualified conservation easement is relationship to the decedent, and a
one that would qualify as a qualified land.
description of their interest;
conservation contribution under section 3. The items of real property shown
170(h). It must be a contribution: Line 3
on the estate tax return that are subject
• Of a qualified real property interest, Using the general rules for describing
to the qualified conservation easement
• To a qualified organization, and real estate, provide enough information
(identified by schedule and item
• Exclusively for conservation so the IRS can value the easement.
number);
purposes. Give the date the easement was
granted and by whom it was granted. 4. A description of the retained
Qualified real property interest. A development right that is to be
qualified real property interest is any of Line 4 extinguished;
the following: 5. A clear statement of consent that
• The entire interest of the donor, other Enter on this line the gross value at is binding on all parties under
than a qualified mineral interest; which the land was reported on the applicable local law:
• A remainder interest; or applicable asset schedule on this Form a. To take whatever action is
• A restriction granted in perpetuity on 706. Do not reduce the value by the necessary to permanently extinguish
the use that may be made of the real amount of any mortgage outstanding. the retained development rights listed in
property. The restriction must include a Report the estate tax value even if the the agreement and
prohibition on more than a de minimis easement was granted by the decedent b. To be personally liable for
use for commercial recreational activity. (or someone other than the decedent) additional taxes under section
prior to the decedent’s death. 2031(c)(5)(C) if this agreement is not
Qualified organization. A qualified
organization includes: Note. If the value of the land reported implemented by the earlier of:
• Corporations and any community on line 4 was different at the time the • The date that is 2 years after the
chest, fund, or foundation, organized easement was contributed than that date of the decedent’s death or
and operated exclusively for religious, reported on Form 706, see the Caution • The date of sale of the land subject
charitable, scientific, testing for public at the beginning of the Schedule U to the qualified conservation
safety, literary, or educational Instructions. easement;
Part Instructions -39-
 6. A statement that in the event this consideration received for the • Any indebtedness incurred after the
agreement is not timely implemented, easement. If the date of death value of acquisition if the indebtedness would
that they will report the additional tax on the easement is different from the value not have been incurred but for the
whatever return is required by the IRS at the time the consideration was acquisition and the incurrence of the
and will file the return and pay the received, you must reduce the value of indebtedness was reasonably
additional tax by the last day of the 6th the easement by the same proportion foreseeable at the time of the
month following the applicable date that the consideration received bears to acquisition; and
described above. the value of the easement at the time it • The extension, renewal, or
was granted. For example, assume the refinancing of acquisition indebtedness.
All parties to the agreement must value of the easement at the time it was
sign the agreement. granted was $100,000 and $10,000
For an example of an agreement was received in consideration for the Continuation Schedule
containing some of the same terms, easement. If the easement was worth When you need to list more assets or
see Part 3 of Schedule A-1 (Form 706). $150,000 at the date of death, you deductions than you have room for on
Line 10 must reduce the value of the easement one of the main schedules, use the
Enter the total value of the qualified by $15,000 ($10,000/$100,000 × Continuation Schedule at the end of
conservation easements on which the $150,000) and report the value of the Form 706. It provides a uniform format
exclusion is based. This could include easement on line 10 as $135,000. for listing additional assets from
easements granted by the decedent (or Schedules A through I and additional
someone other than the decedent) prior Line 15 deductions from Schedules J, K, L, M,
to the decedent’s death, easements If a charitable contribution deduction for and O.
granted by the decedent that take effect this land has been taken on Schedule
at death, easements granted by the O, enter the amount of the deduction Please remember to:
executor after the decedent’s death, or here. If the easement was granted after • Use a separate Continuation
some combination of these. the decedent’s death, a contribution Schedule for each main schedule you
deduction may be taken on Schedule are continuing. Do not combine assets
Use the value of the easement
O, if it otherwise qualifies, as long as no or deductions from different schedules
! as of the date of death, even if
CAUTION the easement was granted prior income tax deduction was or will be on one Continuation Schedule.
to the date of death. But, if the value of claimed for the contribution by any • Make copies of the blank schedule
the easement was different at the time person or entity. before completing it if you expect to
the easement was contributed than at need more than one.
the date of death, see the Caution at Line 16 • Use as many Continuation
the beginning of the Schedule U You must reduce the value of the land Schedules as needed to list all the
Instructions. by the amount of any acquisition assets or deductions.
Explain how this value was indebtedness on the land at the date of • Enter the letter of the schedule you
determined and attach copies of any the decedent’s death. Acquisition are continuing in the space at the top of
appraisals. Normally, the appropriate indebtedness includes the unpaid the Continuation Schedule.
way to value a conservation easement amount of: • Use the Unit value column only if
is to determine the FMV of the land • Any indebtedness incurred by the continuing Schedule B, E, or G. For all
both before and after the granting of the donor in acquiring the property; other schedules, use this space to
easement, with the difference being the • Any indebtedness incurred before the continue the description.
value of the easement. acquisition if the indebtedness would • Carry the total from the Continuation
You must reduce the reported value not have been incurred but for the Schedules forward to the appropriate
of the easement by the amount of any acquisition; line on the main schedule.
If continuing Report Where on Continuation Schedule
Schedule E, Pt. 2 Percentage includible Alternate valuation date
Schedule K Amount unpaid to date Alternate valuation date
Schedule K Amount in contest Alternate value
Schedules J, L, M Description of deduction continuation Alternate valuation date and Alternate value
Schedule O Character of institution Alternate valuation date and Alternate value
Schedule O Amount of each deduction Amount deductible

