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

Instructions for Form 706

Department of the Treasury
Internal Revenue Service

(Rev. August 2013)

For decedents dying after December 31, 2012
United States Estate (and Generation-Skipping Transfer) Tax Return
Section references are to the Internal Revenue
Code unless otherwise noted.

Prior Revisions of Form 706
For Decedents Dying
After
December 31,
1998
December 31,
2000
December 31,
2001
December 31,
2002
December 31,
2003
December 31,
2004
December 31,
2005
December 31,
2006
December 31,
2007
December 31,
2008
December 31,
2009
December 31,
2010
December 31,
2011

and Before
January 1,
2001
January 1,
2002
January 1,
2003
January 1,
2004
January 1,
2005
January 1,
2006
January 1,
2007
January 1,
2008
January 1,
2009
January 1,
2010
January 1,
2011
January 1,
2012
January 1,
2013

Use
Revision of
Form 706
Dated
July 1999
November
2001
August
2002
August
2003
August
2004
August
2005
October
2006
September
2007
August
2008
September
2009
July 2011
August
2011
August
2012

Contents
Reminders . . . . . . . . . . . . . .
General Instructions . . . . . . . .
Purpose of Form . . . . . . .
Which Estates Must File . .
Executor . . . . . . . . . . . .
When To File . . . . . . . . .
Where To File . . . . . . . . .
Paying the Tax . . . . . . . .
Signature and Verification .
Amending Form 706 . . . .
Supplemental Documents .
Rounding Off to Whole
Dollars . . . . . . . . . . .
Penalties . . . . . . . . . . . .
Obtaining Forms and
Publications To File or
Use . . . . . . . . . . . . .
Specific Instructions . . . . . . . .
Part 1—Decedent and
Executor . . . . . . . . . .
Part 2—Tax Computation .
Part 3—Elections by the
Executor . . . . . . . . . .
Part 4—General Information
Nov 06, 2013

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Contents

Page

Part 5—Recapitulation . . . .
Part 6—Portability of
Deceased Spousal
Unused Exclusion
(DSUE) . . . . . . . . . . . .
Schedule A—Real Estate . .
Schedule A-1—Section
2032A Valuation . . . . . .
Schedule B—Stocks and
Bonds . . . . . . . . . . . . .
Schedule C—Mortgages,
Notes, and Cash . . . . . .
Schedule D—Insurance on
the Decedent's Life . . . .
Schedule E—Jointly Owned
Property . . . . . . . . . . .
Schedule F—Other
Miscellaneous Property .
Decedent Who Was a
Surviving Spouse . . . . .
Schedule G—Transfers
During Decedent's Life . .
Schedule H—Powers of
Appointment . . . . . . . .
Schedule I—Annuities . . . .
Schedule J—Funeral
Expenses and Expenses
Incurred in Administering
Property Subject to
Claims . . . . . . . . . . . .
Schedule K—Debts of the
Decedent and Mortgages
and Liens . . . . . . . . . .
Schedule L—Net Losses
During Administration
and Expenses Incurred in
Administering Property
Not Subject to Claims . . .
Schedule M—Bequests,
etc., to Surviving Spouse
(Marital Deduction) . . . .
Schedule O—Charitable,
Public, and Similar Gifts
and Bequests . . . . . . . .
Schedule P—Credit for
Foreign Death Taxes . . .
Schedule Q—Credit for Tax
on Prior Transfers . . . . .
Schedules R and R-1 –
Generation-Skipping
Transfer Tax . . . . . . . .
Schedule U—Qualified
Conservation Easement
Exclusion . . . . . . . . . .
Schedule PC—Protective
Claim for Refund . . . . . .
Continuation Schedule . . . .
Index . . . . . . . . . . . . . . . . . .
Checklist . . . . . . . . . . . . . . . .

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Future Developments
For the latest information about
developments related to Form 706 and
its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/form706.

What's New
Schedule PC—Protective Claim for
Refund has been added to Form 706.
By filing Schedule PC, taxpayers can
preserve their right to a refund of estate
taxes paid when a claim or expense
which is the subject of unresolved
controversy at the time of filing the
return later becomes deductible under
section 2053.
Line 7 Worksheet in the instructions
has been expanded to include the
calculation for cumulative lifetime gifts
on which tax was paid or payable. This
amount is used in Section C of Part 6–
Portability of Deceased Spousal
Unused Exclusion (DSUE).
Submit a copy of the Line 7
Worksheet (if completed) when you file
Form 706.
Various dollar amounts and
limitations in the Form 706 are indexed
for inflation. For decedents dying in
2013, the following amounts are
applicable:
a. The basic exclusion amount is
$5,250,000.
b. The ceiling on special-use
valuation is $1,070,000.
c. The amount used in figuring the
2% portion of estate tax payable in
installments is $1,430,000.
The IRS will publish amounts for future
years in annual revenue procedures.

Reminders

Executors must provide
documentation of their status.
The credit for transfers made by
lifetime gift has been reunified with the
credit against transfers made at death.
The applicable credit amount for 2013 is
$2,045,800 (based on the basic
exclusion amount of $5,250,000). This
does not include any applicable credit
resulting from DSUE amount received
from a predeceased spouse.

Portability of Deceased Spousal
Unused Exclusion
1. Part 6—Portability of Deceased
Spousal Unused Exclusion (DSUE) was
added to Form 706. The only action
required to elect portability of the DSUE
amount, if any, is to file a timely and
complete Form 706. In this Part,
taxpayers can opt out of electing to
transfer any DSUE amount to a
surviving spouse, calculate the amount
of DSUE to be transferred in the event
of an election, and/or account for any
DSUE amount received from
predeceased spouse(s).
2. Line 9 of Part 2—Tax
Computation was replaced with lines 9a
through 9d to calculate the applicable
exclusion amount and applicable credit
amount (formerly unified credit amount),
factoring in any DSUE amount received
from a predeceased spouse.
3. Executors of estates who are not
required to file Form 706 under section
6018(a) but who are filing to elect
portability of DSUE amount to the
surviving spouse are not required to
report the value of certain property
eligible for the marital deduction under
section 2056 or 2056A or the charitable
deduction under section 2055 under the
special rule of Reg. section 20.2010–
2T(a)(7)(ii). However, the value of those
assets must be estimated and included
in the total value of the gross estate.
The special rule does not apply to
assets whose valuation is required for
eligibility under section 2032, 2032A,
2652(a)(3), 6166 or other provision of
the Code or Regulations.
A timely and complete Form 706
must be filed by the executor of any
estate who intends to transfer the DSUE
amount to the decedent's surviving
spouse, regardless of the amount of the
gross estate. See instructions for Part
6—Portability of Deceased Spousal
Unused Exclusion, below.
Filing a timely and complete Form
706 with a DSUE amount will be
considered an election to transfer the
DSUE amount to the surviving spouse.
An executor of an estate who files a
Form 706 that does not elect to transfer
the DSUE amount to the surviving
spouse must affirmatively opt out of
portability. See Part 6—Portability of
Deceased Spousal Exclusion,
Section A.

General Instructions
Purpose of Form

The executor of a decedent's estate
uses Form 706 to figure the estate tax
imposed by Chapter 11 of the Internal
Revenue Code. This tax is levied on the
entire taxable estate and not just on the
share received by a particular
beneficiary. Form 706 is also used to
figure the generation-skipping transfer
(GST) tax imposed by Chapter 13 on
direct skips (transfers to skip persons of
interests in property included in the
decedent's gross estate).

Which Estates Must File

For decedents who died in 2013, Form
706 must be filed by the executor of the
estate of every U.S. citizen or resident:
a. Whose gross estate, plus
adjusted taxable gifts and specific
exemption, is more than
$5,250,000; or,
b. Whose executor elects to transfer
the DSUE amount to the surviving
spouse, regardless of the size of the
decedent's gross estate. See
instructions for Part 6—Portability of
Deceased Spousal Unused
Exclusion and sections 2010(c)(4)
and (c)(5).
To determine whether you must file a
return for the estate under test a above,
add:
1. The adjusted taxable gifts (as
defined in section 2503) made by the
decedent after December 31, 1976;
2. The total specific exemption
allowed under section 2521 (as in effect
before its repeal by the Tax Reform Act
of 1976) for gifts made by the decedent
after September 8, 1976; and
3. The decedent's gross estate
valued as of the date of death.

Gross Estate

The gross estate includes all property in
which the decedent had an interest
(including real property outside the
United States). It also includes:
Certain transfers made during the
decedent's life without an adequate and
full consideration in money or money's
worth,
Annuities,
The includible portion of joint estates
with right of survivorship (see
instructions for Schedule E),
The includible portion of tenancies by
the entirety (see instructions for
Schedule E),

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Certain life insurance proceeds (even
though payable to beneficiaries other
than the estate) (see instructions for
Schedule D),
Property over which the decedent
possessed a general power of
appointment,
Dower or curtesy (or statutory estate)
of the surviving spouse, and
Community property to the extent of
the decedent's interest as defined by
applicable law.
Note. Under the special rule of
Regulations section 20.2010–2T(a)(7)
(ii), executors of estates who are not
required to file Form 706 under section
6018(a), but who are filing to elect
portability of DSUE amount to the
surviving spouse, are not required to
report the value of certain property
eligible for the marital deduction under
section 2056 or 2056A or the charitable
deduction under section 2055.
However, the value of those assets
must be estimated and included in the
total value of the gross estate. See
instructions for Part 5—Recapitulation,
lines 10 and 23, for more information.
For more specific information, see
the instructions for Schedules A through
I.

U.S. Citizens or Residents;
Nonresident Noncitizens

File Form 706 for the estates of
decedents who were either U.S. citizens
or U.S. residents at the time of death.
For estate tax purposes, a resident is
someone who had a domicile in the
United States at the time of death. A
person acquires a domicile by living in a
place for even a brief period of time, as
long as the person had no intention of
moving from that place.
File Form 706-NA, U.S. Estate (and
Generation-Skipping Transfer) Tax
Return, for the estates of nonresident
alien decedents (decedents who were
neither U.S. citizens nor U.S. residents
at the time of death).

Residents of U.S. Possessions

All references to citizens of the United
States are subject to the provisions of
sections 2208 and 2209, relating to
decedents who were U.S. citizens and
residents of a U.S. possession on the
date of death. If such a decedent
became a U.S. citizen only because of
his or her connection with a possession,
then the decedent is considered a
nonresident alien decedent for estate
tax purposes, and you should file Form
706-NA. If such a decedent became a
U.S. citizen wholly independently of his
General Instructions

or her connection with a possession,
then the decedent is considered a U.S.
citizen for estate tax purposes, and you
should file Form 706.

Executor

The term executor includes the
executor, personal representative, or
administrator of the decedent's estate. If
none of these is appointed, qualified,
and acting in the United States, every
person in actual or constructive
possession of any property of the
decedent is considered an executor and
must file a return.
Executors must provide
documentation proving their status.
Documentation will vary, but may
include documents such as a certified
copy of the will or a court order
designating the executor(s). A
statement by the executor attesting to
their status is insufficient.

When To File

You must file Form 706 to report estate
and/or GST tax within 9 months after the
date of the decedent's death. If you are
unable to file Form 706 by the due date,
you may receive an extension of time to
file. Use Form 4768, Application for
Extension of Time To File a Return
and/or Pay U.S. Estate (and
Generation-Skipping Transfer) Taxes, to
apply for an automatic 6-month
extension of time to file.
Note. An executor can only elect to
transfer the DSUE amount to the
surviving spouse if the Form 706 is filed
timely; that is, within 9 months of the
decedent's date of death or, if you have
received an extension of time to file,
before the 6-month extension period
ends.

Private delivery services. You can
use certain private delivery services
designated by the IRS to meet the
“timely mailing as timely filing/paying”
rule for tax returns and payments.
These private delivery services include
only the following:
DHL Express (DHL): DHL Same Day
Service.
Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, FedEx
International First.
United Parcel Service (UPS): UPS
Next Day Air, UPS Next Day Air Saver,
UPS 2nd Day Air, UPS 2nd Day Air
A.M., UPS Worldwide Express Plus,
and UPS Worldwide Express.
General Instructions

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

Where To File

File Form 706 at the following address:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999

Paying the Tax

The estate and GST taxes are due
within 9 months of the date of the
decedent's death. You may request an
extension of time for payment by filing
Form 4768. You may also elect under
section 6166 to pay in installments or
under section 6163 to postpone the part
of the tax attributable to a reversionary
or remainder interest. These elections
are made by checking lines 3 and 4
(respectively) of Part 3—Elections by
the Executor, and attaching the required
statements.
If the tax paid with the return is
different from the balance due as
figured on the return, explain the
difference in an attached statement. If
you have made prior payments to the
IRS, attach a statement to Form 706
including these facts.

Paying by check. Make the check
payable to the “United States Treasury.”
Please write the decedent's name,
social security number (SSN), and
“Form 706” on the check to assist us in
posting it to the proper account.
Paying Electronically. Payment of the
tax due shown on Form 706 may be
submitted electronically through the
Electronic Federal Tax Payment System
(EFTPS). EFTPS is a free service of the
Department of Treasury.
To be considered timely, payments
made through EFTPS must be
completed no later than 8 p.m. Eastern
time the day before the due date. All
EFTPS payments must be scheduled in
advance of the due date and, if
necessary, may be changed or
cancelled up to two business days
before the scheduled payment date.
To get more information about
EFTPS or to enroll, visit www.eftps.gov
or call 1–800–555–4477. Additional
information about EFTPS is available in
Publication 966, Electronic Federal Tax
Payment System: A Guide to Getting
Started.

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Signature and Verification
If there is more than one
executor, all listed executors
CAUTION
are responsible for the return.
However, it is sufficient for only one of
the co-executors to sign the return.

!

All executors are responsible for the
return as filed and are liable for
penalties imposed for erroneous or false
returns.
If two or more persons are liable for
filing the return, they should all join
together in filing one complete return.
However, if they are unable to join in
making one complete return, each is
required to file a return disclosing all the
information the person has about the
estate, including the name of every
person holding an interest in the
property and a full description of the
property. If the appointed, qualified, and
acting executor is unable to make a
complete return, then every person
holding an interest in the property must,
on notice from the IRS, make a return
regarding that interest.
The executor who files the return
must, in every case, sign the declaration
on page 1 under penalties of perjury.
Generally, anyone who is paid to
prepare the return must sign the return
in the space provided and fill in the Paid
Preparer Use Only area. See section
7701(a)(36)(B) for exceptions.
In addition to signing and completing
the required information, the paid
preparer must give a copy of the
completed return to the executor.
Note. A paid preparer may sign original
or amended returns by rubber stamp,
mechanical device, or computer
software program.

Amending Form 706

If you find that you must change
something on a return that has already
been filed, you should:
File another Form 706;
Enter “Supplemental Information”
across the top of page 1 of the form;
and
Attach a copy of pages 1, 2, 3, and 4
of the original Form 706 that has already
been filed.
If you have already been notified that
the return has been selected for
examination, you should provide the
additional information directly to the
office conducting the examination.

Supplemental Documents
Note. You must attach the death
certificate to the return.
If the decedent was a citizen or
resident of the United States and died
testate (leaving a valid will), attach a
certified copy of the will to the return. If
you cannot obtain a certified copy,
attach a copy of the will and an
explanation of why it is not certified.
Other supplemental documents may be
required as explained below. Examples
include Forms 712, Life Insurance
Statement; 709, United States Gift (and
Generation-Skipping Transfer) Tax
Return; and 706-CE, Certificate of
Payment of Foreign Death Tax; trust
and power of appointment instruments;
and state certification of payment of
death taxes. If you do not file these
documents with the return, the
processing of the return will be delayed.
If the decedent was a U.S. citizen but
not a resident of the United States, you
must attach the following documents to
the return:
1. A copy of the inventory of
property and the schedule of liabilities,
claims against the estate, and expenses
of administration filed with the foreign
court of probate jurisdiction, certified by
a proper official of the court;
2. A copy of the return filed under
the foreign inheritance, estate, legacy,
succession tax, or other death tax act,
certified by a proper official of the
foreign tax department, if the estate is
subject to such a foreign tax; and
3. If the decedent died testate, a
certified copy of the will.

Rounding Off to Whole
Dollars

You may show the money items on the
return and accompanying schedules as
whole-dollar amounts. To do so, drop
the cents from any amount with less
than 50 cents and increase any amount
with 50 to 99 cents to the next dollar.
For example, $1.39 becomes $1 and
$2.55 become $3. If you have to add
two or more amounts to compute an
item's value, include the cents when
adding the amounts and round off only
the total.

Penalties
Late filing and late payment. Section
6651 provides for penalties for both late
filing and for late payment unless there
is reasonable cause for the delay. The
law also provides for penalties for willful
attempts to evade payment of tax. The

late filing penalty will not be imposed if
the taxpayer can show that the failure to
file a timely return is due to reasonable
cause.
Reasonable cause determinations. If
you receive a notice about penalties
after you file Form 706, send an
explanation and we will determine if you
meet reasonable cause criteria. Do not
attach an explanation when you file
Form 706. Explanations attached to the
return at the time of filing will not be
considered.
Valuation understatement. Section
6662 provides a 20% penalty for the
underpayment of estate tax that
exceeds $5,000 when the
underpayment is attributable to
valuation understatements. A valuation
understatement occurs when the value
of property reported on Form 706 is
65% or less of the actual value of the
property.
This penalty increases to 40% if
there is a gross valuation
understatement. A gross valuation
understatement occurs if any property
on the return is valued at 40% or less of
the value determined to be correct.
Penalties also apply to late filing, late
payment, and underpayment of GST
taxes.
Return preparer. Estate tax return
preparers, who prepare any return or
claim for refund which reflects an
understatement of tax liability due to
willful or reckless conduct, are subject
to a penalty of $5,000 or 50% of the
income derived (or income to be
derived), whichever is greater, for the
preparation of each such return. See
section 6694(b), the regulations
thereunder, and Ann. 2009-15, 2009-11
I.R.B. 687 (available at www.irs.gov/
pub/irs-irbs/irb09-11.pdf) for more
information.

Form 706-CE, Certificate of Payment
of Foreign Death Tax.
Form 706-NA, United States Estate
(and Generation-Skipping Transfer) Tax
Return, Estate of nonresident not a
citizen of the United States.
Form 709, United States Gift (and
Generation-Skipping Transfer) Tax
Return.
Form 712, Life Insurance Statement.
Form 2848, Power of Attorney and
Declaration of Representative.
Form 4768, Application for Extension
of Time To File a Return and/or Pay
U.S. Estate (and Generation-Skipping
Transfer) Taxes.
Form 4808, Computation of Credit for
Gift Tax.
Form 8821, Tax Information
Authorization.
Form 8822, Change of Address.
Additional Information. The following
publications may assist you in learning
about and preparing Form 706:
Publication 559, Survivors,
Executors, and Administrators.
Publication 910, IRS Guide to Free
Tax Services.
Note. For information about release of
nonresident U.S. citizen decedents'
assets using transfer certificates under
Regulations section 20.6325-1, write to:
Internal Revenue Service
Cincinnati, OH 45999
Stop 824G

Specific Instructions
You must file the first four pages of
Form 706 and all required schedules.
File Schedules A through I, as
appropriate, to support the entries in
items 1 through 9 of Part
5—Recapitulation.

Obtaining Forms and
Publications To File or Use
Internet. You can access the IRS
website 24 hours a day, 7 days a week
at IRS.gov to:
Download forms, instructions, and
publications;
Order IRS products online;
Research your tax questions online;
Search publications online by topic or
keyword; and
Sign up to receive local and national
tax news by email.
Other forms that may be required.
Form SS-5, Application for a Social
Security Card.
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General, Specific, and Part Instructions

you must report the
asset on the
appropriate schedule,
but you are not required
to enter a value for the
asset. Include the
estimated value of the
asset in the totals
entered on lines 10 and
23 of Part 5—
Recapitulation.

you claim an
exclusion on item 11,

complete and attach
Schedule U.

you claim any
deductions on items
14 through 22 of the
Recapitulation,

complete and attach the
appropriate schedules
to support the claimed
deductions.

you claim credits for
complete and attach
foreign death taxes or Schedule P or Q.
tax on prior transfers,
there is not enough
space on a schedule
to list all the items,

attach a Continuation
Schedule (or additional
sheets of the same
size) to the back of the
schedule (see the
Continuation Schedule
at the end of Form 706);
photocopy the blank
schedule before
completing it, if you will
need more than one
copy.

Also consider the following:
Form 706 has 31 numbered pages.
The pages are perforated so that you
can remove them for copying and filing.
Number the items you list on each
schedule, beginning with the number “1”
each time, or using the numbering
convention as indicated on the schedule
(for example, Schedule M).
Total the items listed on the schedule
and its attachments, Continuation
Schedules, etc.
Enter the total of all attachments,
Continuation Schedules, etc., at the
bottom of the printed schedule, but do
not carry the totals forward from one
schedule to the next.
Enter the total, or totals, for each
schedule on page 3, Part
5—Recapitulation.
Do not complete the “Alternate
valuation date” or “Alternate value”
columns of any schedule unless you
elected alternate valuation on line 1 of
Part 3—Elections by the Executor.

Part Instructions

Line 2

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

Line 6a. Name of Executor

If there is more than one executor, enter
the name of the executor to be
contacted by the IRS and see line 6d.

Line 6b. Executor's Address

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

Line 6c. Executor's Social
Security Number

Only one executor should complete this
line. If there is more than one executor,
see line 6d.

Line 6d. Multiple Executors

Check here if there is more than one
executor. On an attached statement,
provide the names, addresses,
telephone numbers, and SSNs of any
executor other than the one named on
line 6a.

Line 11. Special Rule

If the estate is estimating the value of
assets under the special rule of
Regulations section 20.2010–2T(a)(7)
(ii), check here and see the instructions
for lines 10 and 23 of Part
5—Recapitulation.

Part 2—Tax Computation

In general, the estate tax is figured by
applying the unified rates shown in
Table A to the total of transfers both
during life and at death, and then
subtracting the gift taxes, as refigured
based on the date of death rates. See
Worksheet TG, Line 4 Worksheet, and
Line 7 Worksheet.

Note. You must complete Part 2—Tax
Computation.

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Column
A
Taxable
amount
over

Column
B
Taxable
amount
not over

$0
$10,000
10,000
20,000
20,000
40,000
40,000
60,000
60,000
80,000
80,000
100,000
100,000
150,000
150,000
250,000
250,000
500,000
500,000
750,000
750,000 1,000,000
1,000,000
––––

Column
C
Tax on
amount
in
Column
A

$0
1,800
3,800
8,200
13,000
18,200
23,800
38,800
70,800
155,800
248,300
345,800

Column
D
Rate of
tax on
excess
over
amount
in
Column
A
.

you are estimating the
value of one or more
assets pursuant to the
special rule of
Regulations section
20.2010–2T(a)(7)(ii),

Part 1—Decedent and
Executor

Table A — Unified Rate
Schedule

.

you enter zero on any you need not file the
item of the
schedule (except for
Recapitulation,
Schedule F) referred to
on that item.

When you complete the return, staple
all the required pages together in the
proper order.

.

THEN . . .

.

IF . . .

18%
20%
22%
24%
26%
28%
30%
32%
34%
37%
39%
40%

Line 1

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

Line 3b. State Death Tax
Deduction
The estates of decedents dying
after December 31, 2004, will
CAUTION
be allowed a deduction for
state death taxes, instead of a credit.
The state death tax credit was repealed
as of January 1, 2005.

!

You may take a deduction on line 3b for
estate, inheritance, legacy, or
succession taxes paid as the result of
the decedent's death to any state or the
District of Columbia.
You may claim an anticipated
amount of deduction and figure the
federal estate tax on the return before
the state death taxes have been paid.
However, the deduction cannot be
finally allowed unless you pay the state
death taxes and claim the deduction
within 4 years after the return is filed, or
later (see section 2058(b)) if:
A petition is filed with the Tax Court of
the United States,
You have an extension of time to pay,
or
You file a claim for refund or credit of
an overpayment which extends the
deadline for claiming the deduction.

Worksheet TG and Line 4 Worksheet

a.

b.

Calendar year or
calendar quarter

Total taxable gifts for
period (see Note)

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
by the decedent or the decedent’s spouse. In addition to gifts reported on Form
709, you must include any taxable gifts in excess of the annual exclusion that
were not reported on Form 709.
c.

1.

Taxable amount
included in col. b
for gifts included
in the gross estate

Total taxable gifts
made before 1977

d.
Taxable amount
included in col. b for
gifts that qualify for
“special treatment of
split gifts” described
below

e.

f.

Gift tax paid by
decedent on gifts
in col. d

Gift tax paid by
decedent’s spouse on
gifts in col. c

Gifts made
after 1976

Gifts made after June 6,
1932, and before 1977

Worksheet TG— Taxable Gifts Reconciliation
(To be used for lines 4 and 7 of the Tax Computation)

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

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

Note. The deduction is not subject to
dollar limits.
If you make a section 6166 election
to pay the federal estate tax in
installments and make a similar election
to pay the state death tax in
installments, see section 2058(b) for
exceptions and periods of limitation.
If you transfer property other than
cash to the state in payment of state
inheritance taxes, the amount you may
claim as a deduction is the lesser of the
state inheritance tax liability discharged
or the fair market value (FMV) of the
property on the date of the transfer. For
more information on the application of
such transfers, see the principles
discussed in Revenue Ruling 86-117,
1986-2 C.B. 157, prior to the repeal of
section 2011.
Send the following evidence to the
IRS:
1. Certificate of the proper officer of
the taxing state, or the District of
Columbia, showing the:
a. Total amount of tax imposed
(before adding interest and penalties
and before allowing discount),
b. Amount of discount allowed,

c. Amount of penalties and interest
imposed or charged,
d. Total amount actually paid in
cash, and
e. Date of payment.
2. Any additional proof the IRS
specifically requests.
File the evidence requested above
with the return, if possible. Otherwise,
send it as soon as possible after the
return is filed.

Line 6

To figure the tentative tax on the amount
on line 5, use Table A—Unified Rate
Schedule, above, and put the result on
this line.

Lines 4 and 7

Three worksheets are provided to help
you figure the entries for these lines.
Worksheet TG—Taxable Gifts
Reconciliation allows you to reconcile
the decedent's lifetime taxable gifts to
figure totals that will be used for the
Line 4 Worksheet and the Line 7
Worksheet.

4
5

completing Worksheet TG—Taxable
Gifts Reconciliation. The amounts
needed for Worksheet TG can usually
be found on the filed returns that were
subject to tax. However, if any of the
returns were audited by the IRS, use the
amounts that were finally determined as
a result of the audits.
In addition, you must make a
reasonable effort to discover any gifts in
excess of the annual exclusion made by
the decedent (or on behalf of the
decedent under a power of attorney) for
which no Forms 709 were filed. Include
the value of such gifts in column b of
Worksheet TG. The annual exclusion
per donee for 1977 through 1981 was
$3,000, $10,000 for 1981 through 2001,
$11,000 for 2002 through 2005,
$12,000 for 2006 through 2008, and
$13,000 for 2009 through 2012. For
2013, the annual exclusion for gifts of
present interest is $14,000 per donee.

