Form 706

What Is Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return?

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return is an Internal Revenue Service (IRS) form utilized by an executor of a decedent's estate to work out the estate tax owed, as indicated by Chapter 11 of the Internal Revenue Code (IRC). The tax is required on the whole taxable estate, not just on the share a specific beneficiary gets. Executors likewise use Form 706 to compute the generation-skipping transfer tax (GSTT) forced by Chapter 13 of the IRC.

Form 706 is utilized by an executor of an estate to compute the amount of tax owed on estates valued at more than $11.7 million if the decedent passed on in 2021 ($12.06 million out of 2022).

Form 706 additionally assists executors with deciding the overall value of an estate prior to distributing any assets to beneficiaries as illustrated in the decedent's will or trust. The IRS treats any inheritance on a stepped-up valuation — or a step-up basis. That means the cost basis is adjusted to the fair market value of the inherited property as of the date of death.

Utilizing the stepped-up valuation methodology permits heirs to limit capital gains taxes. The method likewise considers a cleaner valuation process in terms of restricting the number of administrative tasks associated with the estate.

Who Can File Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return?

Form 706 must be filed by the executor of the estate of each and every U.S. citizen or resident:

• Whose gross estate, adjusted [taxable gifts](/yearly exclusion), and specific exemptions total more than the exclusion amount: $11.7 million for decedents who passed on in 2021 ($12.06 million out of 2022), or
• Whose executor chooses for transfer the "deceased spousal unused exclusion" (DSUE) amount to the enduring spouse, no matter what the size of the decedent's gross estate.

To decide whether the estate surpasses the exclusion amount, include amounts 1, 2, and 3 below.

1. The adjusted taxable gifts made by the decedent after Dec. 31, 1976
2. The total specific exemption permitted under Section 2521 (as in effect before its nullification by the Tax Reform Act of 1976) for gifts made by the decedent after Sept. 8, 1976
3. The decedent's gross estate valued as of the date of death

The gross estate incorporates:

• All property where the decedent had an interest (counting real property outside the U.S.)
• Certain transfers made during the decedent's life without adequate thought
• Annuities
• The includable part of joint estates with rights of survivorship
• The includable part of tenancies by the entirety
• Certain life insurance continues
• Property over which the decedent had a general power of arrangement
• Dower or curtesy (or statutory estate) of the enduring spouse
• Community property in which the decedent had an interest

The IRS involves a stepped-up valuation methodology in deciding the value of an estate.

Form 706 is accessible on the IRS page.

Related Forms

Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, is utilized to work out estate tax and GSTT liability for nonresident alien decedents.

Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions, is utilized to work out taxes due on trust distributions subject to the GSTT. Any skip person who gets a taxable distribution coming from a trust must utilize Form 706-GS(D) to work out and report the tax due.

A generation-skipping transfer tax (GST) is a transfer of money or property, either as an inheritance or a gift, to somebody who is at least two generations below the grantor. The person who gets the inheritance or gift is called the "skip person." While a skip person is many times a grandkid, it very well may be any individual who's no less than 37\u00bd years more youthful than the grantor.

The GSTT is forced on gifts and inheritances that a skip person gets. This guarantees that taxes are paid at each generational level. The GSTT has a similar lifetime exemption as the federal estate and gift taxes — $11.7 million for 2021 ($12.06 million for 2022).

Trustees must report taxable distributions to skip persons utilizing Form 706-GS(D-1), Notification of Distribution From a Generation-Skipping Trust. Note that trustees must likewise give the skip person the information expected to figure the tax due on the distribution.

Where to Mail Form 706

You must file a paper Form 706 to report estate or GSTT in something like nine months of the date of the decedent's death. On the off chance that you can't file Form 706 by the due date, you can apply for an automatic half year extension utilizing Form 4768, Application for Extension of Time to File a Return as well as Pay U.S. Estate (and Generation-Skipping Transfer) Taxes.

File Form 706 at the accompanying address:

• Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999

On the off chance that you're utilizing a private delivery service (counting DHL Express, FedEx, and UPS), send Form 706 to:

• Internal Revenue Submission Processing Center, 333 W. Pershing Road, Kansas City, MO 64108

On the off chance that you're filing an amended Form 706, utilize the accompanying address (even assuming you're utilizing a private delivery service):

• Internal Revenue Service Center, Attn: E&G, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915

The estate tax and the GSTT are due in no less than nine months of the date of the decedent's death. Make checks payable to "United States Treasury" and note the decedent's name, Social Security number, and "Form 706" on the check. Alternatively, you can pay online through the Electronic Federal Tax Payments System (EFTPS).

Features

• Form 706-GS(D) is utilized to ascertain taxes due on trust distributions subject to the generation-skipping transfer tax (GSTT).
• Form 706 must be filed for a deceased U.S. citizen or resident whose gross estate, adjusted taxable gifts, and specific exemptions surpass $11.7 million of every 2021 ($12.06 million out of 2022).
• Form 706 is utilized by an executor of a decedent's estate to work out estate tax owed, as per Chapter 11 of the Internal Revenue Code (IRC), and to compute the generation-skipping transfer tax (GSTT) forced by Chapter 13 of the IRC.