-40- Instructions for Schedules

Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal
Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the right amount of tax. Subtitle B and section 6109, and the regulations
require you to provide this information.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless
the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long
as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return
information are confidential as required by section 6103. However, section 6103 allows or requires the Internal Revenue
Service to disclose information from this form in certain circumstances. For example, we may disclose information to the
Department of Justice for civil or criminal litigation, and to cities, states, the District of Columbia, and U.S. commonwealths or
possessions for use in administering their tax laws. We may also disclose this information to other countries under a tax
treaty, to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and intelligence
agencies to combat terrorism. Failure to provide this information, or providing false information, may subject you to penalties.
The time needed to complete and file this form and related schedules will vary depending on individual circumstances. The
estimated average times are:
Learning about the law Preparing the form Copying, assembling, and
Form Recordkeeping or the form sending the form to the IRS
706 1 hr., 25 min. 1 hr., 50 min. 3 hr., 42 min. 48 min.
Schedule A ---- 15 min. 12 min. 20 min.
Schedule A-1 33 min. 31 min. 1 hr., 15 min. 1 hr., 3 min.
Schedule B 19 min. 9 min. 16 min. 20 min.
Schedule C 19 min. 1 min. 13 min. 20 min.
Schedule D 6 min. 6 min. 13 min. 20 min.
Schedule E 39 min. 6 min. 36 min. 20 min.
Schedule F 26 min. 8 min. 18 min. 20 min.
Schedule G 26 min. 21 min. 12 min. 13 min.
Schedule H 26 min. 6 min. 12 min. 13 min.
Schedule I 13 min. 30 min. 15 min. 20 min.
Schedule J 26 min. 6 min. 16 min. 20 min.
Schedule K 13 min. 9 min. 18 min. 20 min.
Schedule L 13 min. 4 min. 15 min. 20 min.
Schedule M 13 min. 34 min. 25 min. 20 min.
Schedule O 19 min. 12 min. 21 min. 20 min.
Schedule P 6 min. 15 min. 18 min. 13 min.
Schedule Q ---- 12 min. 15 min. 13 min.
Worksheet for Schedule Q 6 min. 6 min. 58 min. 20 min.
Schedule R 19 min. 45 min. 1 hr., 10 min. 48 min.
Schedule R-1 6 min. 46 min. 35 min. 20 min.
Schedule U 19 min. 26 min. 29 min. 20 min.
Continuation Schedule 19 min. 1 min. 13 min. 20 min.
If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we
would be happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee,
SE:W:CAR:MP:T:M:S, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this
address. Instead, see Where To File.