You must have all of the decedent's
gift tax returns (Forms 709) before
-6-

Part Instructions

Line 7 Worksheet – Submit a copy with Form 706
Line 7 Worksheet Part A- Used to determine Applicable Credit Allowable for Prior Periods after 1976
(a)

Tax Period1

(b)

Taxable Gifts for Applicable Period

(c)

Taxable Gifts for Prior Periods 2

(d)

Cumulative Taxable Gifts Including Applicable
Period (add Row (b) and Row (c))

(e)

Tax at Date of Death Rates for Prior Gifts (from
Row (c))3

(f)

Tax at Date of Death Rates for Cumulative Gifts
including Applicable Period (from Row (d))

(g)

Tax at Date of Death Rates for Gifts in
Applicable Period (subtract Row (e) from Row
(f))

(h)

Total DSUE applied from Prior Periods and
Applicable Period (from Line 2 of Schedule C of
Applicable Period Form 709)

(i)

Basic Exclusion for Applicable Period (Enter
the amount from the Table of Basic Exclusion
Amounts)

(j)

Basic Exclusion amount plus Total DSUE
applied in prior periods and applicable period
(add Row (h) and Row (i))

(k)

Maximum Applicable Credit amount based on
Row (j) (Using Table A—Unified Rate
Schedule)4

(l)

Applicable Credit amount used in Prior Periods
(add Row (l) and Row (n) from prior period)

(m)

Available Credit in Applicable Period (subtract
Row (l) from Row (k))

(n)

Credit Allowable (lesser of Row (g) or Row (m))

(o)

Tax paid or payable at Date of Death rates for
Applicable Period (subtract Row (n) from Row
(g))

(p)

Tax on Cumulative Gifts less tax paid or
payable for Applicable Period (subtract Row (o)
from Row (f))

(q)

Cumulative Taxable Gifts less Gifts in the
Applicable Period on which tax was paid or
payable based on Row (p) (Using the Taxable
Gift Amount Table)

(r)

Gifts in the Applicable Period on which tax was
payable (subtract Row (g) from Row (d))

Pre-1977

Line 7 Worksheet Part B
1

Total gift taxes payable on gifts after 1976 (sum of amounts in Row (o)).

2

Gift taxes paid by the decedent on gifts that qualify for “special treatment.” Enter the amount from Worksheet TG, line 2, col.
(e).

3

Subtract line 2 from line 1.

4

Gift tax paid by decedent's spouse on split gifts included on Schedule G. Enter amount from Worksheet TG, line 2, col. (f).

5

Add lines 3 and 4. Enter here and on Part 2—Tax Computation, line 7.

6

Cumulative lifetime gifts on which tax was paid or payable. Enter this amount on line 3, Section C, Part 6 of Form 706 (sum
of amounts in Row (r)).

Footnotes:
1
Row (a): For annual returns, enter the tax period as (YYYY). For quarterly returns enter tax period as (YYYY–Q).
2
Row (c): Enter amount from Row (d) of the previous column.
3
Row (e): Enter amount from Row (f) of the previous column.
4
Row (k): Calculate the applicable credit on the amount in column (j), using Table A — Unified Rate Schedule, and enter here. (For each row in column (k), subtract 20
percent of any amount allowed as a specific exemption for gifts made after September 8, 1976, and before January 1, 1977.)

Part Instructions

-7-

Taxable Gift Amount Table
Column A Column B Column
C

Column D

Amount in Amount in Property
Rate
Row (p)
Row (p)
Value on (Divisor)
Line 7
Line 7
Amount on excess
Worksheet Worksheet
in
of amount
over...
not over... Column A in Column
A
0

1,800

0

18%

1,800

3,800

10,000

20%

3,800

8,200

20,000

22%

8,200

13,000

40,000

24%

13,000

18,200

60,000

26%

18,200

23,800

80,000

28%

23,800

38,800

100,000

30%

38,800

70,800

150,000

32%

70,800

155,800

250,000

34%

155,800

248,300

500,000

37%

248,300

345,800

750,000

39%

345,800

––––––

1,000,000

40%

How to complete line 7 worksheet.
Row (a). Beginning with the earliest
year in which the taxable gifts were
made, enter the tax period of prior gifts.
If you filed returns for gifts made after
1981, enter the calendar year in Row (a)
as (YYYY). If you filed returns for gifts
made after 1976 and before 1982, enter
the calendar quarters in Row (a) as
(YYYY-Q).
Row (b). Enter all taxable gifts made in
the specified year. Enter all pre-1977
gifts on the pre-1977 column.
Row (c). Enter the amount from Row
(d) of the previous column.
Row (d). Enter the sum of Row (b) and
Row (c) from the current column.
Row (e). Enter the amount from Row (f)
of the previous column.
Row (f). Enter the tax based on the
amount in Row (d) of the current column
using Table A — Unified Rate Schedule,
earlier.
Row (g). Subtract the amount in Row
(e) from the amount in Row (f) for the
current column.
Row (h). Complete this row only if a
DSUE amount was received from
predeceased spouse(s) and was
applied to lifetime gifts. See line 2 of
Schedule C on the Form 709 filed for
the year listed in Row (a) for the amount
to be entered in this row.
Row (i). Enter the applicable amount
from the Table of Basic Exclusion
Amounts.

Row (j). Enter the sum of Rows (h) and
Row (i).
Row (k). Calculate the applicable credit
on the amount in Row (j) using Table
A — Unified Rate Schedule, and enter
here.
Note. The entries in each column of
Row (k) must be reduced by 20 percent
of the amount allowed as a specific
exemption for gifts made after
September 8, 1976, and before January
1, 1977 (but no more than $6,000).
Row (l). Add the amounts in Row (l)
and Row (n) from the previous column.
Row (m). Subtract the amount in Row
(l) from the amount in Row (k) to
determine the amount of any available
credit. Enter result in Row (m).
Row (n). Enter the lesser of the
amounts in Row (g) or Row (m).
Row (o). Subtract the amount in Row
(n) from the amount in Row (g) for the
current column.
Row (p). Subtract the amount in Row
(o) from the amount in Row (f) for the
current column.
Row (q). Enter the Cumulative Taxable
Gift amount based on the amount in
Row (p) using the Taxable Gift Amount
Table.
Row (r). If Row (o) is greater than zero
in the applicable period, subtract Row
(q) from Row (d). If Row (o) is not
greater than zero enter -0-.
Repeat for each year in which
taxable gifts were made.
Remember to submit a copy of
the Line 7 Worksheet when you
CAUTION
file Form 706. If additional
space is needed to report prior gifts,
please attach additional sheets.

!

-8-

Table of
Basic Exclusion Amounts

Period

Basic
Exclusion
Amount

Credit
Equivalent
at 2013
rates

1977 (Quarters 1
and 2)

$30,000

$6,000

1977 (Quarters 3
and 4)

$120,667

$30,000

1978

$134,000

$34,000

1979

$147,333

$38,000

1980

$161,563

$42,500

1981

$175,625

$47,000

1982

$225,000

$62,800

1983

$275,000

$79,300

1984

$325,000

$96,300

1985

$400,000

$121,800

1986

$500,000

$155,800

1987 through 1997

$600,000

$192,800

1998

$625,000

$202,050

1999

$650,000

$211,300

2000 and 2001

$675,000

$220,550

2002 through 2010

$1,000,000

$345,800

2011

$5,000,000

$1,945,800

2012

$5,120,000

$1,993,800

2013

$5,250,000

$2,045,800

Note. In figuring the line 7 amount, do
not include any tax paid or payable on
gifts made before 1977. The line 7
amount is a hypothetical figure used to
calculate the estate tax.
Special treatment of split gifts.
These special rules apply only if:
The decedent's spouse predeceased
the decedent;
The decedent's spouse made gifts
that were “split” with the decedent under
the rules of section 2513;
The decedent was the “consenting
spouse” for those split gifts, as that term
is used on Form 709; and
The split gifts were included in the
decedent's spouse's gross estate under
section 2035.
If all four conditions above are met,
do not include these gifts on line 4 of the
Tax Computation and do not include the
gift taxes payable on these gifts on
line 7 of the Tax Computation. These
adjustments are incorporated into the
worksheets.

Part Instructions

Lines 9a through 9d. Applicable
Credit Amount (formerly
Unified Credit Amount)

The applicable credit amount is
allowable credit against estate and gift
taxes. It is calculated by determining the
tentative tax on the applicable exclusion
amount, which is the amount that can be
transferred before an estate tax liability
will be incurred.
The applicable exclusion amount
equals the total of:
Line 9a: The basic exclusion amount.
In 2013, the basic exclusion amount, as
adjusted for inflation under 2010(c)(3),
is $5,250,000.
Line 9b: The deceased spousal
unused exclusion amount (DSUE). If the
decedent had a spouse who died on or
after January 1, 2011, whose estate did
not use all of its applicable exclusion
against gift or estate tax liability, a
DSUE amount may be available for use
by the decedent's estate. If the
predeceased spouse died in 2011, the
DSUE amount was calculated and
attached to his or her Form 706. If the
predeceased spouse died in 2012 or
after, this amount is found in Part 6,
Section C of the Form 706 filed by the
estate of the decedent's predeceased
spouse. The amount to be entered on
line 9b is calculated in Part 6, Section D.

Line 10. Adjustment to
Applicable Credit

If the decedent made gifts (including
gifts made by the decedent's spouse
and treated as made by the decedent
by reason of gift splitting) after
September 8, 1976, and before January
1, 1977, for which the decedent claimed
a specific exemption, the applicable
credit amount on this estate tax return
must be reduced. The reduction is
figured by entering 20% of the specific
exemption claimed for these gifts.
Note. The specific exemption was
allowed by section 2521 for gifts made
before January 1, 1977.
If the decedent did not make any gifts
between September 8, 1976, and
January 1, 1977, or if the decedent
made gifts during that period but did not
claim the specific exemption, enter zero.

Line 15. Total Credits

Generally, line 15 is used to report the
total of credit for foreign death taxes
(line 13) and credit for tax on prior
transfers (line 14).
However, you may also use line 15 to
report credit taken for federal gift taxes
imposed by Chapter 12 of the Code,

Part Instructions

and the corresponding provisions of
prior laws, on certain transfers the
decedent made before January 1, 1977,
that are included in the gross estate.
The credit cannot be more than the
amount figured by the following formula:
Gross estate tax minus (the
sum of the state death taxes
and unified credit)
Value of gross estate minus
(the sum of the deductions for
charitable, public, and similar
gifts and bequests and marital
deduction)

Line 1. Alternate Valuation
TIP

x

Value of
included
gift

When taking the credit for pre-1977
federal gift taxes:
Include the credit in the amount on
line 15 and
Identify and enter the amount of the
credit you are taking on the dotted line
to the left of the entry space for line 15
on page 1 of Form 706 with a notation,
“section 2012 credit.”
For more information, see the
regulations under section 2012. This
computation may be made using Form
4808. Attach a copy of a completed
Form 4808 or the computation of the
credit. Also, attach all available copies
of Forms 709 filed by the decedent to
help verify the amounts entered on lines
4 and 7, and the amount of credit taken
(on line 15) for pre-1977 federal gift
taxes.
Canadian marital credit. In addition to
using line 15 to report credit for federal
gift taxes on pre-1977 gifts, you may
also use line 15 to claim the Canadian
marital credit, where applicable.
When taking the marital credit under
the 1995 Canadian Protocol:
Include the credit in the amount on
line 15 and
Identify and enter the amount of the
credit you are taking on the dotted line
to the left of the entry space for line 15
on page 1 of Form 706 with a notation,
“Canadian marital credit.”
Also, attach a statement to the return
that refers to the treaty, waives QDOT
rights, and shows the computation of
the marital credit. See the 1995
Canadian income tax treaty protocol for
details on figuring the credit.

Part 3—Elections by the
Executor
Note. The election to allow the
decedent's surviving spouse to use the
decedent's unused exclusion amount is
made by filing a timely and complete
Form 706. See instructions for Part
-9-

6—Portability of Deceased Spousal
Unused Exclusion, below, and sections
2010(c)(4) and (c)(5).
See the example showing the
use of Schedule B where the
alternate valuation is adopted.

Unless you elect at the time the return is
filed to adopt alternate valuation as
authorized by section 2032, value all
property included in the gross estate as
of the date of the decedent's death.
Alternate valuation cannot be applied to
only a part of the property.
You may elect special-use valuation
(line 2) in addition to alternate valuation.
You may not elect alternate valuation
unless the election will decrease both
the value of the gross estate and the
sum (reduced by allowable credits) of
the estate and GST taxes payable by
reason of the decedent's death for the
property includible in the decedent's
gross estate.
Elect alternate valuation by checking
“Yes,” on line 1 and filing Form 706. You
may make a protective alternate
valuation election by checking “Yes,” on
line 1, writing the word “protective,” and
filing Form 706 using regular values.
Once made, the election may not be
revoked. The election may be made on
a late-filed Form 706 provided it is not
filed later than 1 year after the due date
(including extensions actually granted).
Relief under sections 301.9100-1 and
301.9100-3 may be available to make
an alternate valuation election or a
protective alternate valuation election,
provided a Form 706 is filed no later
than 1 year after the due date of the
return (including extensions actually
granted).
If alternate valuation is elected, value
the property included in the gross estate
as of the following dates as applicable:
Any property distributed, sold,
exchanged, or otherwise disposed of or
separated or passed from the gross
estate by any method within 6 months
after the decedent's death is valued on
the date of distribution, sale, exchange,
or other disposition. Value this property
on the date it ceases to be a part of the
gross estate; for example, on the date
the title passes as the result of its sale,
exchange, or other disposition.
Any property not distributed, sold,
exchanged, or otherwise disposed of
within the 6-month period is valued as of
6 months after the date of the
decedent's death.

Any property, interest, or estate that
is affected by mere lapse of time is
valued as of the date of decedent's
death or on the date of its distribution,
sale, exchange, or other disposition,
whichever occurs first. However, you
may change the date of death value to
account for any change in value that is
not due to a “mere lapse of time” on the
date of its distribution, sale, exchange,
or other disposition.
The property included in the alternate
valuation and valued as of 6 months
after the date of the decedent's death,
or as of some intermediate date (as
described above) is the property
included in the gross estate on the date
of the decedent's death. Therefore, you
must first determine what property was
part of the gross estate at the
decedent's death.
Interest. Interest accrued to the date of
the decedent's death on bonds, notes,
and other interest-bearing obligations is
property of the gross estate on the date
of death and is included in the alternate
valuation.
Rent. Rent accrued to the date of the
decedent's death on leased real or
personal property is property of the
gross estate on the date of death and is
included in the alternate valuation.
Dividends. Outstanding dividends that
were declared to stockholders of record
on or before the date of the decedent's
death are considered property of the
gross estate on the date of death, and
are included in the alternate valuation.
Ordinary dividends declared to
stockholders of record after the date of
the decedent's death are not included in
the gross estate on the date of death
and are not eligible for alternate
valuation. However, if dividends are
declared to stockholders of record after
the date of the decedent's death so that
the shares of stock at the later valuation
date do not reasonably represent the
same property at the date of the
decedent's death, include those
dividends (except dividends paid from
earnings of the corporation after the
date of the decedent's death) in the
alternate valuation.
On Schedules A through I, you must
show:
1. What property is included in the
gross estate on the date of the
decedent's death;
2. What property was distributed,
sold, exchanged, or otherwise disposed
of within the 6-month period after the
decedent's death, and the dates of
these distributions, etc. (These two

items should be entered in the
“Description” column of each schedule.
Briefly explain the status or disposition
governing the alternate valuation date,
such as: “Not disposed of within 6
months following death, ”“Distributed,”
“Sold,” “Bond paid on maturity,” etc. In
this same column, describe each item of
principal and includible income);
3. The date of death value, entered
in the appropriate value column with
items of principal and includible income
shown separately; and
4. The alternate value, entered in
the appropriate value column with items
of principal and includible income
shown separately. (In the case of any
interest or estate, the value of which is
affected by lapse of time, such as
patents, leaseholds, estates for the life
of another, or remainder interests, the
value shown under the heading
“Alternate value” must be the adjusted
value; for example, the value as of the
date of death with an adjustment
reflecting any difference in its value as
of the later date not due to lapse of
time.)
Note. If any property on Schedules A
through I is being valued pursuant to the
special rule of Regulations section
20.2010–2T(a)(7)(ii), values for those
assets are not required to be reported
on the Schedule. See Part
5—Recapitulation, line 10.
Distributions, sales, exchanges, and
other dispositions of the property within
the 6-month period after the decedent's
death must be supported by evidence. If
the court issued an order of distribution
during that period, you must submit a
certified copy of the order as part of the
evidence. The IRS may require you to
submit additional evidence, if
necessary.
If the alternate valuation method is
used, the values of life estates,
remainders, and similar interests are
figured using the age of the recipient on
the date of the decedent's death and the
value of the property on the alternate
valuation date.

Line 2. Special-Use Valuation of
Section 2032A
In general. Under section 2032A, you
may elect to value certain farm and
closely held business real property at its
farm or business use value rather than
its fair market value (FMV). Both
special-use valuation and alternate
valuation may be elected.
To elect special-use valuation, check
“Yes,” on line 2 and complete and
-10-

attach Schedule A-1 and its required
additional statements. You must file
Schedule A-1 and its required
attachments with Form 706 for this
election to be valid. You may make the
election on a late-filed return so long as
it is the first return filed.
The total value of the property valued
under section 2032A may not be
decreased from FMV by more than
$1,070,000 for decedents dying in
2013.
Real property may qualify for the
section 2032A election if:
1. The decedent was a U.S. citizen
or resident at the time of death;
2. The real property is located in the
United States;
3. At the decedent's death, the real
property was used by the decedent or a
family member for farming or in a trade
or business, or was rented for such use
by either the surviving spouse or a lineal
descendant of the decedent to a family
member on a net cash basis;
4. The real property was acquired
from or passed from the decedent to a
qualified heir of the decedent;
5. The real property was owned and
used in a qualified manner by the
decedent or a member of the
decedent's family during 5 of the 8 years
before the decedent's death;
6. There was material participation
by the decedent or a member of the
decedent's family during 5 of the 8 years
before the decedent's death; and
7. The property meets the following
percentage requirements:
a. At least 50% of the adjusted
value of the gross estate must consist of
the adjusted value of real or personal
property that was being used as a farm
or in a closely-held business and that
was acquired from, or passed from, the
decedent to a qualified heir of the
decedent, and
b. At least 25% of the adjusted
value of the gross estate must consist of
the adjusted value of qualified farm or
closely-held business real property.
For this purpose, adjusted value is
the value of property determined without
regard to its special-use value. The
value is reduced for unpaid mortgages
on the property or any indebtedness
against the property, if the full value of
the decedent's interest in the property
(not reduced by such mortgage or
indebtedness) is included in the value of
the gross estate. The adjusted value of
the qualified real and personal property
used in different businesses may be
Part Instructions

combined to meet the 50% and 25%
requirements.

Qualified Real Property
Qualified use. Qualified use means
use of the property as a farm for farming
purposes or in a trade or business other
than farming. Trade or business applies
only to the active conduct of a business.
It does not apply to passive investment
activities or the mere passive rental of
property to a person other than a
member of the decedent's family. Also,
no trade or business is present in the
case of activities not engaged in for
profit.
Ownership. To qualify as special-use
property, the decedent or a member of
the decedent's family must have owned
and used the property in a qualified use
for 5 of the last 8 years before the
decedent's death. Ownership may be
direct or indirect through a corporation,
a partnership, or a trust.
If the ownership is indirect, the
business must qualify as a closely-held
business under section 6166. The
indirect ownership, when combined with
periods of direct ownership, must meet
the requirements of section 6166 on the
date of the decedent's death and for a
period of time that equals at least 5 of
the 8 years preceding death.
Directly owned property leased by
the decedent to a separate closely-held
business, is considered qualified real
property if the business entity to which it
was rented was a closely-held business
(as defined by section 6166) for the
decedent on the date of the decedent's
death and for sufficient time to meet the
“5 in 8 years” test explained above.
Structures and other real property
improvements. Qualified real property
includes residential buildings and other
structures and real property
improvements regularly occupied or
used by the owner or lessee of real
property (or by the employees of the
owner or lessee) to operate a farm or
other closely-held business. A farm
residence which the decedent occupied
is considered to have been occupied for
the purpose of operating the farm even
when a family member and not the
decedent was the person materially
participating in the operation of the farm.
Qualified real property also includes
roads, buildings, and other structures
and improvements functionally related
to the qualified use.
Elements of value such as mineral
rights that are not related to the farm or
Part Instructions

business use are not eligible for
special-use valuation.

days) during which there was
uninterrupted material participation.

Property acquired from the decedent. Property is considered to have
been acquired from or to have passed
from the decedent if one of the following
applies:
The property is considered to have
been acquired from or to have passed
from the decedent under section
1014(b) (relating to basis of property
acquired from a decedent);
The property is acquired by any
person from the estate; or
The property is acquired by any
person from a trust, to the extent the
property is includible in the gross estate.

Retirement or disability. If, on the
date of death, the time period for
material participation could not be met
because the decedent was retired or
disabled, a substitute period may apply.
The decedent must have retired on
social security or been disabled for a
continuous period ending with death. A
person is disabled for this purpose if he
or she was mentally or physically unable
to materially participate in the operation
of the farm or other business.
The substitute time period for
material participation for these
decedents is a period totaling at least 5
years out of the 8-year period that
ended on the earlier of:
The date the decedent began
receiving social security benefits or
The date the decedent became
disabled.

Qualified heir. A person is a qualified
heir of property if he or she is a member
of the decedent's family and acquired or
received the property from the
decedent. If a qualified heir disposes of
any interest in qualified real property to
any member of his or her family, that
person will then be treated as the
qualified heir for that interest.
A member of the family includes only:
An ancestor (parent, grandparent,
etc.) of the individual;
The spouse of the individual;
The lineal descendant (child,
stepchild, grandchild, etc.) of the
individual, the individual's spouse, or a
parent of the individual; or
The spouse, widow, or widower of
any lineal descendant described above.
A legally adopted child of an individual
is treated as a child of that individual by
blood.

Material Participation
To elect special-use valuation, either the
decedent or a member of his or her
family must have materially participated
in the operation of the farm or other
business for at least 5 of the 8 years
ending on the date of the decedent's
death. The existence of material
participation is a factual determination.
Passively collecting rents, salaries,
draws, dividends, or other income from
the farm or other business is not
sufficient for material participation, nor is
merely advancing capital and reviewing
a crop plan and financial reports each
season or business year.
In determining whether the required
participation has occurred, disregard
brief periods (that is, 30 days or less)
during which there was no material
participation, as long as such periods
were both preceded and followed by
substantial periods (more than 120
-11-

Surviving spouse. A surviving spouse
who received qualified real property
from the predeceased spouse is
considered to have materially
participated if he or she was engaged in
the active management of the farm or
other business. If the surviving spouse
died within 8 years of the first spouse's
death, you may add the period of
material participation of the
predeceased spouse to the period of
active management by the surviving
spouse to determine if the surviving
spouse's estate qualifies for special-use
valuation. To qualify for this, the
property must have been eligible for
special-use valuation in the
predeceased spouse's estate, though it
does not have to have been elected by
that estate.
For additional details regarding
material participation, see Regulations
section 20.2032A-3(e).

Valuation Methods
The primary method of valuing
special-use property that is used for
farming purposes is the annual gross
cash rental method. If comparable gross
cash rentals are not available, you can
substitute comparable average annual
net share rentals. If neither of these is
available, or if you so elect, you can use
the method for valuing real property in a
closely-held business.
Average annual gross cash rental.
Generally, the special-use value of
property that is used for farming
purposes is determined as follows:

1. Subtract the average annual state
and local real estate taxes on actual
tracts of comparable real property from
the average annual gross cash rental for
that same comparable property and
2. Divide the result in (1) by the
average annual effective interest rate
charged for all new Federal Land Bank
loans. See Effective interest rate, below.
The computation of each average
annual amount is based on the 5 most
recent calendar years ending before the
date of the decedent's death.
Gross cash rental. Generally,
gross cash rental is the total amount of
cash received in a calendar year for the
use of actual tracts of comparable farm
real property in the same locality as the
property being specially valued. You
may not use:
Appraisals or other statements
regarding rental value or areawide
averages of rentals, or
Rents paid wholly or partly in-kind, or
Property for which the amount of rent
is based on production.
The rental must have resulted from an
arm's-length transaction and the amount
of rent may not be reduced by the
amount of any expenses or liabilities
associated with the farm operation or
the lease.
Comparable property.
Comparable property must be situated
in the same locality as the qualified real
property as determined by generally
accepted real property valuation rules.
The determination of comparability is
based on a number of factors, none of
which carries more weight than the
others. It is often necessary to value
land in segments where there are
different uses or land characteristics
included in the specially valued land.
The following list contains some of
the factors considered in determining
comparability:
Similarity of soil;
Whether the crops grown would
deplete the soil in a similar manner;
Types of soil conservation techniques
that have been practiced on the two
properties;
Whether the two properties are
subject to flooding;
Slope of the land;
For livestock operations, the carrying
capacity of the land;
For timbered land, whether the timber
is comparable;
Whether the property as a whole is
unified or segmented. If segmented, the
availability of the means necessary for
movement among the different sections;

Number, types, and conditions of all
buildings and other fixed improvements
located on the properties and their
location as it affects efficient
management, use, and value of the
property; and
Availability and type of transportation
facilities in terms of costs and of
proximity of the properties to local
markets.
You must specifically identify on the
return the property being used as
comparable property. Use the type of
descriptions used to list real property on
Schedule A.
Effective interest rate. See Tables
1 and 2 of Revenue Ruling 2013-19,
2013-39 I.R.B. 240, available at http://
www.irs.gov/pub/irs-irbs/irb13-39.pdf,
for the average annual effective interest
rates in effect for 2013.
Net share rental. You may use
average annual net share rental from
comparable land only if there is no
comparable land from which average
annual gross cash rental can be
determined. Net share rental is the
difference between the gross value of
produce received by the lessor from the
comparable land and the cash operating
expenses (other than real estate taxes)
of growing the produce that, under the
lease, are paid by the lessor. The
production of the produce must be the
business purpose of the farming
operation. For this purpose, produce
includes livestock.
The gross value of the produce is
generally the gross amount received if
the produce was disposed of in an
arm's-length transaction within the
period established by the Department of
Agriculture for its price support program.
Otherwise, the value is the weighted
average price for which the produce
sold on the closest national or regional
commodities market. The value is
figured for the date or dates on which
the lessor received (or constructively
received) the produce.
Valuing a real property interest in
closely held business. Use this
method to determine the special-use
valuation for qualifying real property
used in a trade or business other than
farming. You may also use this method
for qualifying farm property if there is no
comparable land or if you elect to use it.
Under this method, the following factors
are considered:
The capitalization of income that the
property can be expected to yield for
farming or for closely-held business
purposes over a reasonable period of
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time with prudent management and
traditional cropping patterns for the
area, taking into account soil capacity,
terrain configuration, and similar factors;
The capitalization of the fair rental
value of the land for farming or for
closely-held business purposes;
The assessed land values in a state
that provides a differential or use value
assessment law for farmland or
closely-held business;
Comparable sales of other farm or
closely-held business land in the same
geographical area far enough removed
from a metropolitan or resort area so
that nonagricultural use is not a
significant factor in the sales price; and
Any other factor that fairly values the
farm or closely-held business value of
the property.

Making the Election
Include the words “section 2032A
valuation” in the “Description” column of
any Form 706 schedule if section 2032A
property is included in the decedent's
gross estate.
An election under section 2032A
need not include all the property in an
estate that is eligible for special-use
valuation, but sufficient property to
satisfy the threshold requirements of
section 2032A(b)(1)(B) must be
specially valued under the election.
If joint or undivided interests (that is,
interests as joint tenants or tenants in
common) in the same property are
received from a decedent by qualified
heirs, an election for one heir's joint or
undivided interest need not include any
other heir's interest in the same property
if the electing heir's interest plus other
property to be specially valued satisfies
the requirements of section 2032A(b)(1)
(B).
If successive interests (that is, life
estates and remainder interests) are
created by a decedent in otherwise
qualified property, an election under
section 2032A is available only for that
property (or part) in which qualified heirs
of the decedent receive all of the
successive interests, and such an
election must include the interests of all
of those heirs.
For example, if a surviving spouse
receives a life estate in otherwise
qualified property and the spouse's
brother receives a remainder interest in
fee, no part of the property may be
valued under a section 2032A election.
Part Instructions

Where successive interests in
specially valued property are created,
remainder interests are treated as being
received by qualified heirs only if the
remainder interests are not contingent
on surviving a nonfamily member or are
not subject to divestment in favor of a
nonfamily member.

Protective Election
You may make a protective election to
specially value qualified real property.
Under this election, whether or not you
may ultimately use special-use valuation
depends upon final values (as shown on
the return determined following
examination of the return) meeting the
requirements of section 2032A.
To make a protective election, check
“Yes,” on line 2 and complete
Schedule A-1 according to the
instructions for Protective Election.
If you make a protective election,
complete the initial Form 706 by valuing
all property at its FMV. Do not use
special-use valuation. Usually, this will
result in higher estate and GST tax
liabilities than will be ultimately
determined if special-use valuation is
allowed. The protective election does
not extend the time to pay the taxes
shown on the return. If you wish to
extend the time to pay the taxes, file
Form 4768 in adequate time before the
due date of the return. See the separate
instructions for Form 4768.
If the estate qualifies for special-use
valuation based on the values as finally
determined, you must file an amended
Form 706 (with a complete section
2032A election) within 60 days after the
date of this determination. Prepare the
amended return using special-use
values under the rules of section 2032A,
complete Schedule A-1, and attach all
of the required statements.

Additional information
For definitions and additional
information, see section 2032A and the
related regulations.

how much of the estate tax may be paid
in installments under section 6166,
below. In general, that amount is the
amount of tax that bears the same ratio
to the total estate tax that the value of
the closely-held business included in
the gross estate bears to the adjusted
gross estate.
Bond or lien. The IRS may require that
an estate furnish a surety bond when
granting the installment payment
election. In the alternative, the executor
may consent to elect the special lien
provisions of section 6324A, in lieu of
the bond. The IRS will contact you
regarding the specifics of furnishing the
bond or electing the special lien. The
IRS will make this determination on a
case-by-case basis, and you may be
asked to provide additional information.
If you elect the lien provisions,
section 6324A requires that the lien be
placed on property having a value equal
to the total deferred tax plus 4 years of
interest. The property must be expected
to survive the deferral period, and does
not necessarily have to be property of
the estate. In addition, all people with an
interest in the designated property must
consent to the creation of this lien.
Percentage requirements. To qualify
for installment payments, the value of
the interest in the closely-held business
that is included in the gross estate must
be more than 35% of the adjusted gross
estate (the gross estate less expenses,
indebtedness, taxes, and losses –
Schedules J, K, and L of Form 706 (do
not include any portion of the state
death tax deduction)).
Interests in two or more closely-held
businesses are treated as an interest in
a single business if at least 20% of the
total value of each business is included
in the gross estate. For this purpose,
include any interest held by the
surviving spouse that represents the
surviving spouse's interest in a business
held jointly with the decedent as
community property or as joint tenants,
tenants by the entirety, or tenants in
common.

If the gross estate includes an interest in
a closely-held business, you may be
able to elect to pay part of the estate tax
in installments under section 6166.

Value. The value used for meeting
the percentage requirements is the
same value used for determining the
gross estate. Therefore, if the estate is
valued under alternate valuation or
special-use valuation, you must use
those values to meet the percentage
requirements.

The maximum amount that can be
paid in installments is that part of the
estate tax that is attributable to the
closely-held business; see Determine

Transfers before death. Generally,
gifts made before death are not
included in the gross estate. However,
the estate must meet the 35%

Line 3. Section 6166 Installment
Payments

Part Instructions

-13-

requirement by both including in and
excluding from the gross estate any gifts
made by the decedent in the 3-year
period ending on the date of death.
Passive assets. In determining the
value of a closely-held business and
whether the 35% requirement is met, do
not include the value of any passive
assets held by the business. A passive
asset is any asset not used in carrying
on a trade or business. Any asset used
in a qualifying lending and financing
business is treated as an asset used in
carrying on a trade or business; see
section 6166(b)(10) for details. Stock in
another corporation is a passive asset
unless the stock is treated as held by
the decedent because of the election to
treat holding company stock as
business company stock; see Holding
company stock, below.
If a corporation owns at least 20% in
value of the voting stock of another
corporation, or the other corporation
had no more than 45 shareholders and
at least 80% of the value of the assets of
each corporation is attributable to
assets used in carrying on a trade or
business, then these corporations will
be treated as a single corporation, and
the stock will not be treated as a passive
asset. Stock held in the other
corporation is not taken into account in
determining the 80% requirement.
Interest in closely held business.
For purposes of the installment payment
election, an interest in a closely-held
business means:
Ownership of a trade or business
carried on as a proprietorship,
An interest as a partner in a
partnership carrying on a trade or
business if 20% or more of the total
capital interest was included in the
gross estate of the decedent or the
partnership had no more than 45
partners, or
Stock in a corporation carrying on a
trade or business if 20% or more in
value of the voting stock of the
corporation is included in the gross
estate of the decedent or the
corporation had no more than 45
shareholders.
The partnership or corporation must
be carrying on a trade or business at the
time of the decedent's death. For further
information on whether certain
partnerships or corporations owning real
property interests constitute a
closely-held business, see Rev. Rul.
2006-34, 2006-26 I.R.B. 1171, available
at www.irs.gov/pub/irs-irbs/irb06-26.pdf.

In determining the number of
partners or shareholders, a partnership
or stock interest is treated as owned by
one partner or shareholder if it is
community property or held by a
husband and wife as joint tenants,
tenants in common, or as tenants by the
entirety.
Property owned directly or indirectly
by or for a corporation, partnership,
estate, or trust is treated as owned
proportionately by or for its
shareholders, partners, or beneficiaries.
For trusts, only beneficiaries with
present interests are considered.
The interest in a closely-held farm
business includes the interest in the
residential buildings and related
improvements occupied regularly by the
owners, lessees, and employees
operating the farm.
Holding company stock. The
executor may elect to treat as business
company stock the portion of any
holding company stock that represents
direct ownership (or indirect ownership
through one or more other holding
companies) in a business company. A
holding company is a corporation
holding stock in another corporation. A
business company is a corporation
carrying on a trade or business.
In general, this election applies only
to stock that is not readily tradable.
However, the election can be made if
the business company stock is readily
tradable, as long as all of the stock of
each holding company is not readily
tradable.
For purposes of the 20% voting stock
requirement, stock is treated as voting
stock to the extent the holding company
owns voting stock in the business
company.

If the executor makes this election,
the first installment payment is due
when the estate tax return is filed. The
5-year deferral for payment of the tax,
as discussed below under Time for
payment, does not apply. In addition,
the 2% interest rate, discussed below
under Interest computation, will not
apply. Also, if the business company
stock is readily tradable, as explained
above, the tax must be paid in five
installments.
Determine how much of the estate
tax may be paid in installments under section 6166. To determine
whether the election may be made, you
must calculate the adjusted gross
estate. (See, Line 3
Worksheet —Adjusted Gross Estate,
below.) To determine the value of the
adjusted gross estate, subtract the
deductions (Schedules J, K, and L) from
the value of the gross estate.
To determine over how many
installments the estate tax may be paid,
please refer to sections 6166(a), (b)(7),
(b)(8), and (b)(10).
Time for payment. Under the
installment method, the executor may
elect to defer payment of the qualified
estate tax, but not interest, for up to 5
years from the original payment due
date. After the first installment of tax is
paid, you must pay the remaining
installments annually by the date 1 year
after the due date of the preceding
installment. There can be no more than
10 installment payments.
Interest on the unpaid portion of the
tax is not deferred and must be paid
annually. Interest must be paid at the
same time as and as a part of each
installment payment of the tax.
Acceleration of payments. If the
estate fails to make payments of tax or

Line 3 Worksheet—Adjusted Gross Estate
1
2
3
4
5

6

interest within 6 months of the due date,
the IRS may terminate the right to make
installment payments and force an
acceleration of payment of the tax upon
notice and demand.
Generally, if any portion of the
interest in the closely-held business
which qualifies for installment payments
is distributed, sold, exchanged, or
otherwise disposed of, or money and
other property attributable to such an
interest is withdrawn, and the aggregate
of those events equals or exceeds 50%
of the value of the interest, then the right
to make installment payments will be
terminated, and the unpaid portion of
the tax will be due upon notice and
demand. See section 6166(g)(1)(A).
Interest computation. A special
interest rate applies to installment
payments. For decedents dying in 2013,
the interest rate is 2% on the lesser of:
$572,000 or
The amount of the estate tax that is
attributable to the closely-held business
and that is payable in installments.
2% portion. The 2% portion is an
amount equal to the amount of the
tentative estate tax (on $1,000,000 plus
the applicable exclusion amount in
effect) minus the applicable credit
amount in effect. However, if the
amount of estate tax extended under
section 6166 is less than the amount
figured above, the 2% portion is the
lesser amount.
Inflation adjustment. The
$1,000,000 amount used to calculate
the 2% portion is indexed for inflation for
the estates of decedents who died in a
calendar year after 1998. For an estate
of a decedent who died in 2013, the
dollar amount used to determine the
“2% portion” of the estate tax payable in
installments under section 6166 is
$1,430,000.
Computation. Interest on the
portion of the tax in excess of the 2%
portion is figured at 45% of the annual
rate of interest on underpayments. This
rate is based on the federal short-term
rate and is announced quarterly by the
IRS in the Internal Revenue Bulletin.
If you elect installment payments and
the estate tax due is more than the
maximum amount to which the 2%
interest rate applies, each installment
payment is deemed to comprise both
tax subject to the 2% interest rate and
tax subject to 45% of the regular
underpayment rate. The amount of each
installment that is subject to the 2% rate
is the same as the percentage of total

What is the value of the decedent's interest in closely-held
business(es) included in the gross estate (less value of passive
assets, as mentioned in section 6166(b)(9))? . . . . . . . . . . . . .
What is the value of the gross estate (Form 706, page 3, Part 5,
line 13)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add lines 18, 19, and 20 from Form 706, page 3, Part 5. . . . . . .
Subtract line 3 from line 2 to calculate the adjusted gross
estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Divide line 1 by line 4 to calculate the value the business interest
bears to the value of the adjusted gross estate. For purposes of this
calculation, carry the decimal to the sixth place; the IRS will make
this adjustment for purposes of determining the correct amount. If
this amount is less than 0.350000, the estate does not qualify to
make the election under section 6166. . . . . . . . . . . . . . . . . .
Multiply line 5 by the amount on line 16 of Form 706, page 1, Part 2.
This is the maximum amount of estate tax that may be paid in
installments under section 6166. (Certain GST taxes may be
deferred as well; see section 6166(i) for more information.) . . . . .

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Part Instructions

tax payable in installments that is
subject to the 2% rate.
The interest paid on installment
payments is not deductible as
CAUTION
an administrative expense of
the estate.

!

Making the election. If you check this
line to make a final election, you must
attach the notice of election described in
Regulations section 20.6166-1(b). If you
check this line to make a protective
election, you must attach a notice of
protective election as described in
Regulations section 20.6166-1(d).
Regulations section 20.6166-1(b)
requires that the notice of election is
made by attaching to a timely filed
estate tax return the following
information:
The decedent's name and taxpayer
identification number as they appear on
the estate tax return;
The amount of tax that is to be paid in
installments;
The date selected for payment of the
first installment;
The number of annual installments,
including first installment, in which the
tax is to be paid;
The properties shown on the estate
tax return that are the closely-held
business interest (identified by schedule
and item number); and
The facts that formed the basis for the
executor's conclusion that the estate
qualifies for payment of the estate tax in
installments.
You may also elect to pay certain
GST taxes in installments. See section
6166(i).

Line 4. Reversionary or
Remainder Interests

For details of this election, see section
6163 and the related regulations.

Part 4—General
Information
Authorization

Completing the authorization will
authorize one attorney, accountant, or
enrolled agent to represent the estate
and receive confidential tax information,
but will not authorize the representative
to enter into closing agreements for the
estate. If you would like to authorize
your representative to enter into
agreements or perform other
designated acts on behalf of the estate,
you must file Form 2848 with Form 706.

Part Instructions

Note. If you intend for the
representative to represent the estate
before the IRS, he or she must complete
and sign this authorization.
Complete and attach Form 2848 if
you would like to authorize:
Persons other than attorneys,
accountants, or enrolled agents to
represent the estate, or
More than one person to receive
confidential information or represent the
estate, or
Someone to sign agreements,
consents, waivers or other documents
for the estate.
Filing a completed Form 2848 with this
return may expedite processing of the
Form 706.
If you wish only to authorize
someone to inspect and/or receive
confidential tax information (but not to
represent you before the IRS), complete
and file Form 8821.

Line 3

Enter the marital status of the decedent
at the time of death by checking the
appropriate box on line 3a. If the
decedent was married at the time of
death, complete line 4. If the decedent
had one or more prior marriages,
complete line 3b by providing the name
and SSN of each former spouse, the
date(s) the marriage ended, and specify
whether the marriage ended by
annulment, divorce decree, or death of
spouse. If the prior marriage ended in
death and the predeceased spouse
died after December 31, 2010,
complete Part 6 — Portability of
Deceased Spousal Unused Exclusion,
Section D if the estate of the
predeceased spouse elected to allow
the decedent to use any unused
exclusion amount. For more
information, see section 2010(c)(4) and
related regulations.

Line 4

Complete line 4 whether or not there is a
surviving spouse and whether or not the
surviving spouse received any benefits
from the estate. If there was no surviving
spouse on the date of decedent's death,
enter “None” in line 4a and leave lines
4b and 4c blank. The value entered in
line 4c need not be exact. See the
instructions for “Amount” under line 5
below.
Note. Do not include any DSUE
amount transferred to the surviving
spouse in the total entered on line 4c.

-15-

Line 5
Name. Enter the name of each
individual, trust, or estate that received
(or will receive) benefits of $5,000 or
more from the estate directly as an heir,
next-of-kin, devisee, or legatee; or
indirectly (for example, as beneficiary of
an annuity or insurance policy,
shareholder of a corporation, or partner
of a partnership that is an heir, etc.).
Identifying number. Enter the SSN of
each individual beneficiary listed. If the
number is unknown, or the individual
has no number, please indicate
“unknown” or “none.” For trusts and
other estates, enter the EIN.
Relationship. For each individual
beneficiary, enter the relationship (if
known) to the decedent by reason of
blood, marriage, or adoption. For trust
or estate beneficiaries, indicate
“TRUST” or “ESTATE.”
Amount. Enter the amount actually
distributed (or to be distributed) to each
beneficiary including transfers during
the decedent's life from Schedule G
required to be included in the gross
estate. The value to be entered need
not be exact. A reasonable estimate is
sufficient. For example, where precise
values cannot readily be determined, as
with certain future interests, a
reasonable approximation should be
entered. The total of these distributions
should approximate the amount of gross
estate reduced by funeral and
administrative expenses, debts and
mortgages, bequests to surviving
spouse, charitable bequests, and any
federal and state estate and GST taxes
paid (or payable) relating to the benefits
received by the beneficiaries listed on
lines 4 and 5.
All distributions of less than $5,000 to
specific beneficiaries may be included
with distributions to unascertainable
beneficiaries on the line provided.

Line 6. Protective Claim for
Refund

If you answered “Yes,” complete
Schedule PC for each claim. Two
copies of each Schedule PC must be
filed with the return.
A protective claim for refund may be
filed when there is an unresolved claim
or expense that will not be deductible
under section 2053 before the
expiration of the period of limitation
under section 6511(a). To preserve the
estate's right to a refund once the claim
or expense has been finally determined,
the protective claim must be filed before

the end of the limitations period. For
more information on how to file a
protective claim for refund with this
Form 706, see the instructions for
Schedule PC, below.

Line 7. Section 2044 Property
If you answered “Yes,” these assets
must be shown on Schedule F.

Section 2044 property is property for
which a previous section 2056(b)(7)
election (QTIP election) has been made,
or for which a similar gift tax election
(section 2523) has been made. For
more information, see the instructions
for Schedule F, below.

Line 9. Insurance Not Included
in the Gross Estate

If you answered “Yes,” to either 9a or
9b, for each policy you must complete
and attach Schedule D, Form 712, and
an explanation of why the policy or its
proceeds are not includible in the gross
estate.

Line 11. Partnership Interests
and Stock in Close
Corporations

If you answered “Yes,” on line 11a, you
must include full details for partnerships
(including family limited partnerships),
unincorporated businesses, and limited
liability companies on Schedule F
(Schedule E if the partnership interest is
jointly owned). Also include full details
for fractional interests in real estate on
Schedule A and for stock of inactive or
close corporations on Schedule B.
Value these interests using the rules
of Regulations section 20.2031-2
(stocks) or 20.2031-3 (other business
interests).
A close corporation is a corporation
whose shares are owned by a limited
number of shareholders. Often, one
family holds the entire stock issue. As a
result, little, if any, trading of the stock
takes place. There is, therefore, no
established market for the stock, and
those sales that do occur are at irregular
intervals and seldom reflect all the
elements of a representative transaction
as defined by FMV.

Line 13. Trusts

If you answered “Yes,” on either line 13a
or line 13b, attach a copy of the trust
instrument for each trust.
Complete Schedule G if you
answered “Yes,” on line 13a and
Schedule F if you answered “Yes,” on
line 13b.

Line 15. Foreign Accounts

Check “Yes,” on line 15 if the decedent
at the time of death had an interest in or
signature or other authority over a
financial account in a foreign country,
such as a bank account, securities
account, an offshore trust, or other
financial account.

Part 5—Recapitulation
Gross Estate—Items 1 through
11
Items 1 through 9. You must make an
entry in each of items 1 through 9.
If the gross estate does not contain
any assets of the type specified by a
given item, enter zero for that item.
Entering zero for any of items 1 through
9 is a statement by the executor, made
under penalties of perjury, that the gross
estate does not contain any includible
assets covered by that item.
Do not enter any amounts in the
“Alternate value” column unless you
elected alternate valuation on line 1 of
Part 3—Elections by the Executor on
page 2 of the Form 706.
Note. If estimating the value of one or
more assets pursuant to the special rule
of Regulations section 20.2010–2T(a)
(7)(ii), do not enter values for those
assets in items 1 through 9. Total the
estimated values for those assets and
follow the instructions for item 10.

gifts is less than the basic exclusion
amount (see section 6018(a)) and Form
706 is being filed only to elect portability
of the DSUE amount, the estate is not
required to report the value of certain
property eligible for the marital or
charitable deduction. For this property
being reported on Schedules A, B, C, D,
E, F, G, H and I, the executor must
calculate his or her best estimate of the
value. Do not include the estimated
value on the line corresponding to the
schedule on which the property was
reported. Instead, total the estimated
value of the assets subject to the
special rule and enter on line 10 the
amount from the Table of Estimated
Values, below, that corresponds to that
total.
Note. The special rule does not apply if
the valuation of the asset is needed to
determine the estate's eligibility for the
provisions of sections 2032, 2032A,
2652(a)(3), 6166, or any other provision
of the Code or Regulations.
Note. As applies to all other values
reported on Form 706, estimates of the
value of property subject to the special
rule of Regulations section
20.2010-2T(a)(7)(ii) must result from the
executor’s exercise of due diligence and
are subject to penalties of perjury.

Which schedules to attach for items
1 through 9. You must attach:
Schedule F. Answer its questions
even if you report no assets on it;
Schedules A, B, and C, if the gross
estate includes any (1) Real Estate, (2)
Stocks and Bonds, or (3) Mortgages,
Notes, and Cash, respectively;
Schedule D, if the gross estate
includes any life insurance or if you
answered “Yes,” to question 9a of Part
4—General Information;
Schedule E, if the gross estate
contains any jointly-owned property or if
you answered “Yes,” to question 10 of
Part 4;
Schedule G, if the decedent made
any of the lifetime transfers to be listed
on that schedule or if you answered
“Yes,” to question 12 or 13a of Part 4;
Schedule H, if you answered “Yes,” to
question 14 of Part 4; and
Schedule I, if you answered “Yes,” to
question 16 of Part 4.
Item 10. Under Regulations section
20.2010-2T(a)(7)(ii), if the total value of
the gross estate and adjusted taxable
-16-

Part Instructions

Table of Estimated Values
If the total
estimated
value of the
assets
eligible for
the special
rule under
Reg. section
20.2010–
2T(a)(7)(ii) is
more than

But less
than or
equal to

Include this
amount on
lines 10 and
23:

$0

$250,000

$250,000

$250,000

$500,000

$500,000

$500,000

$750,000

$750,000

$750,000

$1,000,000

$1,000,000

$1,000,000

$1,250,000

$1,250,000

$1,250,000

$1,500,000

$1,500,000

$1,500,000

$1,750,000

$1,750,000

$1,750,000

$2,000,000

$2,000,000

$2,000,000

$2,250,000

$2,250,000

$2,250,000

$2,500,000

$2,500,000

$2,500,000

$2,750,000

$2,750,000

$2,750,000

$3,000,000

$3,000,000

$3,000,000

$3,250,000

$3,250,000

$3,250,000

$3,500,000

$3,500,000

$3,500,000

$3,750,000

$3,750,000

$3,750,000

$4,000,000

$4,000,000

$4,000,000

$4,250,000

$4,250,000

$4,250,000

$4,500,000

$4,500,000

$4,500,000

$4,750,000

$4,750,000

$4,750,000

$5,000,000

$5,000,000

$5,000,000

$5,250,000

$5,250,000

Exclusion — Item 12
Item 12. Conservation easement exclusion. Complete and attach
Schedule U (along with any required
attachments) to claim the exclusion on
this line.

Deductions — Items 14 through
23
Items 14 through 22. Attach the
appropriate schedules for the
deductions claimed.
Item 18. If item 17 is less than or equal
to the value (at the time of the
decedent's death) of the property
subject to claims, enter the amount from
item 17 on item 18.
If the amount on item 17 is more than
the value of the property subject to
claims, enter the greater of:
The value of the property subject to
claims or

Part Instructions

The amount actually paid at the time
the return is filed.
In no event should you enter more on
item 18 than the amount on item 17.
See section 2053 and the related
regulations for more information.
Item 23. Under Regulations section
20.2010-2T(a)(7)(ii), if the total value of
the gross estate and adjusted taxable
gifts is less than the basic exclusion
amount (see section 6018(a)) and Form
706 is being filed only to elect portability
of the DSUE amount, the estate is not
required to report the value of certain
property eligible for the marital or
charitable deduction. For this property
being reported on Schedule M or O,
enter on line 23 the amount from line 10.

spouse and does not prevent the
surviving spouse from applying the
DSUE amount to taxable transfers.
When a taxable gift is made, the
DSUE amount received from the last
deceased spouse is applied before the
surviving spouse’s basic exclusion
amount. A surviving spouse may use
the DSUE amount of the last deceased
spouse to offset the tax on any taxable
transfer made after the deceased
spouse's death. A surviving spouse who
has more than one predeceased
spouse is not precluded from using the
DSUE amount of each spouse in
succession. A surviving spouse may not
use the sum of DSUE amounts from
multiple predeceased spouses at one
time nor may the DSUE amount of a
predeceased spouse be applied after
the death of a subsequent spouse.

Part 6—Portability of
Deceased Spousal Unused
Making the Election
Exclusion (DSUE)

Section 303 of the Tax Relief,
Unemployment Insurance
Reauthorization, and Job Creation Act
of 2010 authorized estates of decedents
dying on or after January 1, 2011, to
elect to transfer any unused exclusion to
the surviving spouse. The amount
received by the surviving spouse is
called the deceased spousal unused
exclusion, or DSUE, amount. If the
executor of the decedent’s estate elects
transfer, or portability, of the DSUE
amount, the surviving spouse can apply
the DSUE amount received from the
estate of his or her last deceased
spouse (defined below) against any tax
liability arising from subsequent lifetime
gifts and transfers at death.
Note. A nonresident surviving spouse
who is not a citizen of the United States
may not take into account the DSUE
amount of a deceased spouse, except
to the extent allowed by treaty with his
or her country of citizenship.

Last Deceased Spouse
Limitation

The last deceased spouse is the most
recently deceased person who was
married to the surviving spouse at the
time of that person’s death. The identity
of the last deceased spouse is
determined as of the day a taxable gift is
made, or in the case of a transfer at
death, the date of the surviving spouse's
death. The identity of the last deceased
spouse is not impacted by whether the
decedent's estate elected portability or
whether the last deceased spouse had
any DSUE amount available.
Remarriage also does not affect the
designation of the last deceased
-17-

A timely-filed and complete Form 706 is
required to elect portability of the DSUE
amount to a surviving spouse. The filing
requirement applies to all estates of
decedents choosing to elect portability
of the DSUE amount, regardless of the
size of the estate. A timely-filed return is
one that is filed on or before the due
date of the return, including extensions.
The timely filing of a complete Form
706 with DSUE will be deemed a
portability election if there is a surviving
spouse. The election is effective as of
the decedent’s date of death, so the
DSUE amount received by a surviving
spouse may be applied to any transfer
occurring after the decedent’s death. A
portability election is irrevocable, unless
an adjustment or amendment to the
election is made on a subsequent return
filed on or before the due date.
Note. Under Regulations section
20.2010-2T(a)(5), the executor of an
estate of a nonresident decedent who
was not a citizen of the United States at
the time of death cannot make a
portability election.
If an executor is appointed, qualified,
and acting with the United States on
behalf of the decedent’s estate, only
that executor may make or opt out of a
portability election. If there is no
executor, see Regulations section
20.2010-2T(a)(6)(ii).