Instructions for Schedules -41-

Index

A G Publications, obtaining . . . . . . . . . 3 Schedules R and R-1, direct

Address, executor . . . . . . . . . . . . . 4 General Information . . . . . . . . . . 12 Purpose of Form . . . . . . . . . . . . . . 2 skips . . . . . . . . . . . . . . . . . . . . . . 36
Alternate valuation . . . . . . . . . . . . . 7 General Instructions . . . . . . . . . . . 2 Section 2032A . . . . . . . . . . . . . . . . 8
Amending Form 706 . . . . . . . . . . . 3 Generation-skipping transfer Q Section 2035(a) transfers . . . . . 21
Annuities . . . . . . . . . . . . . . . . . . . . . 23 tax . . . . . . . . . . . . . . . . . . . . . . . . 34 Qualified conservation easement Section 2036 transfers . . . . . . . . 21
Applicable credit amount . . . . . . . 7 Gifts and bequests . . . . . . . . . . . 30 exclusion . . . . . . . . . . . . . . . . . . 38 Section 2037 transfers . . . . . . . . 21
Authorization . . . . . . . . . . . . . . . . . 12 Gross estate . . . . . . . . . . . . . . . 2, 13 Qualified heir . . . . . . . . . . . . . . . . . . 9 Section 2038 transfers . . . . . . . . 21
Qualified real property . . . . . . . . . 9 Signature and verification . . . . . . 3
B I Social security number . . . . . . . . . 4
Bequests . . . . . . . . . . . . . . . . . . . . 30 Inclusion ratio for trust . . . . . . . . 37 special-use valuation of Section
R 2032A . . . . . . . . . . . . . . . . . . . . . . 8
Bonds . . . . . . . . . . . . . . . . . . . . . . . 17 Installment payments . . . . . . . . . 11 Real property interest,
Instructions for Schedule A — Real Specific Instructions . . . . . . . . . . . 4
qualified . . . . . . . . . . . . . . . . . . . 39
Estate . . . . . . . . . . . . . . . . . . . . . 14 Stocks . . . . . . . . . . . . . . . . . . . . . . . 17
C Real property, qualified . . . . . . . . 9
Insurance . . . . . . . . . . . . . . . . . . . . 13 Recapitulation . . . . . . . . . . . . . . . . 13
Canadian marital credit . . . . . . . . 7
Interests, reversionary or Residents of U. S. T
Close corporations . . . . . . . . . . . 13 remainder . . . . . . . . . . . . . . . . . . 12 Possessions . . . . . . . . . . . . . . . . 2 Table A, Unified Rate
Conservation purpose . . . . . . . . 39 Schedule . . . . . . . . . . . . . . . . . . . 4
Continuation Schedule (See Rounding off to whole
L dollars . . . . . . . . . . . . . . . . . . . . . . 3 Tax Computation . . . . . . . . . . . . . . 4
Continuation Schedule on Form
706) Liens . . . . . . . . . . . . . . . . . . . . . . . . 27 Taxes, foreign death . . . . . . . . . . 31
Credit for foreign death Losses, expenses . . . . . . . . . . . . 27 S Total Credits . . . . . . . . . . . . . . . . . . 7
taxes . . . . . . . . . . . . . . . . . . . . . . 31 Lump sum distribution Schedule B Stocks and Transfers, direct skips . . . . . . . . 34
Credit for tax on prior election . . . . . . . . . . . . . . . . . . . . 25 Bonds . . . . . . . . . . . . . . . . . . . . . 17 Transfers, valuation rules . . . . . 22
transfers . . . . . . . . . . . . . . . . . . . 32 Schedule G Transfers during Trusts . . . . . . . . . . . . . . . . . . . . . . . 13
M decedent’s life . . . . . . . . . . . . . 21
D Material participation . . . . . . . . . . . 9 Schedule G, how to U
Death certificate . . . . . . . . . . . . . . . 3 Member of family . . . . . . . . . . . 9, 39 complete . . . . . . . . . . . . . . . . . . . 22 U. S. Citizens or Residents . . . . . 2
Debts of the decedent . . . . . . . . 26 Mortgages and liens . . . . . . . . . . 27 Schedule H Powers of Unified Credit (applicable credit
Debts, mortgages and appointment . . . . . . . . . . . . . . . 22 amount) . . . . . . . . . . . . . . . . . . . . 7
liens . . . . . . . . . . . . . . . . . . . . . . . 26 Schedule I Annuities . . . . . . . . . . 23 Unified credit adjustment . . . . . . . 7
N Schedule I, how to
Deductions . . . . . . . . . . . . . . . . . . . 14 Nonresident Noncitizens . . . . . . . 2
Direct skips . . . . . . . . . . . . . . . . . . 34 complete . . . . . . . . . . . . . . . . . . . 25
V
Disclaimer, qualified . . . . . . . . . . 31 Schedule K Debts . . . . . . . . . . . . 26
Valuation methods . . . . . . . . . . . . . 9
Documents, supplemental . . . . . . 3 P Schedule L Losses, expenses
during administration . . . . . . . 27 Valuation rules, transfers . . . . . . 22
Part 1, Decedent and
Executor . . . . . . . . . . . . . . . . . . . . 4 Schedule O Gifts and
E Part 2. Tax Computation . . . . . . . 4 bequests . . . . . . . . . . . . . . . . . . . 30 W
Election . . . . . . . . . . . . . . . . . . 10, 12 Part 3. Elections by the Schedule P Foreign death What’s New . . . . . . . . . . . . . . . . . . . 1
Election, lump sum Executor . . . . . . . . . . . . . . . . . . . . 7 taxes . . . . . . . . . . . . . . . . . . . . . . 31 When To File . . . . . . . . . . . . . . . . . . 2
distribution . . . . . . . . . . . . . . . . . 25 Part 4. General Schedule Q Prior transfers, credit Which Estates Must File . . . . . . . 2
Exclusion . . . . . . . . . . . . . . . . . . . . 14 Information . . . . . . . . . . . . . . . . 12 for . . . . . . . . . . . . . . . . . . . . . . . . . 32 Worksheet for Schedule Q . . . . 34
Executor . . . . . . . . . . . . . . . . . . . . 2, 4 Part 5. Recapitulation . . . . . . . . . 13 Schedule R and R-1 Worksheet TG-Taxable Gifts
Expenses, losses . . . . . . . . . . . . . 27 Paying the Tax . . . . . . . . . . . . . . . . 2 Generation-skipping transfer Reconciliation . . . . . . . . . . . . . . . 5
Payments, installment . . . . . . . . 11 tax . . . . . . . . . . . . . . . . . . . . . . . . 34 Worksheet, inclusion ratio for
Penalties . . . . . . . . . . . . . . . . . . . . . . 3 Schedule R, how to trust . . . . . . . . . . . . . . . . . . . . . . . 37
F complete . . . . . . . . . . . . . . . . . . . 37
Foreign accounts . . . . . . . . . . . . . 13 Powers of appointment . . . . . . . 22
Forms and publications, Privacy Act and Paperwork
Schedule R-1, how to ■
complete . . . . . . . . . . . . . . . 37, 38
obtaining . . . . . . . . . . . . . . . . . . . . 3 Reduction Act Notice . . . . . . . 41
Schedule U Qualified conservation
Private delivery services . . . . . . . 2 easement exclusion . . . . . . . . 38
Property, section 2044 . . . . . . . . 13