Opting Out

If an estate files a Form 706 but does
not wish to make the portability election,
the executor can opt out of the
portability election by checking the box
indicated in Section A of this Part. If no
return is required under section 6018(a),

not filing Form 706 will avoid making the
election.

Computing the DSUE Amount

Regulations section 20.2010-2T(b)(1)
requires that a decedent's DSUE be
computed on the estate tax return. The
DSUE amount is the lesser of (A) the
basic exclusion amount in effect on the
date of death of the decedent whose
DSUE is being computed, or (B) the
decedent's applicable exclusion amount
less the amount on line 5 of Part 2–Tax
Computation on the Form 706 for the
estate of the decedent. Amounts on
which gift taxes were paid are excluded
from adjusted taxable gifts for the
purpose of this computation.
When a surviving spouse applies the
DSUE amount to a lifetime gift or
bequest at death, the IRS may examine
any return of a predeceased spouse
whose executor elected portability to
verify the allowable DSUE amount. The
DSUE amount may be adjusted or
eliminated as a result of the
examination; however, the IRS may only
make an assessment of additional tax
on the return of the predeceased
spouse within the applicable limitations
period under section 6501.

Special Rule Where Value of
Certain Property Not Required
to Be Reported on Form 706

The temporary regulations provide that
executors of estates who are not
otherwise required to file Form 706
under section 6018(a) do not have to
report the value of certain property
qualifying for the marital or charitable
deduction. For such property, the
executor may estimate the value in
good faith and with the due diligence to
be afforded all assets includible in the
gross estate. The amount reported on
Form 706 will correspond to a range of
dollar values and will be included in the
value of the gross estate shown on
line 1 of Part 2-Tax Computation. See
instructions for lines 10 and 23 of Part
5-Recapitulation, above, for more
details.

Specific Instructions
Portability Election. If you intend to
elect portability of the DSUE amount,
timely filing a complete Form 706 is all
that is required. Complete section B if
any assets of the estate are being
transferred to a qualified domestic trust
and complete section C of this Part to
calculate the DSUE amount that will be
transferred to the surviving spouse.

Section A. Opting Out of Portability.
If you are filing Form 706 and do not
wish to elect portability, then check the
box indicated. Do not complete sections
B or C.
Section B. Portability and Qualified
Domestic Trusts. A qualified domestic
trust (QDOT) allows the estate of a
decedent to bequeath property to
surviving spouse who is not a citizen of
the United States and still receive a
marital deduction. When property
passes to a QDOT, estate tax is
imposed under section 2056A as
distributions are made from the trust.
When a QDOT is established and there
is a DSUE amount, the executor of the
decedent’s estate will determine a
preliminary DSUE amount for the
purpose of electing portability. This
amount will decrease as section 2056A
distributions are made. In estates with a
QDOT, the DSUE amount generally
may not be applied against tax arising
from lifetime gifts because it will not be
available to the surviving spouse until it
is finally determined, usually upon the
death of the surviving spouse or when
the QDOT is terminated.
Check the appropriate box in this
section and see the instructions for
Schedule M if more information is
needed about qualified domestic trusts.
Section C. DSUE Amount Portable to
Decedent's Surviving Spouse.
Complete section C only if electing
portability of the DSUE amount to the
surviving spouse.
On line 1, enter the decedent’s
applicable exclusion amount from Part
2—Tax Computation, line 9c. Under
section 2010(c)(2), the applicable
exclusion amount is the sum of the
basic exclusion amount for the year of
death and any DSUE amount received
from a predeceased spouse, if
applicable.
Line 2 is reserved.
On line 3, enter the value of the
cumulative lifetime gifts on which gift tax
was paid or payable. This amount is
figured on line 6 of the Line 7 Worksheet
Part B as the total of Row (r) from Line 7
Worksheet Part A. Enter the amount as
it appears on line 6 of the Line 7
Worksheet Part B
Figure the unused exclusion amount
on line 9. The DSUE amount available
to the surviving spouse will be the lesser
of this amount or the basic exclusion
amount shown on line 9a of Part 2—Tax
Computation. Enter the DSUE amount
as determined on line 10.
-18-

Section D. DSUE Amount Received
from Predeceased Spouse(s).
Complete section D if the decedent was
a surviving spouse who received a
DSUE amount from one or more
predeceased spouse(s).
Section D requests information on all
DSUE amounts received from the
decedent’s last deceased spouse and
any previously deceased spouses.
Each line in the chart should reflect a
different predeceased spouse; enter the
calendar year(s) in column F. In Part 1,
provide information on the decedent’s
last deceased spouse. In Part 2, provide
information as requested if the decedent
had any other predeceased spouse
whose executor made the portability
election. Any remaining DSUE amount
which was not used prior to the death of
a subsequent spouse is not considered
in this calculation and cannot be applied
against any taxable transfer. In column
E, total only the amounts of DSUE
received and used from spouses who
died before the decedent’s last
deceased spouse. Add this amount to
the amount from Part 1, column D, if
any, to determine the decedent’s total
DSUE amount.

Schedule A—Real Estate
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

If the total gross estate contains any
real estate, complete Schedule A and
file it with the return. On Schedule A, list
real estate the decedent owned or had
contracted to purchase. Number each
parcel in the left-hand column.
Describe the real estate in enough
detail so that the IRS can easily locate it
for inspection and valuation. For each
parcel of real estate, report the area
and, if the parcel is improved, describe
the improvements. For city or town
property, report the street and number,
ward, subdivision, block and lot, etc. For
rural property, report the township,
range, landmarks, etc.
If any item of real estate is subject to
a mortgage for which the decedent's
estate is liable, that is, if the
indebtedness may be charged against
other property of the estate that is not
subject to that mortgage, or if the
decedent was personally liable for that
Part Instructions

Schedule A–Example 1
In this example, alternate valuation is not adopted; the date of death is January 1, 2013.
Item
Number
1

2

Description

Alternate
Valuation
Date

Alternate
Value

Value at
date of
death

House and lot, 1921 William Street, NW, Washington, DC (lot 6, square 481). Rent of $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, 2012, but not collected at date of death . . .
Rent accrued on Item 1 for November and December 2012 . . . . . . . . . . . . . . . . . . . . . .
House and lot, 304 Jefferson Street, Alexandria, VA (lot 18, square 40). Rent of $1,800 payable
monthly. Value based on appraisal, copy of which is attached . . . . . . . . . . . . . . . . . . . . .
Rent due on Item 2 for December 2012, but not collected at death . . . . . . . . . . . . . . . . . .

$550,000

8,100
5,400
375,000
1,800

Schedule A–Example 2
In this example, alternate valuation is adopted; the date of death is January 1, 2013.
Item
Number
1

2

Description

Alternate
Valuation
Date

House and lot, 1921 William Street, NW, Washington, DC (lot 6, square 481). Rent of $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, 2012, but not collected until February 1,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent accrued on Item 1 for November and December 2012, collected on February 1, 2013 . . .
House and lot, 304 Jefferson Street, Alexandria, VA (lot 18, square 40). Rent of $1,800 payable
monthly. Value based on appraisal, copy of which is attached. Property exchanged for farm on May
1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent due on Item 2 for December 2012, but not collected until February 1, 2013 . . . . . . . . . .

7/1/13

$535,000

$550,000

2/1/13

8,100

8,100

2/1/13
5/1/13

5,400
369,000

5,400
375,000

2/1/13

1,800

1,800

mortgage, you must report the full value
of the property in the value column.
Enter the amount of the mortgage under
“Description” on this schedule. The
unpaid amount of the mortgage may be
deducted on Schedule K.
If the decedent’s estate is not liable
for the amount of the mortgage, report
only the value of the equity of
redemption (or value of the property
less the indebtedness) in the value
column as part of the gross estate. Do
not enter any amount less than zero. Do
not deduct the amount of indebtedness
on Schedule K.
Also list on Schedule A real property
the decedent contracted to purchase.
Report the full value of the property and
not the equity in the value column.
Deduct the unpaid part of the purchase
price on Schedule K.
Report the value of real estate
without reducing it for homestead or
other exemption, or the value of dower,
curtesy, or a statutory estate created
instead of dower or curtesy.
Explain how the reported values
were determined and attach copies of
any appraisals.

Part Instructions

Schedule A-1—Section
2032A Valuation

The election to value certain farm and
closely-held business property at its
special-use value is made by checking
“Yes,” on Form 706, Part 3—Elections
by the Executor, line 2. Schedule A-1 is
used to report the additional information
that must be submitted to support this
election. In order to make a valid
election, you must complete
Schedule A-1 and attach all of the
required statements and appraisals.
For definitions and additional
information concerning special-use
valuation, see section 2032A and the
related regulations.

Part 1. Type of Election
Estate and GST tax elections. If you
elect special-use valuation for the estate
tax, you must also elect special-use
valuation for the Generation-Skipping
Transfer (GST) tax and vice versa.
Protective election. To make the
protective election described in the
separate instructions for Part
3—Elections by the Executor, line 2,
you must check the box in Part 1. Type
of Election, enter the decedent's name
and social security number in the
spaces provided at the top of
Schedule A-1, and complete Part 2.
-19-

Alternate
Value

Value at
date of
death

Notice of Election, line 1 and lines 3 and
4, column A. For purposes of the
protective election, list on line 3 all of the
real property that passes to the qualified
heirs even though some of the property
will be shown on line 2 when the
additional notice of election is
subsequently filed. You need not
complete columns B through D of lines
3 and 4. You need not complete any
other line entries on Schedule A-1.
Completing Schedule A-1 as described
above constitutes a Notice of Protective
Election as described in Regulations
section 20.2032A-8(b).

Part 2. Notice of Election
Line 10. Because the special-use
valuation election creates a potential tax
liability for the recapture tax of section
2032A(c), you must list each person
who receives an interest in the specially
valued property on Schedule A-1. If
there are more than eight persons who
receive interests, use an additional
sheet that follows the format of line 10.
In the columns “Fair market value” and
“Special-use value,” enter the total
respective values of all the specially
valued property interests received by
each person.

GST Tax Savings

To figure the additional GST tax due
upon disposition (or cessation of
qualified use) of the property, each “skip
person” (as defined in the instructions to
Schedule R) who receives an interest in
the specially valued property must know
the total GST tax savings all interests in
specially valued property received. The
GST tax savings is the difference
between the total GST tax that was
imposed on all interests in specially
valued property received by the skip
person valued at their special-use value
and the total GST tax that would have
been imposed on the same interests
received by the skip person had they
been valued at their FMV.
Because the GST tax depends on
the executor's allocation of the GST
exemption and the grandchild
exclusion, the skip person who receives
the interests is unable to figure this GST
tax savings. Therefore, for each skip
person who receives an interest in
specially valued property, you must
attach a calculation of the total GST tax
savings attributable to that person's
interests in specially valued property.
How to figure the GST tax savings.
Before figuring each skip person's GST
tax savings, complete Schedules R and
R-1 for the entire estate (using the
special-use values).
For each skip person, complete two
Schedules R (Parts 2 and 3 only) as
worksheets, one showing the interests
in specially valued property received by
the skip person at their special-use
value and one showing the same
interests at their FMV.
If the skip person received interests
in specially valued property that were
shown on Schedule R-1, show these
interests on the Schedule R, Parts 2 and
3 worksheets, as appropriate. Do not
use Schedule R-1 as a worksheet.
Completing the special-use value
worksheets. On Schedule R, Parts 2
and 3, lines 2 through 4 and 6, enter -0-.
Completing the fair market value
worksheets.
Schedule R, Parts 2 and 3, lines 2
and 3, fixed taxes and other charges. If
valuing the interests at FMV (instead of
special-use value) causes any of these
taxes and charges to increase, enter the
increased amount (only) on these lines
and attach an explanation of the
increase. Otherwise, enter -0-.
Schedule R, Parts 2 and 3,
line 6—GST exemption allocation. If you
completed Schedule R, Part 1, line 10,
enter on line 6 the amount shown for the

skip person on the line 10 special-use
allocation schedule you attached to
Schedule R. If you did not complete
Schedule R, Part 1, line 10, enter -0- on
line 6.
Total GST tax savings. For each skip
person, subtract the tax amount on
line 10, Part 2 of the special-use value
worksheet from the tax amount on
line 10, Part 2 of the fair market value
worksheet. This difference is the skip
person's total GST tax savings.

Part 3. Agreement to Special
Valuation Under Section 2032A

The agreement to special valuation is
required under sections 2032A(a)(1)(B)
and (d)(2) and must be signed by all
parties who have any interest in the
property being valued based on its
qualified use as of the date of the
decedent's death.
An interest in property is an interest
that, as of the date of the decedent's
death, can be asserted under applicable
law so as to affect the disposition of the
specially valued property by the estate.
Any person who at the decedent's death
has any such interest in the property,
whether present, future, vested, or
contingent, must enter into the
agreement. Included are owners of
remainder and executory interests; the
holders of general or special powers of
appointment; beneficiaries of a gift over
in default of exercise of any such power;
joint tenants and holders of similar
undivided interests when the decedent
held only a joint or undivided interest in
the property or when only an undivided
interest is specially valued; and trustees
of trusts and representatives of other
entities holding title to or any interests in
the property. An heir who has the power
under local law to challenge a will and
thereby affect disposition of the property
is not, however, considered to be a
person with an interest in property under
section 2032A solely by reason of that
right. Likewise, creditors of an estate
are not such persons solely by reason of
their status as creditors.

matters relating to continued
qualification under section 2032A of the
specially valued real property and on all
matters relating to the special lien
arising under section 6324B. It is the
duty of the agent as attorney-in-fact for
the parties with interests in the specially
valued property to furnish the IRS with
any requested information and to notify
the IRS of any disposition or cessation
of qualified use of any part of the
property.

Checklist for Section 2032A
Election
When making the special-use
valuation election on
CAUTION
Schedule A-1, please use this
checklist to ensure that you are
providing everything necessary to make
a valid election.

!

To have a valid special-use valuation
election under section 2032A, you must
file, in addition to the federal estate tax
return, (a) a notice of election
(Schedule A-1, Part 2), and (b) a fully
executed agreement (Schedule A-1,
Part 3). You must include certain
information in the notice of election. To
ensure that the notice of election
includes all of the information required
for a valid election, use the following
checklist. The checklist is for your use
only. Do not file it with the return.

If any person required to enter into
the agreement either desires that an
agent act for him or her or cannot legally
bind himself or herself due to infancy or
other incompetency, or due to death
before the election under section 2032A
is timely exercised, a representative
authorized by local law to bind the
person in an agreement of this nature
may sign the agreement on his or her
behalf.
The IRS will contact the agent
designated in the agreement on all
-20-

Part Instructions

Does the notice of election include
the decedent's name and social
security number as they appear
on the estate tax return?
Does the notice of election include
the relevant qualified use of the
property to be specially valued?
Does the notice of election
describe the items of real property
shown on the estate tax return
that are to be specially valued and
identify the property by the Form
706 schedule and item number?
Does the notice of election include
the FMV of the real property to be
specially valued and also include
its value based on the qualified
use (determined without the
adjustments provided in section
2032A(b)(3)(B))?
Does the notice of election include
the adjusted value (as defined in
section 2032A(b)(3)(B)) of (a) all
real property that both passes
from the decedent and is used in
a qualified use, without regard to
whether it is to be specially
valued, and (b) all real property to
be specially valued?
Does the notice of election include
(a) the items of personal property
shown on the estate tax return
that pass from the decedent to a
qualified heir and that are used in
qualified use and (b) the total
value of such personal property
adjusted under section 2032A(b)
(3)(B)?
Does the notice of election include
the adjusted value of the gross
estate? (See section 2032A(b)(3)
(A).)
Does the notice of election include
the method used to determine the
special-use value?

Does the notice of election include
copies of written appraisals of the
FMV of the real property?
Does the notice of election include
a statement that the decedent
and/or a member of his or her
family has owned all of the
specially valued property for at
least 5 years of the 8 years
immediately preceding the date of
the decedent's death?

Has the agreement been signed
by each qualified heir having an
interest in the property being
specially valued?
Has every qualified heir
expressed consent to personal
liability under section 2032A(c)
in the event of an early
disposition or early cessation of
qualified use?

Does the notice of election include
a statement as to whether there
were any periods during the
8-year period preceding the
decedent's date of death during
which the decedent or a member
of his or her family did not (a) own
the property to be specially
valued, (b) use it in a qualified
use, or (c) materially participate in
the operation of the farm or other
business? (See section 2032A(e)
(6).)
Does the notice of election
include, for each item of specially
valued property, the name of
every person who has an interest
in that item of specially valued
property and the following
information about each such
person: (a) the person's address,
(b) the person's taxpayer
identification number, (c) the
person's relationship to the
decedent, and (d) the value of the
property interest passing to that
person based on both FMV and
qualified use?
Does the notice of election include
affidavits describing the activities
constituting material participation
and the identity of the material
participants?
Does the notice of election include
a legal description of each item of
specially valued property?
(In the case of an election made for
qualified woodlands, the information
included in the notice of election must
include the reason for entitlement to
the Woodlands election.)

Any election made under section
2032A will not be valid unless a properly
executed agreement (Schedule A-1,
Part Instructions

Part 3) is filed with the estate tax return.
To ensure that the agreement satisfies
the requirements for a valid election,
use the following checklist:

-21-

Is the agreement that is actually
signed by the qualified heirs in a
form that is binding on all of the
qualified heirs having an interest
in the specially valued property?
Does the agreement designate
an agent to act for the parties to
the agreement in all dealings
with the IRS on matters arising
under section 2032A?
Has the agreement been signed
by the designated agent and
does it give the address of the
agent?

Schedule B—Stocks and
Bonds
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

Before completing Schedule B,
see the examples illustrating
the alternate valuation dates
being adopted and not being adopted,
below.

TIP

If the total gross estate contains any
stocks or bonds, you must complete
Schedule B and file it with the return.
On Schedule B, list the stocks and
bonds included in the decedent's gross
estate. Number each item in the
left-hand column.

Schedule B Examples
Example showing use of Schedule B where the alternate valuation is not adopted; date of death, January 1, 2013
Item
number

Description, including face amount of bonds or number of shares and par value where
needed for identification. Give CUSIP number. If trust, partnership, or closely-held
entity, give EIN.

Alternate
valuation
date

Unit value

Alternate
value

Value at
date of
death

CUSIP number or
EIN, where
applicable
1

2

$60,000-Arkansas Railroad Co. first mortgage 4%, 20-year
bonds, due 2014. Interest payable quarterly on Feb. 1, May 1,
Aug. 1, and Nov. 1; N.Y. Exchange . . . . . . . . . . . . . . . . .

100

-------

$- - - - - - -

$ 60,000

Interest coupons attached to bonds, item 1, due and payable on
Nov. 1, 2012, but not cashed at date of death . . . . . . . . . . .

-------

-------

-------

600

Interest accrued on item 1, from Nov. 1, 2012, to Jan. 1,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-------

-------

-------

400

110

-------

-------

55,000

-------

-------

-------

1,000

500 shares Public Service Corp., common; N.Y. Exchange

. .

XXXXXXXXX

XXXXXXXXX

Dividend on item 2 of $2 per share declared Dec. 10, 2012,
payable on Jan. 9, 2013, to holders of record on Dec. 30,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Example showing use of Schedule B where the alternate valuation is adopted; date of death, January 1, 2013
Item
number

Description, including face amount of bonds or number of shares and par value where
needed for identification. Give CUSIP number. If trust, partnership, or closely-held
entity, give EIN.

Unit value

Alternate
valuation
date

Alternate
value

Value at
date of
death

CUSIP number or
EIN, where
applicable
1

$60,000-Arkansas Railroad Co. first mortgage 4%, 20-year bonds,
due 2014. 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, 2013 . . . .

99

4/1/13

29,700

------

$30,000 of item 1 sold by executor on May 1, 2013

98

5/1/13

29,400

------

------

2/2/13

600

600

. . . . . . .

Interest coupons attached to bonds, item 1, due and payable on
Nov. 1, 2012, but not cashed at date of death. Cashed by
executor on Feb. 2, 2013 . . . . . . . . . . . . . . . . . . . . . . .
Interest accrued on item 1, from Nov. 1, 2012, to Jan. 1, 2013.
Cashed by executor on Feb. 2, 2013 . . . . . . . . . . . . . . . .
2

500 shares Public Service Corp., common; N.Y. Exchange

. .

XXXXXXXXX

Not disposed of within 6 months following death . . . . . . . . .
Dividend on item 2 of $2 per share declared Dec. 10, 2012, paid
on Jan. 9, 2013, to holders of record on Dec. 30, 2012 . . . . .

Note. Unless specifically exempted by
an estate tax provision of the Code,
bonds that are exempt from federal
income tax are not exempt from estate
tax. You should list these bonds on
Schedule B.
Public housing bonds includible in
the gross estate must be included at
their full value.
If you paid any estate, inheritance,
legacy, or succession tax to a foreign
country on any stocks or bonds included
in this schedule, group those stocks and
bonds together and label them
“Subjected to Foreign Death Taxes.”
List interest and dividends on each
stock or bond on a separate line.

Indicate as a separate item dividends
that have not been collected at death
and are payable to the decedent or the
estate because the decedent was a
stockholder of record on the date of
death. However, if the stock is being
traded on an exchange and is selling
ex-dividend on the date of the
decedent's death, do not include the
amount of the dividend as a separate
item. Instead, add it to the ex-dividend
quotation in determining the FMV of the
stock on the date of the decedent's
death. Dividends declared on shares of
stock before the death of the decedent
but payable to stockholders of record on
a date after the decedent's death are
not includible in the gross estate for

-22-

------

2/2/13

400

400

110

------

------

55,000

90

7/1/13

45,000

------

------

1/9/13

1,000

1,000

federal estate tax purposes and should
not be listed here.

Description
Stocks. For stocks, indicate:
Number of shares;
Whether common or preferred;
Issue;
Par value where needed for
identification;
Price per share;
Exact name of corporation;
Principal exchange upon which sold,
if listed on an exchange; and
Nine-digit CUSIP number (defined
below).
Bonds. For bonds, indicate:
Quantity and denomination;
Part Instructions

Name of obligor;
Date of maturity;
Interest rate;
Interest due date;
Principal exchange, if listed on an
exchange; and
Nine-digit CUSIP number.
If the stock or bond is unlisted, show the
company's principal business office.
If the gross estate includes any
interest in a trust, partnership, or
closely-held entity, provide the
employer identification number (EIN) of
the entity in the description column on
Schedules B, E, F, G, M, and O. You
must also provide the EIN of an estate
(if any) in the description column on the
above-noted schedules, where
applicable.
The CUSIP (Committee on Uniform
Security Identification Procedure)
number is a nine-digit number that is
assigned to all stocks and bonds traded
on major exchanges and many unlisted
securities. Usually, the CUSIP number
is printed on the face of the stock
certificate. If you do not have a stock
certificate, the CUSIP may be found on
the broker's or custodian's statement or
by contacting the company's transfer
agent.

Valuation

List the FMV of the stocks or bonds. The
FMV of a stock or bond (whether listed
or unlisted) is the mean between the
highest and lowest selling prices quoted
on the valuation date. If only the closing
selling prices are available, then the
FMV is the mean between the quoted
closing selling price on the valuation
date and on the trading day before the
valuation date.

If there were no sales on the
valuation date, figure the FMV as
follows:
1. Find the mean between the
highest and lowest selling prices on the
nearest trading date before and the
nearest trading date after the valuation
date. Both trading dates must be
reasonably close to the valuation date.
2. Prorate the difference between
the mean prices to the valuation date.
3. Add or subtract (whichever
applies) the prorated part of the
difference to or from the mean price
figured for the nearest trading date
before the valuation date.

mean between the bona fide bid and
asked prices instead of sales prices. If
actual sales prices or bona fide bid and
asked prices are available within a
reasonable period of time before the
valuation date but not after the valuation
date, or vice versa, use the mean
between the highest and lowest sales
prices or bid and asked prices as the
FMV.
For example, assume that sales of
stock nearest the valuation date (June
15) occurred 2 trading days before
(June 13) and 3 trading days after (June
18). On those days, the mean sale
prices per share were $10 and $15,
respectively. Therefore, the price of $12
is considered the FMV of a share of
stock on the valuation date. If, however,
on June 13 and 18, the mean sale
prices per share were $15 and $10,
respectively, the FMV of a share of
stock on the valuation date is $13.
If only closing prices for bonds are
available, see Regulations section
20.2031-2(b).
Apply the rules in the section 2031
regulations to determine the value of
inactive stock and stock in close
corporations. Attach to Schedule B
complete financial and other data used
to determine value, including balance
sheets (particularly the one nearest to
the valuation date) and statements of
the net earnings or operating results and
dividends paid for each of the 5 years
immediately before the valuation date.
Securities reported as of no value, of
nominal value, or obsolete should be
listed last. Include the address of the
company and the state and date of the
incorporation. Attach copies of
correspondence or statements used to
determine the “no value.”
If the security was listed on more
than one stock exchange, use either the
records of the exchange where the
security is principally traded or the
composite listing of combined
exchanges, if available, in a publication
of general circulation. In valuing listed
stocks and bonds, you should carefully
check accurate records to obtain values
for the applicable valuation date.
If you get quotations from brokers, or
evidence of the sale of securities from
the officers of the issuing companies,
attach to the schedule copies of the
letters furnishing these quotations or
evidence of sale.

If no actual sales were made
reasonably close to the valuation date,
make the same computation using the
Part Instructions

-23-

Schedule C—Mortgages,
Notes, and Cash
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

Complete Schedule C and file it with
your return if the total gross estate
contains any:
Mortgages,
Notes, or
Cash.
List on Schedule C:
Mortgages and notes payable to the
decedent at the time of death.
Cash the decedent had at the date of
death.
Note. Do not list mortgages and notes
payable by the decedent on
Schedule C. (If these are deductible, list
them on Schedule K.)
List the items on Schedule C in the
following order:
1. Mortgages;
2. Promissory notes;
3. Contracts by decedent to sell
land;
4. Cash in possession; and
5. Cash in banks, savings and loan
associations, and other types of
financial organizations.
What to enter in the “Description”
column:
For mortgages, list:
Face value,
Unpaid balance,
Date of mortgage,
Name of maker,
Property mortgaged,
Date of maturity,
Interest rate, and
Interest date.
Example to enter in “Description”
column: “Bond and mortgage of
$50,000, unpaid balance: $17,000;
dated: January 1, 1992; John Doe to
Richard Roe; premises: 22 Clinton
Street, Newark, NJ; due: January 1,
2014; interest payable at 10% a
year—January 1 and July 1.”
For promissory notes, list in the same
way as mortgages.
For contracts by the decedent to sell
land, list:

Name of purchaser,
Contract date,
Property description,
Sale price,
Initial payment,
Amounts of installment payment,
Unpaid balance of principal, and
Interest rate.
For cash on hand, list such cash
separately from bank deposits.
For cash in banks, savings and loan
associations, and other types of
financial organizations, list:
Name and address of each financial
organization,
Amount in each account,
Serial or account number,
Nature of account—checking,
savings, time deposit, etc., and
Unpaid interest accrued from date of
last interest payment to the date of
death.
Note. If you obtain statements from the
financial organizations, keep them for
IRS inspection.

Schedule D—Insurance on
the Decedent's Life
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

If you are required to file Form 706
and there was any insurance on the
decedent's life, whether or not included
in the gross estate, you must complete
Schedule D and file it with the return.
Insurance you must include on
Schedule D. Under section 2042, you
must include in the gross estate:
Insurance on the decedent's life
receivable by or for the benefit of the
estate; and
Insurance on the decedent's life
receivable by beneficiaries other than
the estate, as described below.
The term “insurance” refers to life
insurance of every description, including
death benefits paid by fraternal
beneficiary societies operating under
the lodge system, and death benefits
paid under no-fault automobile
insurance policies if the no-fault insurer
was unconditionally bound to pay the
benefit in the event of the insured's
death.

Insurance in favor of the estate.
Include on Schedule D the full amount
of the proceeds of insurance on the life
of the decedent receivable by the
executor or otherwise payable to or for
the benefit of the estate. Insurance in
favor of the estate includes insurance
used to pay the estate tax, and any
other taxes, debts, or charges that are
enforceable against the estate. The
manner in which the policy is drawn is
immaterial as long as there is an
obligation, legally binding on the
beneficiary, to use the proceeds to pay
taxes, debts, or charges. You must
include the full amount even though the
premiums or other consideration may
have been paid by a person other than
the decedent.
Insurance receivable by beneficiaries other than the estate. Include on
Schedule D the proceeds of all
insurance on the life of the decedent not
receivable by, or for the benefit of, the
decedent's estate if the decedent
possessed at death any of the following
incidents of ownership, exercisable
either alone or in conjunction with any
person or entity.
Incidents of ownership in a policy
include:
The right of the insured or estate to its
economic benefits;
The power to change the beneficiary;
The power to surrender or cancel the
policy;
The power to assign the policy or to
revoke an assignment;
The power to pledge the policy for a
loan;
The power to obtain from the insurer
a loan against the surrender value of the
policy; and
A reversionary interest if the value of
the reversionary interest was more than
5% of the value of the policy
immediately before the decedent died.
(An interest in an insurance policy is
considered a reversionary interest if, for
example, the proceeds become payable
to the insured's estate or payable as the
insured directs if the beneficiary dies
before the insured.)
Life insurance not includible in the
gross estate under section 2042 may be
includible under some other section of
the Code. For example, a life insurance
policy could be transferred by the
decedent in such a way that it would be
includible in the gross estate under
section 2036, 2037, or 2038. See the
instructions to Schedule G for a
description of these sections.

-24-

Completing the Schedule

You must list every insurance policy on
the life of the decedent, whether or not it
is included in the gross estate.

Under “Description,” list:
The name of the insurance company,
and
The number of the policy.
For every life insurance policy listed
on the schedule, request a statement on
Form 712, Life Insurance Statement,
from the company that issued the policy.
Attach the Form 712 to Schedule D.
If the policy proceeds are paid in one
sum, enter the net proceeds received
(from Form 712, line 24) in the value
(and alternate value) columns of
Schedule D. If the policy proceeds are
not paid in one sum, enter the value of
the proceeds as of the date of the
decedent's death (from Form 712,
line 25).
If part or all of the policy proceeds
are not included in the gross estate,
explain why they were not included.

Schedule E—Jointly
Owned Property
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

If you are required to file Form 706,
complete Schedule E and file it with the
return if the decedent owned any joint
property at the time of death, whether or
not the decedent's interest is includible
in the gross estate.
Enter on this schedule all property of
whatever kind or character, whether real
estate, personal property, or bank
accounts, in which the decedent held at
the time of death an interest either as a
joint tenant with right to survivorship or
as a tenant by the entirety.
Do not list on this schedule property
that the decedent held as a tenant in
common, but report the value of the
interest on Schedule A if real estate, or
on the appropriate schedule if personal
property. Similarly, community property
held by the decedent and spouse
should be reported on the appropriate
Schedules A through I. The decedent's
interest in a partnership should not be
entered on this schedule unless the
Part Instructions

partnership interest itself is
jointly-owned. Solely owned partnership
interests should be reported on
Schedule F, “Other Miscellaneous
Property Not Reportable Under Any
Other Schedule.”
Part 1. Qualified joint interests held
by decedent and spouse. Under
section 2040(b)(2), a joint interest is a
qualified joint interest if the decedent
and the surviving spouse held the
interest as:
Tenants by the entirety, or
Joint tenants with right of survivorship
if the decedent and the decedent's
spouse are the only joint tenants.
Interests that meet either of the two
requirements above should be entered
in Part 1. Joint interests that do not meet
either of the two requirements above
should be entered in Part 2.
Under “Description,” describe the
property as required in the instructions
for Schedules A, B, C, and F for the type
of property involved. For example,
jointly held stocks and bonds should be
described using the rules given in the
instructions to Schedule B.
Under “Alternate value” and “Value at
date of death,” enter the full value of the
property.
Note. You cannot claim the special
treatment under section 2040(b) for
property held jointly by a decedent and
a surviving spouse who is not a U.S.
citizen. Report these joint interests on
Part 2 of Schedule E, not Part 1.
Part 2. All other joint interests. All
joint interests that were not entered in
Part 1 must be entered in Part 2.
For each item of property, enter the
appropriate letter A, B, C, etc., from
line 2a to indicate the name and
address of the surviving co-tenant.
Under “Description,” describe the
property as required in the instructions
for Schedules A, B, C, and F for the type
of property involved.
In the “Percentage includible”
column, enter the percentage of the
total value of the property included in
the gross estate.
Generally, you must include the full
value of the jointly-owned property in
the gross estate. However, the full value
should not be included if you can show
that a part of the property originally
belonged to the other tenant or tenants
and was never received or acquired by
the other tenant or tenants from the
decedent for less than adequate and full
consideration in money or money's
Part Instructions

worth. Full value of jointly-owned
property also does not have to be
included in the gross estate if you can
show that any part of the property was
acquired with consideration originally
belonging to the surviving joint tenant or
tenants. In this case, you may exclude
from the value of the property an
amount proportionate to the
consideration furnished by the other
tenant or tenants. Relinquishing or
promising to relinquish dower, curtesy,
or statutory estate created instead of
dower or curtesy, or other marital rights
in the decedent's property or estate is
not consideration in money or money's
worth. See the Schedule A instructions
for the value to show for real property
that is subject to a mortgage.
If the property was acquired by the
decedent and another person or
persons by gift, bequest, devise, or
inheritance as joint tenants, and their
interests are not otherwise specified by
law, include only that part of the value of
the property that is figured by dividing
the full value of the property by the
number of joint tenants.
If you believe that less than the full
value of the entire property is includible
in the gross estate for tax purposes, you
must establish the right to include the
smaller value by attaching proof of the
extent, origin, and nature of the
decedent's interest and the interest(s) of
the decedent's co-tenant or co-tenants.
In the “Includible alternate value” and
“Includible value at date of death”
columns, enter only the values that you
believe are includible in the gross
estate.

Schedule F—Other
Miscellaneous Property
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

You must complete Schedule F
and file it with the return.
On Schedule F, list all items that must
be included in the gross estate that are
not reported on any other schedule,
including:
Debts due the decedent (other than
notes and mortgages included on
Schedule C);
Interests in business;
-25-

Any interest in an Archer medical
savings account (MSA) or health
savings account (HSA), unless such
interest passes to the surviving spouse;
and
Insurance on the life of another
(obtain and attach Form 712, for each
policy).
Note (for single premium or paid-up
policies). In certain situations (for
example, where the surrender value of
the policy exceeds its replacement
cost), the true economic value of the
policy will be greater than the amount
shown on line 59 of Form 712. In these
situations, report the full economic value
of the policy on Schedule F. See Rev.
Rul. 78-137, 1978-1 C.B. 280 for details.
Section 2044 property (see Decedent
Who Was a Surviving Spouse, below);
Claims (including the value of the
decedent's interest in a claim for refund
of income taxes or the amount of the
refund actually received);
Rights;
Royalties;
Leaseholds;
Judgments;
Reversionary or remainder interests;
Shares in trust funds (attach a copy of
the trust instrument);
Household goods and personal
effects, including wearing apparel;
Farm products and growing crops;
Livestock;
Farm machinery; and
Automobiles.
Interests. If the decedent owned any
interest in a partnership or
unincorporated business, attach a
statement of assets and liabilities for the
valuation date and for the 5 years before
the valuation date. Also, attach
statements of the net earnings for the
same 5 years. Be sure to include the
EIN of the entity. You must account for
goodwill in the valuation. In general,
furnish the same information and follow
the methods used to value close
corporations. See the instructions for
Schedule B.
All partnership interests should be
reported on Schedule F unless the
partnership interest, itself, is
jointly-owned. Jointly-owned
partnership interests should be reported
on Schedule E.
If real estate is owned by a sole
proprietorship, it should be reported on
Schedule F and not on Schedule A.
Describe the real estate with the same
detail required for Schedule A.

Valuation discounts. If you
answered “Yes,” to Part 4—General
Information, line 11b for any interest in a
partnership, an unincorporated
business, a limited liability company, or
stock in a closely-held corporation,
attach a statement that lists the item
number from Schedule F and identifies
the total effective discount taken (that is,
XX.XX%) on such interest.

Example of effective discount:
a Pro-rata value of limited liability
company (before any discounts)

$100.00

b Minus: 10% discounts for lack of
control

(10.00)

c Marketable minority interest value
(as if freely traded minority interest
value)

$90.00

d Minus: 15% discount for lack of
marketability

(13.50)

e Non-marketable minority interest
value

$76.50

Calculation of effective discount:
(a minus e) divided by a = effective discount
($100.00 - $76.50) ÷ $100.00 = 23.50%

Note. The amount of discounts are
based on the factors pertaining to a
specific interest and those discounts
shown in the example are for
demonstration purposes only.
If you answered “Yes,” to line 11b for
any transfer(s) described in (1) through
(5) in the Schedule G instructions (and
made by the decedent), attach a
statement to Schedule G which lists
the item number from that schedule and
identifies the total effective discount
taken (that is, XX.XX%) on such
transfer(s).
Line 1. If the decedent owned at the
date of death works of art or items with
collectible value (for example, jewelry,
furs, silverware, books, statuary, vases,
oriental rugs, coin or stamp collections),
check the “Yes,” box on line 1 and
provide full details. If any item or
collection of similar items is valued at
more than $3,000, attach an appraisal
by an expert under oath and the
required statement regarding the
appraiser's qualifications (see
Regulations section 20.2031-6(b)).

terminable interest property (QTIP) from
the predeceased spouse for which the
marital deduction was elected either on
the predeceased spouse's estate tax
return or on a gift tax return, Form 709.
The election is available for transfers
made and decedents dying after
December 31, 1981. List such property
on Schedule F.
If this election was made and the
surviving spouse retained his or her
interest in the QTIP property at death,
the full value of the QTIP property is
includible in his or her estate, even
though the qualifying income interest
terminated at death. It is valued as of
the date of the surviving spouse's death,
or alternate valuation date, if applicable.
Do not reduce the value by any annual
exclusion that may have applied to the
transfer creating the interest.
The value of such property included
in the surviving spouse's gross estate is
treated as passing from the surviving
spouse. It therefore qualifies for the
charitable and marital deductions on the
surviving spouse's estate tax return if it
meets the other requirements for those
deductions.
For additional details, see
Regulations section 20.2044-1.

Schedule G—Transfers
During Decedent's Life
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

Complete Schedule G and file it with
the return if the decedent made any of
the transfers described in (1) through (5)
below, or if you answered “Yes,” to
question 12 or 13a of Part 4—General
Information.
Report the following types of
transfers on this schedule:

Decedent Who Was a
Surviving Spouse

If the decedent was a surviving spouse,
he or she may have received qualified
-26-

IF. . .

AND . . .

THEN . . .

the decedent
made a
transfer from a
trust,

at the time of
the transfer,
the transfer
was from a
portion of the
trust that was
owned by the
grantor under
section 676
(other than by
reason of
section
672(e)) by
reason of a
power in the
grantor,

for purposes of
sections 2035
and 2038, treat
the transfer as
made directly
by the
decedent.

Any such
transfer within
the annual gift
tax exclusion
is not
includible in
the gross
estate.

1. Certain gift taxes (section
2035(b)). Enter at item A of Schedule G
the total value of the gift taxes that were
paid by the decedent or the estate on
gifts made by the decedent or the
decedent's spouse within 3 years of
death.
The date of the gift, not the date of
payment of the gift tax, determines
whether a gift tax paid is included in the
gross estate under this rule. Therefore,
you should carefully examine the Forms
709 filed by the decedent and the
decedent's spouse to determine what
part of the total gift taxes reported on
them was attributable to gifts made
within 3 years of death.
For example, if the decedent died on
July 10, 2012, you should examine gift
tax returns for 2012, 2011, 2010, and
2009. However, the gift taxes on the
2009 return that are attributable to gifts
made on or before July 10, 2009, are
not included in the gross estate.
Explain how you figured the
includible gift taxes if the entire gift taxes
shown on any Form 709 filed for gifts
made within 3 years of death are not
included in the gross estate. Also attach
copies of any relevant gift tax returns
filed by the decedent's spouse for gifts
made within 3 years of death.
2. Other transfers within 3 years
of death (section 2035(a)). These
transfers include only the following:
Any transfer by the decedent with
respect to a life insurance policy within 3
years of death; or
Any transfer within 3 years of death of
a retained section 2036 life estate,
section 2037 reversionary interest, or
Part Instructions

section 2038 power to revoke, etc., if
the property subject to the life estate,
interest, or power would have been
included in the gross estate had the
decedent continued to possess the life
estate, interest, or power until death.
These transfers are reported on
Schedule G, regardless of whether a gift
tax return was required to be filed for
them when they were made. However,
the amount includible and the
information required to be shown for the
transfers are determined:
For insurance on the life of the
decedent using the instructions to
Schedule D (attach Forms 712);
For insurance on the life of another
using the instructions to Schedule F
(attach Forms 712); and
For sections 2036, 2037, and 2038
transfers, using paragraphs (3), (4), and
(5) of these instructions.
3. Transfers with retained life estate
(section 2036). These are transfers by
the decedent in which the decedent
retained an interest in the transferred
property. The transfer can be in trust or
otherwise, but excludes bona fide sales
for adequate and full consideration.
Interests or rights. Section 2036
applies to the following retained
interests or rights:
The right to income from the
transferred property;
The right to the possession or
enjoyment of the property; and
The right, either alone or with any
person, to designate the persons who
shall receive the income from, possess,
or enjoy, the property.
Retained annuity, unitrust, and
other income interests in trusts. If a
decedent transferred property into a
trust and retained or reserved the right
to use the property, or the right to an
annuity, unitrust, or other interest in
such trust for the property for
decedent's life, any period not
ascertainable without reference to the
decedent's death, or for a period that
does not, in fact, end before the
decedent's death, then the decedent's
right to use the property or the retained
annuity, unitrust, or other interest
(whether payable from income and/or
principal) is the retention of the
possession or enjoyment of, or the right
to the income from, the property for
purposes of section 2036. See
Regulations section 20.2036-1(c)(2).
Retained voting rights. Transfers
with a retained life estate also include
transfers of stock in a controlled
corporation after June 22, 1976, if the
decedent retained or acquired voting
Part Instructions

rights in the stock. If the decedent
retained direct or indirect voting rights in
a controlled corporation, the decedent is
considered to have retained enjoyment
of the transferred property. A
corporation is a controlled corporation if
the decedent owned (actually or
constructively) or had the right (either
alone or with any other person) to vote
at least 20% of the total combined
voting power of all classes of stock. See
section 2036(b)(2). If these voting rights
ceased or were relinquished within 3
years of the decedent's death, the
corporate interests are included in the
gross estate as if the decedent had
actually retained the voting rights until
death.
The amount includible in the gross
estate is the value of the transferred
property at the time of the decedent's
death. If the decedent kept or reserved
an interest or right to only a part of the
transferred property, the amount
includible in the gross estate is a
corresponding part of the entire value of
the property.
A retained life estate does not have
to be legally enforceable. What matters
is that a substantial economic benefit
was retained. For example, if a mother
transferred title to her home to her
daughter but with the informal
understanding that she was to continue
living there until her death, the value of
the home would be includible in the
mother's estate even if the agreement
would not have been legally
enforceable.
4. Transfers taking effect at
death (section 2037). A transfer that
takes effect at the decedent's death is
one under which possession or
enjoyment can be obtained only by
surviving the decedent. A transfer is not
treated as one that takes effect at the
decedent's death unless the decedent
retained a reversionary interest (defined
below) in the property that immediately
before the decedent's death had a value
of more than 5% of the value of the
transferred property. If the transfer was
made before October 8, 1949, the
reversionary interest must have arisen
by the express terms of the instrument
of transfer.
A reversionary interest is, generally,
any right under which the transferred
property will or may be returned to the
decedent or the decedent's estate. It
also includes the possibility that the
transferred property may become
subject to a power of disposition by the
decedent. It does not matter if the right
arises by the express terms of the
-27-

instrument of transfer or by operation of
law. For this purpose, reversionary
interest does not include the possibility
that the income alone from the property
may return to the decedent or become
subject to the decedent's power of
disposition.
5. Revocable transfers (section
2038). The gross estate includes the
value of any transferred property which
was subject to the decedent's power to
alter, amend, revoke, or terminate the
transfer at the time of the decedent's
death. A decedent's power to change
beneficiaries and to increase any
beneficiary's enjoyment of the property
are examples of this.
It does not matter whether the power
was reserved at the time of the transfer,
whether it arose by operation of law, or
whether it was later created or
conferred. The rule applies regardless
of the source from which the power was
acquired, and regardless of whether the
power was exercisable by the decedent
alone or with any person (and
regardless of whether that person had a
substantial adverse interest in the
transferred property).
The capacity in which the decedent
could use a power has no bearing. If the
decedent gave property in trust and was
the trustee with the power to revoke the
trust, the property would be included in
his or her gross estate. For transfers or
additions to an irrevocable trust after
October 28, 1979, the transferred
property is includible if the decedent
reserved the power to remove the
trustee at will and appoint another
trustee.
If the decedent relinquished within 3
years of death any of the includible
powers described above, figure the
gross estate as if the decedent had
actually retained the powers until death.
Only the part of the transferred
property that is subject to the
decedent's power is included in the
gross estate.
For more detailed information on
which transfers are includible in the
gross estate, see Regulations section
20.2038-1.

Special Valuation Rules for
Certain Lifetime Transfers

Sections 2701 through 2704 provide
rules for valuing certain transfers to
family members.
Section 2701 deals with the transfer
of an interest in a corporation or
partnership while retaining certain

distribution rights, or a liquidation, put,
call, or conversion right.
Section 2702 deals with the transfer
of an interest in a trust while retaining
any interest other than a qualified
interest. In general, a qualified interest is
a right to receive certain distributions
from the trust at least annually, or a
noncontingent remainder interest if all of
the other interests in the trust are
distribution rights specified in section
2702.
Section 2703 provides rules for the
valuation of property transferred to a
family member but subject to an option,
agreement, or other right to acquire or
use the property at less than FMV. It
also applies to transfers subject to
restrictions on the right to sell or use the
property.
Finally, section 2704 provides that in
certain cases, the lapse of a voting or
liquidation right in a family-owned
corporation or partnership will result in a
deemed transfer.
These rules have potential
consequences for the valuation of
property in an estate. If the decedent (or
any member of his or her family) was
involved in any such transactions, see
sections 2701 through 2704 and the
related regulations for additional details.

How To Complete Schedule G

All transfers (other than outright
transfers not in trust and bona fide
sales) made by the decedent at any
time during life must be reported on
Schedule G, regardless of whether you
believe the transfers are subject to tax.
If the decedent made any transfers not
described in these instructions, the
transfers should not be shown on
Schedule G. Instead, attach a statement
describing these transfers by listing:
The date of the transfer,
The amount or value of the
transferred property, and
The type of transfer.
Complete the schedule for each
transfer that is included in the gross
estate under sections 2035(a), 2036,
2037, and 2038 as described in the
Instructions for Schedule G.
In the “Item number” column, number
each transfer consecutively beginning
with “1.” In the “Description” column, list
the name of the transferee and the date
of the transfer, and give a complete
description of the property. Transfers
included in the gross estate should be
valued on the date of the decedent's
death or, if alternate valuation is
elected, according to section 2032.

If only part of the property transferred
meets the terms of section 2035(a),
2036, 2037, or 2038, then only a
corresponding part of the value of the
property should be included in the value
of the gross estate. If the transferee
makes additions or improvements to the
property, the increased value of the
property at the valuation date should not
be included on Schedule G. However, if
only a part of the value of the property is
included, enter the value of the whole
under the column headed “Description”
and explain what part was included.
Attachments. If a transfer, by trust or
otherwise, was made by a written
instrument, attach a copy of the
instrument to Schedule G. If the copy of
the instrument is of public record, it
should be certified; if not of public
record, the copy should be verified.

Schedule H—Powers of
Appointment
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

Complete Schedule H and file it with
the return if you answered “Yes,” to
question 14 of Part 4—General
Information.
On Schedule H, include in the gross
estate:
The value of property for which the
decedent possessed a general power of
appointment (defined below) on the
date of his or her death and
The value of property for which the
decedent possessed a general power of
appointment that he or she exercised or
released before death by disposing of it
in such a way that if it were a transfer of
property owned by the decedent, the
property would be includible in the
decedent's gross estate as a transfer
with a retained life estate, a transfer
taking effect at death, or a revocable
transfer.

release only to the extent that the value
of the property that could have been
appointed by the exercise of the lapsed
power is more than the greater of
$5,000 or 5% of the total value, at the
time of the lapse, of the assets out of
which, or the proceeds of which, the
exercise of the lapsed power could have
been satisfied.

Powers of Appointment

A power of appointment determines
who will own or enjoy the property
subject to the power and when they will
own or enjoy it. The power must be
created by someone other than the
decedent. It does not include a power
created or held on property transferred
by the decedent.
A power of appointment includes all
powers which are, in substance and
effect, powers of appointment
regardless of how they are identified
and regardless of local property laws.
For example, if a settlor transfers
property in trust for the life of his wife,
with a power in the wife to appropriate
or consume the principal of the trust, the
wife has a power of appointment.
Some powers do not in themselves
constitute a power of appointment. For
example, a power to amend only
administrative provisions of a trust that
cannot substantially affect the beneficial
enjoyment of the trust property or
income is not a power of appointment. A
power to manage, invest, or control
assets, or to allocate receipts and
disbursements, when exercised only in
a fiduciary capacity, is not a power of
appointment.

With the above exceptions, property
subject to a power of appointment is not
includible in the gross estate if the
decedent released the power
completely and the decedent held no
interest in or control over the property.

General power of appointment. A
general power of appointment is a
power that is exercisable in favor of the
decedent, the decedent's estate, the
decedent's creditors, or the creditors of
the decedent's estate, except:
1. A power to consume, invade, or
appropriate property for the benefit of
the decedent that is limited by an
ascertainable standard relating to
health, education, support, or
maintenance of the decedent.
2. A power exercisable by the
decedent only in conjunction with:
a. the creator of the power or
b. a person who has a substantial
interest in the property subject to the
power, which is adverse to the exercise
of the power in favor of the decedent.

If the failure to exercise a general
power of appointment results in a lapse
of the power, the lapse is treated as a

A part of a power is considered a
general power of appointment if the
power:

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Part Instructions

1. May only be exercised by the
decedent in conjunction with another
person and
2. Is also exercisable in favor of the
other person (in addition to being
exercisable in favor of the decedent, the
decedent's creditors, the decedent's
estate, or the creditors of the decedent's
estate).
When there is a partial power, figure
the amount included in the gross estate
by dividing the value of the property by
the number of persons (including the
decedent) in favor of whom the power is
exercisable.
Date power was created. Generally, a
power of appointment created by will is
considered created on the date of the
testator's death.
A power of appointment created by
an inter vivos instrument is considered
created on the date the instrument takes
effect. If the holder of a power exercises
it by creating a second power, the
second power is considered as created
at the time of the exercise of the first.

Attachments

If the decedent ever possessed a power
of appointment, attach a certified or
verified copy of the instrument granting
the power and a certified or verified
copy of any instrument by which the
power was exercised or released. You
must file these copies even if you
contend that the power was not a
general power of appointment, and that
the property is not otherwise includible
in the gross estate.

Schedule I—Annuities
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last three columns. See
instructions for line 10 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

Complete Schedule l and file it with
the return if you answered “Yes,” to
question 16 of Part 4—General
Information.
Enter on Schedule I every annuity
that meets all of the conditions under
General, below, and every annuity
described in paragraphs (a) through (h)
of Annuities Under Approved Plans,
even if the annuities are wholly or
partially excluded from the gross estate.
For a discussion regarding the QTIP
treatment of certain joint and survivor
Part Instructions

annuities, see the Schedule M, line 3
instructions.

General

These rules apply to all types of
annuities, including pension plans,
individual retirement arrangements,
purchased commercial annuities, and
private annuities.
In general, you must include in the
gross estate all or part of the value of
any annuity that meets the following
requirements:
It is receivable by a beneficiary
following the death of the decedent and
by reason of surviving the decedent;
The annuity is under a contract or
agreement entered into after March 3,
1931;
The annuity was payable to the
decedent (or the decedent possessed
the right to receive the annuity) either
alone or in conjunction with another, for
the decedent's life or for any period not
ascertainable without reference to the
decedent's death or for any period that
did not in fact end before the decedent's
death; and
The contract or agreement is not a
policy of insurance on the life of the
decedent.
Note. A private annuity is an annuity
issued by a party not engaged in the
business of writing annuity contracts,
typically a junior generation family
member or a family trust.
An annuity contract that provides
periodic payments to a person for life
and ceases at the person's death is not
includible in the gross estate. Social
security benefits are not includible in the
gross estate even if the surviving
spouse receives benefits.
An annuity or other payment that is
not includible in the decedent's or the
survivor's gross estate as an annuity
may still be includible under some other
applicable provision of the law. For
example, see Powers of Appointment
and the instructions for
Schedule G—Transfers During
Decedent's Life, above. See also
Regulations section 20.2039-1(e).
If the decedent retired before
January 1, 1985, see Annuities Under
Approved Plans, below, for rules that
allow the exclusion of part or all of
certain annuities.