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 Checklist for Completing Form 706
To ensure a complete return, review the following checklist before filing Form 706.

Attachments . . .

Death Certificate

Certified copy of the will—if decedent died testate, you must attach a certified copy of the will. If not certified,
explain why.

Appraisals—attach any appraisals used to value property included on the return.

Copies of all trust documents where the decedent was a grantor or a beneficiary.

Form 2848 or 8821, if applicable.

Copy of any Form(s) 709 filed by the decedent.

Form 712, if any policies of life insurance are included on the return.

Form 706-CE, if claiming a foreign death tax credit.

Have you . . .

Signed the return at the bottom of page 1?

Had the preparer sign, if applicable?

Obtained the signature of your authorized representative on Part 4, page 2?

Entered a Total on all schedules filed?

Made an entry on every line of the Recapitulation, even if it is a zero?

Included the CUSIP number for all stocks and bonds?

Included the EIN of trusts, partnerships, and closely held entities?

Included the first 3 pages of the return and all required schedules?

Completed Schedule F? It must be filed with all returns.

Completed Part 4, line 4, on page 2, if there is a surviving spouse?

Completed and attached Schedule D to report insurance on the life of the decedent, even if its value is not
included in the estate?

Included any QTIP property received from a predeceased spouse?

Entered the decedent’s name, SSN, and “Form 706” on your check or money order?

Included a copy of the predeceased spouse’s Form 706 if this estate applies the deceased spousal unused
exclusion (DSUE) amount?

Attached a statement to the Form 706 or entered “No Election under Section 2010(c)(5)” across the top of page
1, if the estate elects not to transfer any deceased spousal unused exclusion (DSUE) amount to the surviving
spouse?

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