Part Includible
If the decedent contributed only part of
the purchase price of the contract or
agreement, include in the gross estate
-29-

only that part of the value of the annuity
receivable by the surviving beneficiary
that the decedent's contribution to the
purchase price of the annuity or
agreement bears to the total purchase
price.
For example, if the value of the
survivor's annuity was $20,000 and the
decedent had contributed three-fourths
of the purchase price of the contract, the
amount includible is $15,000 (3 4 ×
$20,000).
Except as provided under Annuities
Under Approved Plans, contributions
made by the decedent's employer to the
purchase price of the contract or
agreement are considered made by the
decedent if they were made by the
employer because of the decedent's
employment. For more information, see
section 2039(b).

Definitions
Annuity. An annuity consists of one or
more payments extending over any
period of time. The payments may be
equal or unequal, conditional or
unconditional, periodic or sporadic.
Examples. The following are
examples of contracts (but not
necessarily the only forms of contracts)
for annuities that must be included in the
gross estate:
1. A contract under which the
decedent immediately before death was
receiving or was entitled to receive, for
the duration of life, an annuity with
payments to continue after death to a
designated beneficiary, if surviving the
decedent.
2. A contract under which the
decedent immediately before death was
receiving or was entitled to receive,
together with another person, an annuity
payable to the decedent and the other
person for their joint lives, with
payments to continue to the survivor
following the death of either.
3. A contract or agreement entered
into by the decedent and employer
under which the decedent immediately
before death and following retirement
was receiving, or was entitled to
receive, an annuity payable to the
decedent for life. After the decedent's
death, if survived by a designated
beneficiary, the annuity was payable to
the beneficiary with payments either
fixed by contract or subject to an option
or election exercised or exercisable by
the decedent. However, see Annuities
Under Approved Plans, below.

4. A contract or agreement entered
into by the decedent and the decedent's
employer under which at the decedent's
death, before retirement, or before the
expiration of a stated period of time, an
annuity was payable to a designated
beneficiary, if surviving the decedent.
However, see Annuities Under
Approved Plans, below.
5. A contract or agreement under
which the decedent immediately before
death was receiving, or was entitled to
receive, an annuity for a stated period of
time, with the annuity to continue to a
designated beneficiary, surviving the
decedent, upon the decedent's death
and before the expiration of that period
of time.
6. An annuity contract or other
arrangement providing for a series of
substantially equal periodic payments to
be made to a beneficiary for life or over
a period of at least 36 months after the
date of the decedent's death under an
individual retirement account, annuity,
or bond as described in section 2039(e)
(before its repeal by P.L. 98-369).
Payable to the decedent. An annuity
or other payment was payable to the
decedent if, at the time of death, the
decedent was in fact receiving an
annuity or other payment, with or
without an enforceable right to have the
payments continued.
Right to receive an annuity. The
decedent had the right to receive an
annuity or other payment if, immediately
before death, the decedent had an
enforceable right to receive payments at
some time in the future, whether or not
at the time of death the decedent had a
present right to receive payments.

Annuities Under Approved
Plans

The following rules relate to whether
part or all of an otherwise includible
annuity may be excluded. These rules
have been repealed and apply only if
the decedent either:
On December 31, 1984, was both a
participant in the plan and in pay status
(for example, had received at least one
benefit payment on or before December
31, 1984) and had irrevocably elected
the form of the benefit before July 18,
1984, or
Had separated from service before
January 1, 1985, and did not change the
form of benefit before death.
The amount excluded cannot exceed
$100,000 unless either of the following
conditions is met:

On December 31, 1982, the
decedent was both a participant in the
plan and in pay status (for example, had
received at least one benefit payment
on or before December 31, 1982) and
the decedent irrevocably elected the
form of the benefit before January 1,
1983, or
The decedent separated from service
before January 1, 1983, and did not
change the form of benefit before death.

Approved Plans
Approved plans may be separated into
two categories:
Pension, profit-sharing, stock bonus,
and other similar plans and
Individual retirement arrangements
(IRAs), and retirement bonds.
Different exclusion rules apply to the
two categories of plans.
Pension, etc., plans. The following
plans are approved plans for the
exclusion rules:
a. An employees' trust (or a contract
purchased by an employees' trust)
forming part of a pension, stock bonus,
or profit-sharing plan that met all the
requirements of section 401(a), either at
the time of the decedent's separation
from employment (whether by death or
otherwise) or at the time of the
termination of the plan (if earlier);
b. A retirement annuity contract
purchased by the employer (but not by
an employees' trust) under a plan that,
at the time of the decedent's separation
from employment (by death or
otherwise), or at the time of the
termination of the plan (if earlier), was a
plan described in section 403(a);
c. A retirement annuity contract
purchased for an employee by an
employer that is an organization
referred to in section 170(b)(1)(A)(ii) or
(vi), or that is a religious organization
(other than a trust), and that is exempt
from tax under section 501(a);
d. Chapter 73 of Title 10 of the United
States Code; or
e. A bond purchase plan described in
section 405 (before its repeal by P.L.
98-369, effective for obligations issued
after December 31, 1983).
Exclusion rules for pension, etc.,
plans. If an annuity under an approved
plan described in (a) through (e) above
is receivable by a beneficiary other than
the executor and the decedent made no
contributions under the plan toward the
cost, no part of the value of the annuity,
subject to the $100,000 limitation (if
-30-

applicable), is includible in the gross
estate.
If the decedent made a contribution
under a plan described in (a) through (e)
above toward the cost, include in the
gross estate on this schedule that
proportion of the value of the annuity
which the amount of the decedent's
contribution under the plan bears to the
total amount of all contributions under
the plan. The remaining value of the
annuity is excludable from the gross
estate subject to the $100,000 limitation
(if applicable). For the rules to
determine whether the decedent made
contributions to the plan, see
Regulations section 20.2039-1(c).
IRAs and retirement bonds. The
following plans are approved plans for
the exclusion rules:
f. An individual retirement account
described in section 408(a),
g. An individual retirement annuity
described in section 408(b), or
h. A retirement bond described in
section 409(a) (before its repeal by P.L.
98-369).
Exclusion rules for IRAs and
retirement bonds. These plans are
approved plans only if they provide for a
series of substantially equal periodic
payments made to a beneficiary for life,
or over a period of at least 36 months
after the date of the decedent's death.
Subject to the $100,000 limitation (if
applicable), if an annuity under a “plan”
described in (f) through (h) above is
receivable by a beneficiary other than
the executor, the entire value of the
annuity is excludable from the gross
estate even if the decedent made a
contribution under the plan.
However, if any payment to or for an
account or annuity described in
paragraph (f), (g), or (h) above was not
allowable as an income tax deduction
under section 219 (and was not a
rollover contribution as described in
section 2039(e) before its repeal by P.L.
98-369), include in the gross estate on
this schedule that proportion of the
value of the annuity which the amount
not allowable as a deduction under
section 219 and not a rollover
contribution bears to the total amount
paid to or for such account or annuity.
For more information, see Regulations
section 20.2039-5.
Rules applicable to all approved
plans. The following rules apply to all
approved plans described in
paragraphs (a) through (h) above.

Part Instructions

If any part of an annuity under a
“plan” described in (a) through (h)
above is receivable by the executor, it is
generally includible in the gross estate
to the extent that it is receivable by the
executor in that capacity. In general, the
annuity is receivable by the executor if it
is to be paid to the executor or if there is
an agreement (expressed or implied)
that it will be applied by the beneficiary
for the benefit of the estate (such as in
discharge of the estate's liability for
death taxes or debts of the decedent,
etc.) or that its distribution will be
governed to any extent by the terms of
the decedent's will or the laws of
descent and distribution.
If data available to you does not
indicate whether the plan satisfies the
requirements of section 401(a), 403(a),
408(a), 408(b), or 409(a), you may
obtain that information from the IRS
office where the employer's principal
place of business is located.

described in Regulations section
20.2039-4(d). The election is
irrevocable.
The amount excluded from the gross
estate is the portion attributable to the
employer contributions. The portion, if
any, attributable to the
employee-decedent's contributions is
always includible. Also, you may not
figure the gross estate in accordance
with this election unless you check
“Yes” on line A and attach the name,
address, and identifying number of the
recipients of the lump sum distributions.
See Regulations section 20.2039-4(d)
(2).

How To Complete Schedule I

In describing an annuity, give the name
and address of the grantor of the
annuity. Specify if the annuity is under
an approved plan.

Line A. Lump Sum Distribution
Election
Note. The following rules have been
repealed and apply only if the decedent:
On December 31, 1984, was both a
participant in the plan and in pay status
(for example, had received at least one
benefit payment on or before December
31, 1984) and had irrevocably elected
the form of the benefit before July 18,
1984, or
Had separated from service before
January 1, 1985, and did not change the
form of benefit before death.
Generally, the entire amount of any
lump sum distribution is included in the
decedent's gross estate. However,
under this special rule, all or part of a
lump sum distribution from a qualified
(approved) plan will be excluded if the
lump sum distribution is included in the
recipient's income for income tax
purposes.

THEN . . .

the annuity is under an
approved plan,

state the ratio of the
decedent's
contribution to the
total purchase price of
the annuity.

the decedent was
employed at the time
of death and an
annuity as described in
Definitions, Annuity,
Example 4, above,
became payable to
any beneficiary
because the
beneficiary survived
the decedent,

state the ratio of the
decedent's
contribution to the
total purchase price of
the annuity.

an annuity under an
individual retirement
account or annuity
became payable to
any beneficiary
because that
beneficiary survived
the decedent and is
payable to the
beneficiary for life or
for at least 36 months
following the
decedent's death,

state the ratio of the
amount paid for the
individual retirement
account or annuity
that was not allowable
as an income tax
deduction under
section 219 (other
than a rollover
contribution) to the
total amount paid for
the account or annuity.

the annuity is payable
out of a trust or other
fund,

the description should
be sufficiently
complete to fully
identify it.

the annuity is payable
for a term of years,

include the duration of
the term and the date
on which it began.

the annuity is payable
for the life of a person
other than the
decedent,

include the date of
birth of that person.

the annuity is wholly or
partially excluded from
the gross estate,

enter the amount
excluded under
“Description” and
explain how you
figured the exclusion.

Schedule J—Funeral
Expenses and Expenses
Incurred in Administering
Property Subject to Claims

If the decedent was born before
1936, the recipient may be eligible to
elect special “10-year averaging” rules
(under repealed section 402(e)) and
capital gain treatment (under repealed
section 402(a)(2)) in figuring the income
tax on the distribution. For more
information, see Pub. 575, Pension and
Annuity Income. If this option is
available, the estate tax exclusion
cannot be claimed unless the recipient
elects to forego the “10-year averaging”
and capital gain treatment in figuring the
income tax on the distribution. The
recipient elects to forego this treatment
by treating the distribution as taxable on
his or her income tax return as
Part Instructions

IF . . .

Use Schedule PC to make a
protective claim for refund for
CAUTION
expenses which are not
currently deductible under section 2053.
For such a claim, report the expense on
Schedule J but without a value in the
last column.

!

General. Complete and file Schedule J
if you claim a deduction on item 14 of
Part 5—Recapitulation.
-31-

On Schedule J, itemize funeral
expenses and expenses incurred in
administering property subject to
claims. List the names and addresses of
persons to whom the expenses are
payable and describe the nature of the
expense. Do not list expenses
incurred in administering property
not subject to claims on this
schedule. List them on Schedule L
instead.
The deduction is limited to the
amount paid for these expenses that is
allowable under local law but may not
exceed:
1. The value of property subject to
claims included in the gross estate, plus
2. The amount paid out of property
included in the gross estate but not
subject to claims. This amount must
actually be paid by the due date of the
estate tax return.
The applicable local law under which
the estate is being administered
determines which property is and is not
subject to claims. If under local law a
particular property interest included in
the gross estate would bear the burden
for the payment of the expenses, then
the property is considered property
subject to claims.
Unlike certain claims against the
estate for debts of the decedent (see
the instructions for Schedule K), you
cannot deduct expenses incurred in
administering property subject to claims
on both the estate tax return and the
estate's income tax return. If you choose
to deduct them on the estate tax return,
you cannot deduct them on a Form
1041, U.S. Income Tax Return for
Estate and Trusts, filed for the estate.
Funeral expenses are only deductible
on the estate tax return.
Funeral expenses. Itemize funeral
expenses on line A. Deduct from the
expenses any amounts that were
reimbursed, such as death benefits
payable by the Social Security
Administration or the Veterans
Administration.
Executors' commissions. When you
file the return, you may deduct
commissions that have actually been
paid to you or that you expect will be
paid. Do not deduct commissions if
none will be collected. If the amount of
the commissions has not been fixed by
decree of the proper court, the
deduction will be allowed on the final
examination of the return, provided that:
The Estate and Gift Tax Territory
Manager is reasonably satisfied that the
commissions claimed will be paid;

The amount entered as a deduction is
within the amount allowable by the laws
of the jurisdiction where the estate is
being administered; and
It is in accordance with the usually
accepted practice in that jurisdiction for
estates of similar size and character.
If you have not been paid the
commissions claimed at the time of the
final examination of the return, you must
support the amount you deducted with
an affidavit or statement signed under
the penalties of perjury that the amount
has been agreed upon and will be paid.
You may not deduct a bequest or
devise made to you instead of
commissions. If, however, the decedent
fixed by will the compensation payable
to you for services to be rendered in the
administration of the estate, you may
deduct this amount to the extent it is not
more than the compensation allowable
by the local law or practice.
Do not deduct on this schedule
amounts paid as trustees' commissions
whether received by you acting in the
capacity of a trustee or by a separate
trustee. If such amounts were paid in
administering property not subject to
claims, deduct them on Schedule L.

Interest expense. Interest expenses
incurred after the decedent's death are
generally allowed as a deduction if they
are reasonable, necessary to the
administration of the estate, and
allowable under local law.
Interest incurred as the result of a
federal estate tax deficiency is a
deductible administrative expense.
Penalties are not deductible even if they
are allowable under local law.

Note. Executors' commissions are
taxable income to the executors.
Therefore, be sure to include them as
income on your individual income tax
return.

Schedule K—Debts of the
Decedent and Mortgages
and Liens

Attorney fees. Enter the amount of
attorney fees that have actually been
paid or that you reasonably expect to be
paid. If, on the final examination of the
return, the fees claimed have not been
awarded by the proper court and paid,
the deduction will be allowed provided
the Estate and Gift Tax Territory
Manager is reasonably satisfied that the
amount claimed will be paid and that it
does not exceed a reasonable payment
for the services performed, taking into
account the size and character of the
estate and the local law and practice. If
the fees claimed have not been paid at
the time of final examination of the
return, the amount deducted must be
supported by an affidavit, or statement
signed under the penalties of perjury, by
the executor or the attorney stating that
the amount has been agreed upon and
will be paid.
Do not deduct attorney fees
incidental to litigation incurred by the
beneficiaries. These expenses are
charged against the beneficiaries
personally and are not administration
expenses authorized by the Code.
-32-

Note. If you elect to pay the tax in
installments under section 6166, you
may not deduct the interest payable on
the installments.
Miscellaneous expenses.
Miscellaneous administration expenses
necessarily incurred in preserving and
distributing the estate are deductible.
These expenses include appraiser's
and accountant's fees, certain court
costs, and costs of storing or
maintaining assets of the estate.
The expenses of selling assets are
deductible only if the sale is necessary
to pay the decedent's debts, the
expenses of administration, or taxes, or
to preserve the estate or carry out
distribution.

Use Schedule PC to make a
protective claim for refund for
CAUTION
expenses which are not
currently deductible under section 2053.
For such a claim, report the expense on
Schedule K but without a value in the
last column.

!

You must complete and attach
Schedule K if you claimed deductions
on either item 15 or item 16 of Part
5—Recapitulation.
Income vs. estate tax deduction.
Taxes, interest, and business expenses
accrued at the date of the decedent's
death are deductible both on
Schedule K and as deductions in
respect of the decedent on the income
tax return of the estate.
If you choose to deduct medical
expenses of the decedent only on the
estate tax return, they are fully
deductible as claims against the estate.
If, however, they are claimed on the
decedent's final income tax return under
section 213(c), they may not also be
claimed on the estate tax return. In this
case, you also may not deduct on the
estate tax return any amounts that were
Part Instructions

not deductible on the income tax return
because of the percentage limitations.

Date to which interest was paid
before death.

Debts of the Decedent

Include the exact nature of the claim
as well as the name of the creditor. If the
claim is for services performed over a
period of time, state the period covered
by the claim.

List under “Debts of the Decedent” only
valid debts the decedent owed at the
time of death. List any indebtedness
secured by a mortgage or other lien on
property of the gross estate under the
heading “Mortgages and Liens.” If the
amount of the debt is disputed or the
subject of litigation, deduct only the
amount the estate concedes to be a
valid claim.
Generally, if the claim against the
estate is based on a promise or
agreement, the deduction is limited to
the extent that the liability was
contracted bona fide and for an
adequate and full consideration in
money or money's worth. However, any
enforceable claim based on a promise
or agreement of the decedent to make a
contribution or gift (such as a pledge or
a subscription) to or for the use of a
charitable, public, religious, etc.,
organization is deductible to the extent
that the deduction would be allowed as
a bequest under the statute that applies.

Certain claims of a former spouse
against the estate based on the
relinquishment of marital rights are
deductible on Schedule K. For these
claims to be deductible, all of the
following conditions must be met:
The decedent and the decedent's
spouse must have entered into a written
agreement relative to their marital and
property rights.
The decedent and the spouse must
have been divorced before the
decedent's death and the divorce must
have occurred within the 3-year period
beginning on the date 1 year before the
agreement was entered into. It is not
required that the agreement be
approved by the divorce decree.
The property or interest transferred
under the agreement must be
transferred to the decedent's spouse in
settlement of the spouse's marital rights.
You may not deduct a claim made
against the estate by a remainderman
relating to section 2044 property.
Section 2044 property is described in
the instructions to line 7 in Part
4—General Information.
Include in this schedule notes
unsecured by mortgage or other lien
and give full details, including:
Name of payee,
Face and unpaid balance,
Date and term of note,
Interest rate, and
Part Instructions

Example. Edison Electric
Illuminating Co., for electric service
during December 2010, $150.
If the amount of the claim is the
unpaid balance due on a contract for the
purchase of any property included in the
gross estate, indicate the schedule and
item number where you reported the
property. If the claim represents a joint
and separate liability, give full facts and
explain the financial responsibility of the
co-obligor.
Property and income taxes. The
deduction for property taxes is limited to
the taxes accrued before the date of the
decedent's death. Federal taxes on
income received during the decedent's
lifetime are deductible, but taxes on
income received after death are not
deductible.
Keep all vouchers or original records
for inspection by the IRS.
Allowable death taxes. If you elect to
take a deduction for foreign death taxes
under section 2053(d) rather than a
credit under section 2014, the deduction
is subject to the limitations described in
section 2053(d) and its regulations. If
you have difficulty figuring the
deduction, you may request a
computation of it. Send your request
within a reasonable amount of time
before the due date of the return to:
Department of the Treasury
Commissioner of Internal Revenue
Washington, DC 20224.
Attach to your request a copy of the will
and relevant documents, a statement
showing the distribution of the estate
under the decedent's will, and a
computation of the state or foreign
death tax showing any amount payable
by a charitable organization.

Mortgages and Liens

Under “Mortgages and Liens” list only
obligations secured by mortgages or
other liens on property included in the
gross estate at its full value or at a value
that was undiminished by the amount of
the mortgage or lien. If the debt is
enforceable against other property of
the estate not subject to the mortgage
or lien, or if the decedent was personally
-33-

liable for the debt, include the full value
of the property subject to the mortgage
or lien in the gross estate under the
appropriate schedule and deduct the
mortgage or lien on the property on this
schedule.
However, if the decedent's estate is
not liable, include in the gross estate
only the value of the equity of
redemption (or the value of the property
less the amount of the debt), and do not
deduct any portion of the indebtedness
on this schedule.
Notes and other obligations secured
by the deposit of collateral, such as
stocks, bonds, etc., also should be
listed under “Mortgages and Liens.”

Description

Include under the “Description” column
the particular schedule and item number
where the property subject to the
mortgage or lien is reported in the gross
estate.
Include the name and address of the
mortgagee, payee, or obligee, and the
date and term of the mortgage, note, or
other agreement by which the debt was
established. Also include the face
amount, the unpaid balance, the rate of
interest, and date to which the interest
was paid before the decedent's death.

Schedule L—Net Losses
During Administration and
Expenses Incurred in
Administering Property
Not Subject to Claims
Use Schedule PC to make a
protective claim for refund for
CAUTION
expenses which are not
currently deductible under section 2053.
For such a claim, report the expense on
Schedule L but without a value in the
last column.

!

Complete Schedule L and file it with
the return if you claim deductions on
either item 19 or item 20 of Part
5—Recapitulation.

Net Losses During
Administration

You may deduct only those losses from
thefts, fires, storms, shipwrecks, or
other casualties that occurred during the
settlement of the estate. Deduct only the
amount not reimbursed by insurance or
otherwise.
Describe in detail the loss sustained
and the cause. If you received
insurance or other compensation for the
loss, state the amount collected. Identify

the property for which you are claiming
the loss by indicating the schedule and
item number where the property is
included in the gross estate.
If you elect alternate valuation, do not
deduct the amount by which you
reduced the value of an item to include it
in the gross estate.
Do not deduct losses claimed as a
deduction on a federal income tax return
or depreciation in the value of securities
or other property.

Expenses Incurred in
Administering Property Not
Subject to Claims

You may deduct expenses incurred in
administering property that is included
in the gross estate but that is not subject
to claims. Only deduct these expenses
if they were paid before the section
6501 period of limitations for
assessment expired.
The expenses deductible on this
schedule are usually expenses incurred
in the administration of a trust
established by the decedent before
death. They may also be incurred in the
collection of other assets or the transfer
or clearance of title to other property
included in the decedent's gross estate
for estate tax purposes, but not included
in the decedent's probate estate.
The expenses deductible on this
schedule are limited to those that are
the result of settling the decedent's
interest in the property or of vesting
good title to the property in the
beneficiaries. Expenses incurred on
behalf of the transferees (except those
described above) are not deductible.
Examples of deductible and
nondeductible expenses are provided in
Regulations section 20.2053-8(d).

List the names and addresses of the
persons to whom each expense was
payable and the nature of the expense.
Identify the property for which the
expense was incurred by indicating the
schedule and item number where the
property is included in the gross estate.
If you do not know the exact amount of
the expense, you may deduct an
estimate, provided that the amount may
be verified with reasonable certainty
and will be paid before the period of
limitations for assessment (referred to
above) expires. Keep all vouchers and
receipts for inspection by the IRS.

Schedule M—Bequests,
etc., to Surviving Spouse
(Marital Deduction)
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last column. See
instructions for line 23 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

General

You must complete Schedule M and file
it with the return if you claim a deduction
on Part 5—Recapitulation, item 21.
The marital deduction is authorized
by section 2056 for certain property
interests that pass from the decedent to
the surviving spouse. You may claim the
deduction only for property interests that
are included in the decedent's gross
estate (Schedules A through I).
Note. The marital deduction is
generally not allowed if the surviving
spouse is not a U.S. citizen. The marital
deduction is allowed for property

passing to such a surviving spouse in a
qualified domestic trust (QDOT) or if
such property is transferred or
irrevocably assigned to such a trust
before the estate tax return is filed. The
executor must elect QDOT status on the
return. See the instructions that follow
for details on the election.

Property Interests That You
May List on Schedule M

Generally, you may list on Schedule M
all property interests that pass from the
decedent to the surviving spouse and
are included in the gross estate.
However, do not list any nondeductible
terminable interests (described below)
on Schedule M unless you are making a
QTIP election. The property for which
you make this election must be included
on Schedule M. See Qualified
terminable interest property, below.
For the rules on common disaster
and survival for a limited period, see
section 2056(b)(3).
You may list on Schedule M only
those interests that the surviving spouse
takes:
1. As the decedent's legatee,
devisee, heir, or donee;
2. As the decedent's surviving
tenant by the entirety or joint tenant;
3. As an appointee under the
decedent's exercise of a power or as a
taker in default at the decedent's
nonexercise of a power;
4. As a beneficiary of insurance on
the decedent's life;
5. As the surviving spouse taking
under dower or curtesy (or similar
statutory interest); and
6. As a transferee of a transfer
made by the decedent at any time.

Example—Listing Property Interests on Schedule M
Item
number
B1
B2
B3

Description of property interests passing to surviving spouse.
For securities, give CUSIP number. If trust, partnership, or closely-held entity, give EIN.
All other property:
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) . . . . . . . . . . . . . . . . . .
Proceeds of Metropolitan Life Insurance Company policy No. 104729, payable in one sum to surviving spouse
(Schedule D, item 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash bequest under Paragraph Six of will . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property Interests That You
May Not List on Schedule M

Do not list on Schedule M:
1. The value of any property that
does not pass from the decedent to the
surviving spouse;

2. Property interests that are not
included in the decedent's gross estate;
3. The full value of a property
interest for which a deduction was
claimed on Schedules J through L. The
value of the property interest should be
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Amount

$182,500
200,000
100,000

reduced by the deductions claimed with
respect to it;
4. The full value of a property
interest that passes to the surviving
spouse subject to a mortgage or other
encumbrance or an obligation of the
surviving spouse. Include on
Part Instructions

Schedule M only the net value of the
interest after reducing it by the amount
of the mortgage or other debt;
5. Nondeductible terminable
interests (described below); or
6. Any property interest disclaimed
by the surviving spouse.

Terminable Interests

Certain interests in property passing
from a decedent to a surviving spouse
are referred to as terminable interests.
These are interests that will terminate or
fail after the passage of time, or on the
occurrence or nonoccurrence of a
designated event. Examples are: life
estates, annuities, estates for terms of
years, and patents.
The ownership of a bond, note, or
other contractual obligation, which when
discharged would not have the effect of
an annuity for life or for a term, is not
considered a terminable interest.
Nondeductible terminable interests.
Unless you are making a QTIP election,
do not enter a terminable interest on
Schedule M if:
1. Another interest in the same
property passed from the decedent to
some other person for less than
adequate and full consideration in
money or money's worth; and
2. By reason of its passing, the
other person or that person's heirs may
enjoy part of the property after the
termination of the surviving spouse's
interest.
This rule applies even though the
interest that passes from the decedent
to a person other than the surviving
spouse is not included in the gross
estate, and regardless of when the
interest passes. The rule also applies
regardless of whether the surviving
spouse's interest and the other person's
interest pass from the decedent at the
same time.
Property interests that are
considered to pass to a person other
than the surviving spouse are any
property interest that: (a) passes under
a decedent's will or intestacy; (b) was
transferred by a decedent during life; or
(c) is held by or passed on to any
person as a decedent's joint tenant, as
appointee under a decedent's exercise
of a power, as taker in default at a
decedent's release or nonexercise of a
power, or as a beneficiary of insurance
on the decedent's life. See Regulations
section 20.2056(c)-3.
For example, a decedent devised
real property to his wife for life, with
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remainder to his children. The life
interest that passed to the wife does not
qualify for the marital deduction
because it will terminate at her death
and the children will thereafter possess
or enjoy the property.
However, if the decedent purchased
a joint and survivor annuity for himself
and his wife who survived him, the value
of the survivor's annuity, to the extent
that it is included in the gross estate,
qualifies for the marital deduction
because even though the interest will
terminate on the wife's death, no one
else will possess or enjoy any part of the
property.
The marital deduction is not allowed
for an interest that the decedent
directed the executor or a trustee to
convert, after death, into a terminable
interest for the surviving spouse. The
marital deduction is not allowed for such
an interest even if there was no interest
in the property passing to another
person and even if the terminable
interest would otherwise have been
deductible under the exceptions
described below for life estates, life
insurance, and annuity payments with
powers of appointment. For more
information, see Regulations sections
20.2056(b)-1(f) and 20.2056(b)-1(g),
Example (7).
If any property interest passing from
the decedent to the surviving spouse
may be paid or otherwise satisfied out of
any of a group of assets, the value of
the property interest is, for the entry on
Schedule M, reduced by the value of
any asset or assets that, if passing from
the decedent to the surviving spouse,
would be nondeductible terminable
interests. Examples of property interests
that may be paid or otherwise satisfied
out of any of a group of assets are a
bequest of the residue of the decedent's
estate, or of a share of the residue, and
a cash legacy payable out of the general
estate.
Example. A decedent bequeathed
$100,000 to the surviving spouse. The
general estate includes a term for years
(valued at $10,000 in determining the
value of the gross estate) in an office
building, which interest was retained by
the decedent under a deed of the
building by gift to a son. Accordingly,
the value of the specific bequest
entered on Schedule M is $90,000.
Life estate with power of appointment in the surviving spouse. A
property interest, whether or not in trust,
will be treated as passing to the
surviving spouse, and will not be treated
as a nondeductible terminable interest
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if: (a) the surviving spouse is entitled for
life to all of the income from the entire
interest; (b) the income is payable
annually or at more frequent intervals;
(c) the surviving spouse has the power,
exercisable in favor of the surviving
spouse or the estate of the surviving
spouse, to appoint the entire interest;
(d) the power is exercisable by the
surviving spouse alone and (whether
exercisable by will or during life) is
exercisable by the surviving spouse in
all events; and (e) no part of the entire
interest is subject to a power in any
other person to appoint any part to any
person other than the surviving spouse
(or the surviving spouse's legal
representative or relative if the surviving
spouse is disabled. See Regulations
section 20.2056(b)-5(a) and Revenue
Ruling 85-35, 1985-1 C.B. 328). If these
five conditions are satisfied only for a
specific portion of the entire interest,
see Regulations sections
20.2056(b)-5(b) and -5(c) to determine
the amount of the marital deduction.
Life insurance, endowment, or annuity payments, with power of appointment in surviving spouse. A property
interest consisting of the entire
proceeds under a life insurance,
endowment, or annuity contract is
treated as passing from the decedent to
the surviving spouse, and will not be
treated as a nondeductible terminable
interest if: (a) the surviving spouse is
entitled to receive the proceeds in
installments, or is entitled to interest on
them, with all amounts payable during
the life of the spouse, payable only to
the surviving spouse; (b) the installment
or interest payments are payable
annually, or more frequently, beginning
not later than 13 months after the
decedent's death; (c) the surviving
spouse has the power, exercisable in
favor of the surviving spouse or of the
estate of the surviving spouse, to
appoint all amounts payable under the
contract; (d) the power of appointment
is exercisable by the surviving spouse
alone and (whether exercisable by will
or during life) is exercisable by the
surviving spouse in all events; and (e)
no part of the amount payable under the
contract is subject to a power in any
other person to appoint any part to any
person other than the surviving spouse.
If these five conditions are satisfied only
for a specific portion of the proceeds,
see Regulations section
20.2056(b)-6(b) to determine the
amount of the marital deduction.
Charitable remainder trusts. An
interest in a charitable remainder trust

will not be treated as a nondeductible
terminable interest if:
1. The interest in the trust passes
from the decedent to the surviving
spouse, and
2. The surviving spouse is the only
beneficiary of the trust other than
charitable organizations described in
section 170(c).
A charitable remainder trust is either
a charitable remainder annuity trust or a
charitable remainder unitrust. (See
section 664 for descriptions of these
trusts.)

Election To Deduct Qualified
Terminable Interests (QTIP)

You may elect to claim a marital
deduction for qualified terminable
interest property or property interests.
You make the QTIP election simply by
listing the qualified terminable interest
property on Schedule M and inserting
its value. You are presumed to have
made the QTIP election if you list the
property and insert its value on
Schedule M. If you make this election,
the surviving spouse's gross estate will
include the value of the qualified
terminable interest property. See the
instructions for Part 4—General
Information, line 7, for more details. The
election is irrevocable.
If you file a Form 706 in which you do
not make this election, you may not file
an amended return to make the election
unless you file the amended return on or
before the due date for filing the original
Form 706.
The effect of the election is that the
property (interest) will be treated as
passing to the surviving spouse and will
not be treated as a nondeductible
terminable interest. All of the other
marital deduction requirements must
still be satisfied before you may make
this election. For example, you may not
make this election for property or
property interests that are not included
in the decedent's gross estate.
Qualified terminable interest property. Qualified terminable interest
property is property (a) that passes from
the decedent, (b) in which the surviving
spouse has a qualifying income interest
for life, and (c) for which election under
section 2056(b)(7) has been made.
The surviving spouse has a
qualifying income interest for life if the
surviving spouse is entitled to all of the
income from the property payable
annually or at more frequent intervals, or
has a usufruct interest for life in the
property, and during the surviving

spouse's lifetime no person has a power
to appoint any part of the property to
any person other than the surviving
spouse. An annuity is treated as an
income interest regardless of whether
the property from which the annuity is
payable can be separately identified.
Regulations sections 20.2044-1 and
20.2056(b)-7(d)(3) state that an interest
in property is eligible for QTIP treatment
if the income interest is contingent upon
the executor's election even if that
portion of the property for which no
election is made will pass to or for the
benefit of beneficiaries other than the
surviving spouse.
The QTIP election may be made for
all or any part of qualified terminable
interest property. A partial election must
relate to a fractional or percentile share
of the property so that the elective part
will reflect its proportionate share of the
increase or decline in the whole of the
property when applying section 2044 or
2519. Thus, if the interest of the
surviving spouse in a trust (or other
property in which the spouse has a
qualified life estate) is qualified
terminable interest property, you may
make an election for a part of the trust
(or other property) only if the election
relates to a defined fraction or
percentage of the entire trust (or other
property). The fraction or percentage
may be defined by means of a formula.
Election to Deduct Qualified Terminable Interest Property Under Section 2056(b)(7). If a trust (or other
property) meets the requirements of
qualified terminable interest property
under section 2056(b)(7), and
1. The trust or other property is
listed on Schedule M, and
2. The value of the trust (or other
property) is entered in whole or in part
as a deduction on Schedule M,
then unless the executor specifically
identifies the trust (all or a fractional
portion or percentage) or other property
to be excluded from the election, the
executor shall be deemed to have made
an election to have such trust (or other
property) treated as qualified terminable
interest property under section 2056(b)
(7).
If less than the entire value of the
trust (or other property) that the
executor has included in the gross
estate is entered as a deduction on
Schedule M, the executor shall be
considered to have made an election
only as to a fraction of the trust (or other
property). The numerator of this fraction
is equal to the amount of the trust (or
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other property) deducted on
Schedule M. The denominator is equal
to the total value of the trust (or other
property).

Qualified Domestic Trust
Election (QDOT)

The marital deduction is allowed for
transfers to a surviving spouse who is
not a U.S. citizen only if the property
passes to the surviving spouse in a
qualified domestic trust (QDOT) or if
such property is transferred or
irrevocably assigned to a QDOT before
the decedent's estate tax return is filed.
A QDOT is any trust:
1. That requires at least one trustee
to be either a citizen of the United
States or a domestic corporation;
2. That requires that no distribution
of corpus from the trust can be made
unless such a trustee has the right to
withhold from the distribution the tax
imposed on the QDOT;
3. That meets the requirements of
any applicable regulations; and
4. For which the executor has made
an election on the estate tax return of
the decedent.
Note. For trusts created by an
instrument executed before November
5, 1990, paragraphs 1 and 2 above will
be treated as met if the trust instrument
requires that all trustees be individuals
who are citizens of the United States or
domestic corporations.
You make the QDOT election simply
by listing the qualified domestic trust or
the entire value of the trust property on
Schedule M and deducting its value.
You are presumed to have made the
QDOT election if you list the trust or
trust property and insert its value on
Schedule M. Once made, the election
is irrevocable.
If an election is made to deduct
qualified domestic trust property under
section 2056A(d), provide the following
information for each qualified domestic
trust on an attachment to this schedule:
1. The name and address of every
trustee;
2. A description of each transfer
passing from the decedent that is the
source of the property to be placed in
trust; and
3. The employer identification
number (EIN) for the trust.
The election must be made for an
entire QDOT trust. In listing a trust for
which you are making a QDOT election,
unless you specifically identify the
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trust as not subject to the election,
the election will be considered made
for the entire trust.
The determination of whether a trust
qualifies as a QDOT will be made as of
the date the decedent's Form 706 is
filed. If, however, judicial proceedings
are brought before the Form 706's due
date (including extensions) to have the
trust revised to meet the QDOT
requirements, then the determination
will not be made until the court-ordered
changes to the trust are made.
Election to Deduct Qualified Domestic Trust Property Under Section
2056A. If a trust meets the requirement
of a qualified domestic trust under
section 2056A(a), the return is filed no
later than 1 year after the time
prescribed by law (including
extensions), and the entire value of the
trust or trust property is listed and
entered as a deduction on Schedule M,
then unless the executor specifically
identifies the trust to be excluded from
the election, the executor shall be
deemed to have made an election to
have the entire trust treated as qualified
domestic trust property.

Line 1

If property passes to the surviving
spouse as the result of a qualified
disclaimer, check “Yes,” and attach a
copy of the written disclaimer required
by section 2518(b).

Line 3

Section 2056(b)(7)(C)(ii) creates an
automatic QTIP election for certain joint
and survivor annuities that are includible
in the estate under section 2039. To
qualify, only the surviving spouse can
have the right to receive payments
before the death of the surviving
spouse.
The executor can elect out of QTIP
treatment, however, by checking the
“Yes,” box on line 3. Once made, the
election is irrevocable. If there is more
than one such joint and survivor annuity,
you are not required to make the
election for all of them.
If you make the election out of QTIP
treatment by checking “Yes,” on line 3,
you cannot deduct the amount of the
annuity on Schedule M. If you do not
elect out, you must list the joint and
survivor annuities on Schedule M.

Listing Property Interests on
Schedule M

List each property interest included in
the gross estate that passes from the
decedent to the surviving spouse and

Part Instructions

for which a marital deduction is claimed.
This includes otherwise nondeductible
terminable interest property for which
you are making a QTIP election.
Number each item in sequence and
describe each item in detail. Describe
the instrument (including any clause or
paragraph number) or provision of law
under which each item passed to the
surviving spouse. Indicate the schedule
and item number of each asset.
In listing otherwise nondeductible
property for which you are making a
QTIP election, unless you specifically
identify a fractional portion of the trust or
other property as not subject to the
election, the election will be considered
made for the entire interest.
Enter the value of each interest
before taking into account the federal
estate tax or any other death tax. The
valuation dates used in determining the
value of the gross estate apply also on
Schedule M.
If Schedule M includes a bequest of
the residue or a part of the residue of
the decedent's estate, attach a copy of
the computation showing how the value
of the residue was determined. Include
a statement showing:
The value of all property that is
included in the decedent's gross estate
(Schedules A through I) but is not a part
of the decedent's probate estate, such
as lifetime transfers, jointly-owned
property that passed to the survivor on
decedent's death, and the insurance
payable to specific beneficiaries;
The values of all specific and general
legacies or devises, with reference to
the applicable clause or paragraph of
the decedent's will or codicil. (If legacies
are made to each member of a class, for
example, $1,000 to each of decedent's
employees, only the number in each
class and the total value of property
received by them need be furnished);
The date of birth of all persons, the
length of whose lives may affect the
value of the residuary interest passing to
the surviving spouse; and
Any other important information such
as that relating to any claim to any part
of the estate not arising under the will.
Lines 5a, 5b, and 5c. The total of the
values listed on Schedule M must be
reduced by the amount of the federal
estate tax, the federal GST tax, and the
amount of state or other death and GST
taxes paid out of the property interest
involved. If you enter an amount for
state or other death or GST taxes on
line 5b or 5c, identify the taxes and
attach your computation of them.
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Attachments. If you list property
interests passing by the decedent's will
on Schedule M, attach a certified copy
of the order admitting the will to probate.
If, when you file the return, the court of
probate jurisdiction has entered any
decree interpreting the will or any of its
provisions affecting any of the interests
listed on Schedule M, or has entered
any order of distribution, attach a copy
of the decree or order. In addition, the
IRS may request other evidence to
support the marital deduction claimed.

Schedule O—Charitable,
Public, and Similar Gifts
and Bequests
If there are any assets to which
the special rule of Regulations
CAUTION
section 20.2010–2T(a)(7)(ii)
reported on this schedule, do not enter
any value in the last column. See
instructions for line 23 of Part 5–
Recapitulation for information on how to
estimate and report the value of these
assets.

!

General

You must complete Schedule O and file
it with the return if you claim a deduction
on item 22 of Part 5—Recapitulation.
You can claim the charitable
deduction allowed under section 2055
for the value of property in the
decedent's gross estate that was
transferred by the decedent during life
or by will to or for the use of any of the
following:
The United States, a state, a political
subdivision of a state, or the District of
Columbia, for exclusively public
purposes;
Any corporation or association
organized and operated exclusively for
religious, charitable, scientific, literary,
or educational purposes, including the
encouragement of art, or to foster
national or international amateur sports
competition (but only if none of its
activities involve providing athletic
facilities or equipment, unless the
organization is a qualified amateur
sports organization) and the prevention
of cruelty to children and animals. No
part of the net earnings may benefit any
private individual and no substantial
activity may be undertaken to carry on
propaganda, or otherwise attempt to
influence legislation or participate in any
political campaign on behalf of any
candidate for public office;
A trustee or a fraternal society, order
or association operating under the lodge
system, if the transferred property is to

be used exclusively for religious,
charitable, scientific, literary, or
educational purposes, or for the
prevention of cruelty to children or
animals. No substantial activity may be
undertaken to carry on propaganda or
otherwise attempt to influence
legislation, or participate in any political
campaign on behalf of any candidate for
public office;
Any veterans organization
incorporated by an Act of Congress or
any of its departments, local chapters,
or posts, for which none of the net
earnings benefits any private individual;
or
Employee stock ownership plans, if
the transfer qualifies as a qualified
gratuitous transfer of qualified employer
securities within the meaning provided
in section 664(g).
For this purpose, certain Indian tribal
governments are treated as states and
transfers to them qualify as deductible
charitable contributions. See section
7871 and Revenue Procedure 2008-55,
2008-39 I.R.B. 768, available at
www.irs.gov/pub/irs-irbs/irb08-39.pdf,
as modified and supplemented by
subsequent revenue procedures, for a
list of qualifying Indian tribal
governments.
You may also claim a charitable
contribution deduction for a qualifying
conservation easement granted after
the decedent's death under the
provisions of section 2031(c)(9).
The charitable deduction is allowed
for amounts that are transferred to
charitable organizations as a result of
either a qualified disclaimer (see Line 2.
Qualified Disclaimer, below) or the
complete termination of a power to
consume, invade, or appropriate
property for the benefit of an individual.
It does not matter whether termination
occurs because of the death of the
individual or in any other way. The
termination must occur within the period
of time (including extensions) for filing
the decedent's estate tax return and
before the power has been exercised.
The deduction is limited to the
amount actually available for charitable
uses. Therefore, if under the terms of a
will or the provisions of local law, or for
any other reason, the federal estate tax,
the federal GST tax, or any other estate,
GST, succession, legacy, or inheritance
tax is payable in whole or in part out of
any bequest, legacy, or devise that
would otherwise be allowed as a
charitable deduction, the amount you
may deduct is the amount of the

bequest, legacy, or devise reduced by
the total amount of the taxes.
If you elected to make installment
payments of the estate tax, and the
interest is payable out of property
transferred to charity, you must reduce
the charitable deduction by an estimate
of the maximum amount of interest that
will be paid on the deferred tax.
For split-interest trusts or pooled
income funds, only the figure that is
passing to the charity should be entered
in the “Amount” column. Do not enter
the entire amount that passes to the
trust or fund.
If you are deducting the value of the
residue or a part of the residue passing
to charity under the decedent's will,
attach a copy of the computation
showing how you determined the value,
including any reduction for the taxes
described above.
Also include:
A statement that shows the values of
all specific and general legacies or
devises for both charitable and
noncharitable uses. For each legacy or
devise, indicate the paragraph or
section of the decedent's will or codicil
that applies. If legacies are made to
each member of a class (for example,
$1,000 to each of the decedent's
employees), show only the number of
each class and the total value of
property they received;
The date of birth of all life tenants or
annuitants, the length of whose lives
may affect the value of the interest
passing to charity under the decedent's
will;
A statement showing the value of all
property that is included in the
decedent's gross estate but does not
pass under the will, such as transfers,
jointly-owned property that passed to
the survivor on decedent's death, and
insurance payable to specific
beneficiaries; and
Any other important information such
as that relating to any claim, not arising
under the will, to any part of the estate
(that is, a spouse claiming dower or
curtesy, or similar rights).

Line 2. Qualified Disclaimer

The charitable deduction is allowed for
amounts that are transferred to
charitable organizations as a result of a
qualified disclaimer. To be a qualified
disclaimer, a refusal to accept an
interest in property must meet the
conditions of section 2518. These are
explained in Regulations sections
25.2518-1 through 25.2518-3. If
property passes to a charitable
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beneficiary as the result of a qualified
disclaimer, check the “Yes,” box on
line 2 and attach a copy of the written
disclaimer required by section 2518(b).

Attachments

If the charitable transfer was made by
will, attach a certified copy of the order
admitting the will to probate, in addition
to the copy of the will. If the charitable
transfer was made by any other written
instrument, attach a copy. If the
instrument is of record, the copy should
be certified; if not, the copy should be
verified.

Value

The valuation dates used in determining
the value of the gross estate apply also
on Schedule O.

Schedule P—Credit for
Foreign Death Taxes
General

If you claim a credit on line 13 of Part
2—Tax Computation, complete
Schedule P and file it with the return.
Attach Form(s) 706-CE to Form 706
support any credit you claim.
If the foreign government refuses to
certify Form 706-CE, file it directly with
the IRS as instructed on the Form
706-CE. See Form 706-CE for
instructions on how to complete the
form and a description of the items that
must be attached to the form when the
foreign government refuses to certify it.
The credit for foreign death taxes is
allowable only if the decedent was a
citizen or resident of the United States.
However, see section 2053(d) and the
related regulations for exceptions and
limitations if the executor has elected, in
certain cases, to deduct these taxes
from the value of the gross estate. For a
resident, not a citizen, who was a citizen
or subject of a foreign country for which
the President has issued a proclamation
under section 2014(h), the credit is
allowable only if the country of which the
decedent was a national allows a similar
credit to decedents who were U.S.
citizens residing in that country.
The credit is authorized either by
statute or by treaty. If a credit is
authorized by a treaty, whichever of the
following is the most beneficial to the
estate is allowed:
The credit figured under the treaty;
The credit figured under the statute;
or
The credit figured under the treaty,
plus the credit figured under the statute
for death taxes paid to each political
Part Instructions

subdivision or possession of the treaty
country that are not directly or indirectly
creditable under the treaty.
Under the statute, the credit is
authorized for all death taxes (national
and local) imposed in the foreign
country. Whether local taxes are the
basis for a credit under a treaty depends
upon the provisions of the particular
treaty.
If a credit for death taxes paid in
more than one foreign country is
allowable, a separate computation of
the credit must be made for each
foreign country. The copies of
Schedule P on which the additional
computations are made should be
attached to the copy of Schedule P
provided in the return.
The total credit allowable for any
property, whether subjected to tax by
one or more than one foreign country, is
limited to the amount of the federal
estate tax attributable to the property.
The anticipated amount of the credit
may be figured on the return, but the
credit cannot finally be allowed until the
foreign tax has been paid and a Form
706-CE evidencing payment is filed.
Section 2014(g) provides that for credits
for foreign death taxes, each U.S.
possession is deemed a foreign
country.
Convert death taxes paid to the
foreign country into U.S. dollars by
using the rate of exchange in effect at
the time each payment of foreign tax is
made.
If a credit is claimed for any foreign
death tax that is later recovered, see
Regulations section 20.2016-1 for the
notice required within 30 days.

Limitation Period

The credit for foreign death taxes is
limited to those taxes that were actually
paid and for which a credit was claimed
within the later of 4 years after the filing
of the estate tax return, before the date
of expiration of any extension of time for
payment of the federal estate tax, or 60
days after a final decision of the Tax
Court on a timely filed petition for a
redetermination of a deficiency.

Credit Under the Statute

For the credit allowed by the statute, the
question of whether particular property
is situated in the foreign country
imposing the tax is determined by the
same principles that would apply in
determining whether similar property of
a nonresident not a U.S. citizen is
situated within the United States for
Part Instructions

purposes of the federal estate tax. See
the instructions for Form 706-NA.

Computation of Credit Under
the Statute
Item 1. Enter the amount of the estate,
inheritance, legacy, and succession
taxes paid to the foreign country and its
possessions or political subdivisions,
attributable to property that is:
Situated in that country,
Subjected to these taxes, and
Included in the gross estate.
The amount entered at item 1 should
not include any tax paid to the foreign
country for property not situated in that
country and should not include any tax
paid to the foreign country for property
not included in the gross estate. If only a
part of the property subjected to foreign
taxes is both situated in the foreign
country and included in the gross
estate, it will be necessary to determine
the portion of the taxes attributable to
that part of the property. Also, attach the
computation of the amount entered at
item 1.
Item 2. Enter the value of the gross
estate, less the total of the deductions
on items 21 and 22 of Part
5—Recapitulation.
Item 3. Enter the value of the property
situated in the foreign country that is
subjected to the foreign taxes and
included in the gross estate, less those
portions of the deductions taken on
Schedules M and O that are attributable
to the property.
Item 4. Subtract any credit claimed on
line 15 for federal gift taxes on pre-1977
gifts (section 2012) from line 12 of Part
2—Tax Computation, and enter the
balance at item 4 of Schedule P.

Credit Under Treaties

If you are reporting any items on this
return based on the provisions of a
death tax treaty, you may have to attach
a statement to this return disclosing the
return position that is treaty based. See
Regulations section 301.6114-1 for
details.
In general. If the provisions of a treaty
apply to the estate of a U.S. citizen or
resident, a credit is authorized for
payment of the foreign death tax or
taxes specified in the treaty. Treaties
with death tax conventions are in effect
with the following countries: Australia,
Austria, Canada, Denmark, Finland,
France, Germany, Greece, Ireland, Italy,
Japan, Netherlands, Norway, South
Africa, Switzerland, and the United
Kingdom.
-39-

A credit claimed under a treaty is in
general figured on Schedule P in the
same manner as the credit is figured
under the statute with the following
principal exceptions:
The situs rules contained in the treaty
apply in determining whether property
was situated in the foreign country;
The credit may be allowed only for
payment of the death tax or taxes
specified in the treaty (but see the
instructions above for credit under the
statute for death taxes paid to each
political subdivision or possession of the
treaty country that are not directly or
indirectly creditable under the treaty);
If specifically provided, the credit is
proportionately shared for the tax
applicable to property situated outside
both countries, or that was deemed in
some instances situated within both
countries; and
The amount entered at item 4 of
Schedule P is the amount shown on
line 12 of Part 2—Tax Computation, less
the total of the credits claimed for
federal gift taxes on pre-1977 gifts
(section 2012) and for tax on prior
transfers (line 14 of Part 2—Tax
Computation). (If a credit is claimed for
tax on prior transfers, it will be
necessary to complete Schedule Q
before completing Schedule P.) For
examples of computation of credits
under the treaties, see the applicable
regulations.
Computation of credit in cases
where property is situated outside
both countries or deemed situated
within both countries. See the
appropriate treaty for details.

Schedule Q—Credit for
Tax on Prior Transfers
General

Complete Schedule Q and file it with the
return if you claim a credit on Part
2—Tax Computation, line 14.
The term transferee means the
decedent for whose estate this return is
filed. If the transferee received property
from a transferor who died within 10
years before, or 2 years after, the
transferee, a credit is allowable on this
return for all or part of the federal estate
tax paid by the transferor's estate for the
transfer. There is no requirement that
the property be identified in the estate of
the transferee or that it exist on the date
of the transferee's death. It is sufficient
for the allowance of the credit that the
transfer of the property was subjected to
federal estate tax in the estate of the
transferor and that the specified period

Section 2056(d)(3) contains specific
rules for allowing a credit for certain
transfers to a spouse who was not a
U.S. citizen where the property passed
outright to the spouse, or to a qualified
domestic trust.

Property

The term property includes any interest
(legal or equitable) of which the
transferee received the beneficial
ownership. The transferee is considered
the beneficial owner of property over
which the transferee received a general
power of appointment. Property does
not include interests to which the
transferee received only a bare legal
title, such as that of a trustee. Neither
does it include an interest in property
over which the transferee received a
power of appointment that is not a
general power of appointment. In
addition to interests in which the
transferee received the complete
ownership, the credit may be allowed
for annuities, life estates, terms for
years, remainder interests (whether
contingent or vested), and any other
interest that is less than the complete
ownership of the property, to the extent
that the transferee became the
beneficial owner of the interest.

Maximum Amount of the Credit

The maximum amount of the credit is
the smaller of:
1. The amount of the estate tax of
the transferor's estate attributable to the
transferred property or
2. The amount by which:

Percent Allowable
Where transferee predeceased the
transferor. If not more than 2 years
elapsed between the dates of death, the
credit allowed is 100% of the maximum
amount. If more than 2 years elapsed
between the dates of death, no credit is
allowed.
Where transferor predeceased the
transferee. The percent of the
maximum amount that is allowed as a
credit depends on the number of years
that elapsed between dates of death. It
is determined using the following table:
Period of
Time
Exceeding

Not
Exceeding

----2 years
4 years
6 years
8 years
10 years

Percent
Allowable

2 years
4 years
6 years
8 years
10 years
-----

.

If you are claiming a credit for tax on
prior transfers on Form 706-NA, you
should first complete and attach Part
5—Recapitulation from Form 706 before
figuring the credit on Schedule Q from
Form 706.

If credit for a particular foreign death tax
may be taken under either the statute or
a death duty convention, and on this
return the credit actually is taken under
the convention, then no credit for that
foreign death tax may be taken into
consideration in figuring estate tax (a) or
estate tax (b), above.

.

If the transferee was the transferor's
surviving spouse, no credit is allowed
for property received from the transferor
to the extent that a marital deduction
was allowed to the transferor's estate for
the property. There is no credit for tax
on prior transfers for federal gift taxes
paid in connection with the transfer of
the property to the transferee.

a. An estate tax on the transferee's
estate determined without the credit for
tax on prior transfers exceeds
b. An estate tax on the transferee's
estate determined by excluding from the
gross estate the net value of the
transfer.

.

of time has not elapsed. A credit may be
allowed for property received as the
result of the exercise or nonexercise of
a power of appointment when the
property is included in the gross estate
of the donee of the power.

100
80
60
40
20
none

How To Figure the Credit

A worksheet for Schedule Q is provided
to allow you to figure the limits before
completing Schedule Q. Transfer the
appropriate amounts from the
worksheet to Schedule Q as indicated
on the schedule. You do not need to file
the worksheet with Form 706, but keep
it for your records.
Cases involving transfers from two
or more transferors. Part I of the
worksheet and Schedule Q enable you
to figure the credit for as many as three
transferors. The number of transferors is
irrelevant to Part II of the worksheet. If
you are figuring the credit for more than
three transferors, use more than one
worksheet and Schedule Q, Part I, and
combine the totals for the appropriate
lines.

-40-

Section 2032A additional tax. If the
transferor's estate elected special-use
valuation and the additional estate tax of
section 2032A(c) was imposed at any
time up to 2 years after the death of the
decedent for whom you are filing this
return, check the box on Schedule Q.
On lines 1 and 9 of the worksheet,
include the property subject to the
additional estate tax at its FMV rather
than its special-use value. On line 10 of
the worksheet, include the additional
estate tax paid as a federal estate tax
paid.

How To Complete the
Schedule Q Worksheet

Most of the information to complete Part
I of the worksheet should be obtained
from the transferor's Form 706.
Line 5. Enter on line 5 the applicable
marital deduction claimed for the
transferor's estate (from the transferor's
Form 706).
Lines 10 through 18. Enter on these
lines the appropriate taxes paid by the
transferor's estate.
If the transferor's estate elected to
pay the federal estate tax in
installments, enter on line 10 only the
total of the installments that have
actually been paid at the time you file
this Form 706. See Rev. Rul. 83-15,
1983-1 C.B. 224, for more details.
Line 21. Add lines 11 (allowable
applicable credit) and 13 (foreign death
taxes credit) of Part 2—Tax
Computation to the amount of any credit
taken (on line 15) for federal gift taxes
on pre-1977 gifts (section 2012).
Subtract this total from Part 2—Tax
Computation, line 8. Enter the result on
line 21 of the worksheet.
Line 26. If you figured the marital
deduction using the unlimited marital
deduction in effect for decedents dying
after 1981, for purposes of determining
the marital deduction for the reduced
gross estate, see Rev. Rul. 90-2,
1990-1 C.B. 169. To determine the
“reduced adjusted gross estate,”
subtract the amount on line 25 of the
Schedule Q Worksheet from the amount
on line 24 of the worksheet. If
community property is included in the
amount on line 24 of the worksheet,
figure the reduced adjusted gross estate
using the rules of Regulations section
20.2056(c)-2 and Rev. Rul. 76-311,
1976-2 C.B. 261.

Part Instructions

Worksheet for Schedule Q—Credit for Tax on Prior Transfers
Part I Transferor’s tax on prior transfers
Item
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
TOTAL. Add lines 2, 3, 4, and 5

6.
7.

Net value of
line 6 from line 1

8.
9.
10.

Net value of transfers. Add columns
A, B, and C of line 7
Transferor’s taxable estate
Federal estate tax paid

11.
12.

State death taxes paid
Foreign death taxes paid

13.

Other death taxes paid

A

Transferor (From Schedule Q)
B

C

Total for all transfers
(line 8 only)

transfers. Subtract

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.
23.
24.

Total gross estate of transferee from line 1 of the Tax Computation, page 1, Form 706
Net value of all transfers from line 8 of this worksheet
Transferee’s reduced gross estate. Subtract line 23 from line 22

22

25.

Total debts and deductions (not including marital and charitable deductions)
(line 3b of Part 2—Tax Computation, page 1 and items 18, 19, and 20 of
the Recapitulation, page 3, Form 706)

25

26.

Marital deduction from item 21, Recapitulation, page 3, Form 706
(see instructions)

26

27.

Charitable bequests from item 22, Recapitulation, page 3, Form 706

27

28.
29.

Charitable deduction proportion ( [ line 23 ÷ (line 22 – line 25) ] × line 27 )
Reduced charitable deduction. Subtract line 28 from line 27

28

30.
31.

Transferee’s deduction as adjusted. Add lines 25, 26, and 29
(a) Transferee’s reduced taxable estate. Subtract line 30 from line 24
(b) Adjusted taxable gifts

32.
33.

34.
35.

29
30
31(a)
31(b)
32

33(c)
33(d)

(d) Section 2014 foreign death tax credit
(e) Total credits. Add lines 33(a) through 33(d)
Net tax on reduced taxable estate. Subtract line 33(e) from line 32
Transferee’s tax on prior transfers. Subtract line 34 from line 21

Part Instructions

24

31(c)

(c) Total reduced taxable estate. Add lines 31(a) and 31(b)
Tentative tax on reduced taxable estate
33(a)
(a) Post-1976 gift taxes paid
33(b)
(b) Unified credit (applicable credit amount)
(c) Section 2012 gift tax credit

23

-41-

33(e)
34
35

Schedules R and R-1 –
Generation-Skipping
Transfer Tax
Introduction and Overview

Schedule R is used to figure the
generation-skipping transfer (GST) tax
that is payable by the estate.
Schedule R-1 is used to figure the GST
tax that is payable by certain trusts that
are includible in the gross estate.
The GST tax reported on Form 706 is
imposed only on direct skips occurring
at death. Unlike the estate tax, which is
imposed on the value of the entire
taxable estate regardless of who
receives it, the GST tax is imposed only
on the value of interests in property,
wherever located, that actually pass to
certain transferees, who are referred to
as skip persons (defined below).
For purposes of Form 706, the
property interests transferred must be
includible in the gross estate before they
are subject to the GST tax. Therefore,
the first step in figuring the GST tax
liability is to determine the property
interests includible in the gross estate
by completing Schedules A through I of
Form 706.
The second step is to determine who
the skip persons are. To do this, assign
each transferee to a generation and
determine whether each transferee is a
natural person or a trust for GST
purposes. See section 2613 and
Regulations section 26.2612–1(d) for
details.
The third step is to determine which
skip persons are transferees of interests
in property. If the skip person is a
natural person, anything transferred is
an interest in property. If the skip person
is a trust, make this determination using
the rules under Interest in property,
below. These first three steps are
described in detail under the main
heading, Determining Which Transfers
Are Direct Skips, below.
The fourth step is to determine
whether to enter the transfer on
Schedule R or on Schedule R-1. See
the rules under the main heading,
Dividing Direct Skips Between
Schedules R and R-1.
The fifth step is to complete
Schedules R and R-1 using the How To
Complete instructions for each
schedule.

Determining Which Transfers
Are Direct Skips
Effective dates. The rules below apply
only for the purpose of determining if a

transfer is a direct skip that should be
reported on Schedule R or R-1 of Form
706.
In general. The GST tax is effective
for the estates of decedents dying after
October 22, 1986.
Irrevocable trusts. The GST tax
will not apply to any transfer under a
trust that was irrevocable on September
25, 1985, but only to the extent that the
transfer was not made out of corpus
added to the trust after September 25,
1985. An addition to the corpus after
that date will cause a proportionate part
of future income and appreciation to be
subject to the GST tax. For more
information, see Regulations section
26.2601-1(b)(1).
Mental disability. If, on October 22,
1986, the decedent was under a mental
disability to change the disposition of his
or her property and did not regain the
competence to dispose of property
before death, the GST tax will not apply
to any property included in the gross
estate (other than property transferred
on behalf of the decedent during life and
after October 21, 1986). The GST tax
will also not apply to any transfer under
a trust to the extent that the trust
consists of property included in the
gross estate (other than property
transferred on behalf of the decedent
during life and after October 21, 1986).
Under a mental disability means the
decedent lacked the competence to
execute an instrument governing the
disposition of his or her property,
regardless of whether there was an
adjudication of incompetence or an
appointment of any other person
charged with the care of the person or
property of the transferor.
If the decedent had been adjudged
mentally incompetent, a copy of the
judgment or decree must be filed with
this return.
If the decedent had not been
adjudged mentally incompetent, the
executor must file with the return a
certification from a qualified physician
stating that in his opinion the decedent
had been mentally incompetent at all
times on and after October 22, 1986,
and that the decedent had not regained
the competence to modify or revoke the
terms of the trust or will prior to his
death or a statement as to why no such
certification may be obtained from a
physician.
Direct skip. The GST tax reported on
Form 706 and Schedule R-1 is imposed
only on direct skips. For purposes of
-42-

Form 706, a direct skip is a transfer that
is:
Subject to the estate tax,
Of an interest in property, and
To a skip person.
All three requirements must be met
before the transfer is subject to the GST
tax. A transfer is subject to the estate
tax if you are required to list it on any of
Schedules A through I of Form 706. To
determine if a transfer is of an interest in
property and to a skip person, you must
first determine if the transferee is a
natural person or a trust as defined
below.
Trust. For purposes of the GST tax, a
trust includes not only an ordinary trust
(as defined in Special rule for trusts
other than ordinary trusts), but also any
other arrangement (other than an
estate) which, although not explicitly a
trust, has substantially the same effect
as a trust. For example, a trust includes
life estates with remainders, terms for
years, and insurance and annuity
contracts.
Substantially separate and
independent shares of different
beneficiaries in a trust are treated as
separate trusts.
Interest in property. If a transfer is
made to a natural person, it is always
considered a transfer of an interest in
property for purposes of the GST tax.
If a transfer is made to a trust, a
person will have an interest in the
property transferred to the trust if that
person either has a present right to
receive income or corpus from the trust
(such as an income interest for life) or is
a permissible current recipient of
income or corpus from the trust (that is,
may receive income or corpus at the
discretion of the trustee).
Skip person. A transferee who is a
natural person is a skip person if that
transferee is assigned to a generation
that is two or more generations below
the generation assignment of the
decedent. See Determining the
generation of a transferee, below.
A transferee who is a trust is a skip
person if all the interests in the property
(as defined above) transferred to the
trust are held by skip persons. Thus,
whenever a non-skip person has an
interest in a trust, the trust will not be a
skip person even though a skip person
also has an interest in the trust.
A trust will also be a skip person if
there are no interests in the property
transferred to the trust held by any
person, and future distributions or
Part Instructions

terminations from the trust can be made
only to skip persons.
Non-skip person. A non-skip person is
any transferee who is not a skip person.
Determining the generation of a
transferee. Generally, a generation is
determined along family lines as
follows:
1. Where the beneficiary is a lineal
descendant of a grandparent of the
decedent (that is, the decedent's
cousin, niece, nephew, etc.), the
number of generations between the
decedent and the beneficiary is
determined by subtracting the number
of generations between the grandparent
and the decedent from the number of
generations between the grandparent
and the beneficiary.
2. Where the beneficiary is a lineal
descendant of a grandparent of a
spouse (or former spouse) of the
decedent, the number of generations
between the decedent and the
beneficiary is determined by subtracting
the number of generations between the
grandparent and the spouse (or former
spouse) from the number of generations
between the grandparent and the
beneficiary.
3. A person who at any time was
married to a person described in (1) or
(2) above is assigned to the generation
of that person. A person who at any time
was married to the decedent is
assigned to the decedent's generation.
4. A relationship by adoption or
half-blood is treated as a relationship by
whole-blood.
5. A person who is not assigned to a
generation according to (1), (2), (3), or
(4) above is assigned to a generation
based on his or her birth date, as
follows:
a. A person who was born not more
than 121 2 years after the decedent is in
the decedent's generation.
b. A person born more than 121 2
years, but not more than 371 2 years,
after the decedent is in the first
generation younger than the decedent.
c. A similar rule applies for a new
generation every 25 years.
If more than one of the rules for
assigning generations applies to a
transferee, that transferee is generally
assigned to the youngest of the
generations that would apply.
If an estate, trust, partnership,
corporation, or other entity (other than
certain charitable organizations and
trusts described in sections 511(a)(2)
Part Instructions

and 511(b)(2)) is a transferee, then
each person who indirectly receives the
property interests through the entity is
treated as a transferee and is assigned
to a generation as explained in the
above rules. However, this look-through
rule does not apply for the purpose of
determining whether a transfer to a trust
is a direct skip.
Generation assignment where
intervening parent is deceased. A
special rule may apply in the case of the
death of a parent of the transferee. For
terminations, distributions, and transfers
after December 31, 1997, the existing
rule that applied to grandchildren of the
decedent has been extended to apply to
other lineal descendants.
If property is transferred to an
individual who is a descendant of a
parent of the transferor, and that
individual's parent (who is a lineal
descendant of the parent of the
transferor) is deceased at the time the
transfer is subject to gift or estate tax,
then for purposes of generation
assignment, the individual is treated as
if he or she is a member of the
generation that is one generation below
the lower of:
The transferor's generation or
The generation assignment of the
youngest living ancestor of the
individual, who is also a descendant of
the parent of the transferor.
The same rules apply to the
generation assignment of any
descendant of the individual.
This rule does not apply to a transfer
to an individual who is not a lineal
descendant of the transferor if the
transferor has any living lineal
descendants.
If any transfer of property to a trust
would have been a direct skip except for
this generation assignment rule, then
the rule also applies to transfers from
the trust attributable to such property.
See examples in Regulations section
26.2651–1(c).
Ninety-day rule. For purposes of
determining if an individual's parent is
deceased at the time of a testamentary
transfer, an individual's parent who dies
no later than 90 days after a transfer
occurring by reason of the death of the
transferor is treated as having
predeceased the transferor. The 90-day
rule applies to transfers occurring on or
after July 18, 2005. See Regulations
section 26.2651-1, for more information.
Charitable organizations.
Charitable organizations and trusts
-43-

described in sections 511(a)(2) and
511(b)(2) are assigned to the
decedent's generation. Transfers to
such organizations are therefore not
subject to the GST tax.
Charitable remainder trusts.
Transfers to or in the form of charitable
remainder annuity trusts, charitable
remainder unitrusts, and pooled income
funds are not considered made to skip
persons and, therefore, are not direct
skips even if all of the life beneficiaries
are skip persons.
Estate tax value. Estate tax value is
the value shown on Schedules A
through I of this Form 706.
Examples. The rules above can be
illustrated by the following examples:
1. Under the will, the decedent's
house is transferred to the decedent's
daughter for her life with the remainder
passing to her children. This transfer is
made to a “trust” even though there is
no explicit trust instrument. The interest
in the property transferred (the present
right to use the house) is transferred to a
non-skip person (the decedent's
daughter). Therefore, the trust is not a
skip person because there is an interest
in the transferred property that is held by
a non-skip person. The transfer is not a
direct skip.
2. The will bequeaths $100,000 to
the decedent's grandchild. This transfer
is a direct skip that is not made in trust
and should be shown on Schedule R.
3. The will establishes a trust that is
required to accumulate income for 10
years and then pay its income to the
decedent's grandchildren for the rest of
their lives and, upon their deaths,
distribute the corpus to the decedent's
great-grandchildren. Because the trust
has no current beneficiaries, there are
no present interests in the property
transferred to the trust. All of the
persons to whom the trust can make
future distributions (including
distributions upon the termination of
interests in property held in trust) are
skip persons (for example, the
decedent's grandchildren and
great-grandchildren). Therefore, the
trust itself is a skip person and you
should show the transfer on
Schedule R.
4. The will establishes a trust that is
to pay all of its income to the decedent's
grandchildren for 10 years. At the end of
10 years, the corpus is to be distributed
to the decedent's children. All of the
present interests in this trust are held by
skip persons. Therefore, the trust is a
skip person and you should show this

transfer on Schedule R. You should
show the estate tax value of all the
property transferred to the trust even
though the trust has some ultimate
beneficiaries who are non-skip persons.

Dividing Direct Skips Between
Schedules R and R-1
Report all generation-skipping
transfers on Schedule R unless
the rules below specifically
provide that they are to be reported on
Schedule R-1.

TIP

Under section 2603(a)(2), the GST tax
on direct skips from a trust (as defined
for GST tax purposes) is to be paid by
the trustee and not by the estate.
Schedule R-1 serves as a notification
from the executor to the trustee that a
GST tax is due.
For a direct skip to be reportable on
Schedule R-1, the trust must be
includible in the decedent's gross
estate.
If the decedent was a surviving
spouse receiving benefits for his or her
lifetime from a marital deduction power
of appointment (or QTIP) trust created
by the decedent's spouse, then
transfers caused by reason of the
decedent's death from that trust to skip
persons are direct skips required to be
reported on Schedule R-1.
If a direct skip is made “from a trust”
under these rules, it is reportable on
Schedule R-1 even if it is also made “to
a trust” rather than to an individual.
Similarly, if property in a trust (as
defined for GST tax purposes) is
included in the decedent's gross estate
under sections 2035, 2036, 2037, 2038,
2039, 2041, or 2042 and such property
is, by reason of the decedent's death,
transferred to skip persons, the
transfers are direct skips required to be
reported on Schedule R-1.
Special rule for trusts other than ordinary trusts. An ordinary trust is
defined in Regulations section
301.7701-4(a) as “an arrangement
created by a will or by an inter vivos
declaration whereby trustees take title to
property for the purpose of protecting or
conserving it for the beneficiaries under
the ordinary rules applied in chancery or
probate courts.” Direct skips from
ordinary trusts are required to be
reported on Schedule R-1 regardless of
their size unless the executor is also a
trustee (see Executor as trustee,
below).
Direct skips from trusts that are trusts
for GST tax purposes but are not

ordinary trusts are to be shown on
Schedule R-1 only if the total of all
tentative maximum direct skips from the
entity is $250,000 or more. If this total is
less than $250,000, the skips should be
shown on Schedule R. For purposes of
the $250,000 limit, tentative maximum
direct skips is the amount you would
enter on line 5 of Schedule R-1 if you
were to file that schedule.
A liquidating trust (such as a
bankruptcy trust) under Regulations
section 301.7701-4(d) is not treated as
an ordinary trust for the purposes of this
special rule.
If the proceeds of a life insurance
policy are includible in the gross estate
and are payable to a beneficiary who is
a skip person, the transfer is a direct
skip from a trust that is not an ordinary
trust. It should be reported on
Schedule R-1 if the total of all the
tentative maximum direct skips from the
company is $250,000 or more.
Otherwise, it should be reported on
Schedule R.
Similarly, if an annuity is includible on
Schedule I and its survivor benefits are
payable to a beneficiary who is a skip
person, then the estate tax value of the
annuity should be reported as a direct
skip on Schedule R-1 if the total
tentative maximum direct skips from the
entity paying the annuity is $250,000 or
more.
Executor as trustee. If any of the
executors of the decedent's estate are
trustees of the trust, then all direct skips
for that trust must be shown on
Schedule R and not on Schedule R-1,
even if they would otherwise have been
required to be shown on Schedule R-1.
This rule applies even if the trust has
other trustees who are not executors of
the decedent's estate.

How To Complete Schedules R
and R-1
Valuation. Enter on Schedules R and
R-1 the estate tax value of the property
interests subject to the direct skips. If
you elected alternate valuation (section
2032) and/or special-use valuation
(section 2032A), you must use the
alternate and/or special-use values on
Schedules R and R-1.

How To Complete Schedule R
Part 1. GST Exemption
Reconciliation
Part 1, line 6 of both Parts 2 and 3, and
line 4 of Schedule R-1 are used to
allocate the decedent's GST exemption.
This allocation is made by filing Form
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706 and attaching a completed
Schedule R and/or R-1. Once made, the
allocation is irrevocable. You are not
required to allocate all of the decedent's
GST exemption. However, the portion of
the exemption that you do not allocate
will be allocated by the IRS under the
deemed allocation of unused GST
exemption rules of section 2632(e).
For transfers made through 1998, the
GST exemption was $1 million. The
current GST exemption is $5,250,000.
The exemption amounts for 1999
through 2012 are as follows:
Year of transfer
1999
2000
2001
2002
2003
2004 and 2005
2006, 2007, and 2008
2009
2010 and 2011
2012

GST
exemption
1,010,000
1,030,000
1,060,000
1,100,000
1,120,000
1,500,000
2,000,000
3,500,000
5,000,000
$5,120,000

The amount of each increase can
only be allocated to transfers made (or
appreciation that occurred) during or
after the year of the increase. The
following example shows the application
of this rule:
Example. In 2003, G made a direct
skip of $1,120,000 and applied her full
$1,120,000 of GST exemption to the
transfer. G made a $450,000 taxable
direct skip in 2004 and another of
$90,000 in 2006. For 2004, G can only
apply $380,000 of exemption ($380,000
inflation adjustment from 2004) to the
$450,000 transfer in 2004. For 2006, G
can apply $90,000 of exemption to the
2006 transfer, but nothing to the transfer
made in 2004. At the end of 2006, G
would have $410,000 of unused
exemption that she can apply to future
transfers (or appreciation) starting in
2007.
Special QTIP election. In the case of
property for which a marital deduction is
allowed to the decedent's estate under
section 2056(b)(7) (QTIP election),
section 2652(a)(3) allows you to treat
such property for purposes of the GST
tax as if the election to be treated as
qualified terminable interest property
had not been made.
The 2652(a)(3) election must include
the value of all property in the trust for

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which a QTIP election was allowed
under section 2056(b)(7).
If a section 2652(a)(3) election is
made, then the decedent will, for GST
tax purposes, be treated as the
transferor of all the property in the trust
for which a marital deduction was
allowed to the decedent's estate under
section 2056(b)(7). In this case, the
executor of the decedent's estate may
allocate part or all of the decedent's
GST exemption to the property.
You make the election simply by
listing qualifying property on line 9 of
Part 1.
Line 2. These allocations will have
been made either on Forms 709 filed by
the decedent or on Notices of Allocation
made by the decedent for inter vivos
transfers that were not direct skips but
to which the decedent allocated the
GST exemption. These allocations by
the decedent are irrevocable.
Also include on this line allocations
deemed to have been made by the
decedent under the rules of section
2632. Unless the decedent elected out
of the deemed allocation rules,
allocations are deemed to have been
made in the following order:
1. To inter vivos direct skips and
2. Beginning with transfers made
after December 31, 2000, to lifetime
transfers to certain trusts, by the
decedent, that constituted indirect skips
that were subject to the gift tax.
For more information, see section
2632 and related regulations.
Line 3. Make an entry on this line if you
are filing Form(s) 709 for the decedent
and wish to allocate any exemption.
Lines 4, 5, and 6. These lines
represent your allocation of the GST
exemption to direct skips made by
reason of the decedent's death.
Complete Parts 2 and 3 and
Schedule R-1 before completing these
lines.
Line 9. Line 9 is used to allocate the
remaining unused GST exemption (from
line 8) and to help you figure the trust's
inclusion ratio. Line 9 is a Notice of
Allocation for allocating the GST
exemption to trusts as to which the
decedent is the transferor and from
which a generation-skipping transfer
could occur after the decedent's death.
If line 9 is not completed, the deemed
allocation at death rules will apply to
allocate the decedent's remaining
unused GST exemption. The exemption
will be first allocated to property that is
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the subject of a direct skip occurring at
the decedent's death, and then to trusts
as to which the decedent is the
transferor. To avoid the application of
the deemed allocation rules, you should
enter on line 9 every trust (except
certain trusts entered on Schedule R-1,
as described below) to which you wish
to allocate any part of the decedent's
GST exemption. Unless you enter a
trust on line 9, the unused GST
exemption will be allocated to it under
the deemed allocation rules.
If a trust is entered on Schedule R-1,
the amount you entered on line 4 of
Schedule R-1 serves as a Notice of
Allocation and you need not enter the
trust on line 9 unless you wish to
allocate more than the Schedule R-1,
line 4 amount to the trust. However, you
must enter the trust on line 9 if you wish
to allocate any of the unused GST
exemption amount to it. Such an
additional allocation would not ordinarily
be appropriate in the case of a trust
entered on Schedule R-1 when the trust
property passes outright (rather than to
another trust) at the decedent's death.
However, where section 2032A property
is involved, it may be appropriate to
allocate additional exemption amounts
to the property. See the instructions for
line 10 below.
To avoid application of the
deemed allocation rules, Form
CAUTION
706 and Schedule R should be
filed to allocate the exemption to trusts
that may later have taxable terminations
or distributions under section 2612 even
if the form is not required to be filed to
report estate or GST tax.

!

Line 9, column C. Enter the GST
exemption, included on lines 2 through
6 of Part 1 of Schedule R (discussed
above), that was allocated to the trust.
Line 9, column D. Allocate the
amount on line 8 of Part 1 of Schedule R
in line 9, column D. This amount may be
allocated to transfers into trusts that are
not otherwise reported on Form 706.
For example, the line 8 amount may be
allocated to an inter vivos trust
established by the decedent during his
or her lifetime and not included in the
gross estate. This allocation is made by
identifying the trust on line 9 and making
an allocation to it using column D. If the
trust is not included in the gross estate,
value the trust as of the date of death.
Inform the trustee of each trust listed on
line 9 of the total GST exemption you
allocated to the trust. The trustee will
need this information to figure the GST
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tax on future distributions and
terminations.
Line 9, column E. Trust's
inclusion ratio. The trustee must know
the trust's inclusion ratio to figure the
trust's GST tax for future distributions
and terminations. You are not required
to inform the trustee of the inclusion
ratio and may not have enough
information to figure it. Therefore, you
are not required to make an entry in
column E. However, column E and the
worksheet below are provided to assist
you in figuring the inclusion ratio for the
trustee if you wish to do so.
Inform the trustee of the amount of
the GST exemption you allocated to the
trust. Line 9, columns C and D may be
used to figure this amount for each trust.
Note. This worksheet will figure an
accurate inclusion ratio only if the
decedent was the only settlor of the
trust. Use a separate worksheet for
each trust (or separate share of a trust
that is treated as a separate trust).

WORKSHEET (inclusion ratio):
1 Total estate and gift tax value
of all of the property interests
that passed to the trust . . .
2 Estate taxes, state death taxes,
and other charges actually
recovered from the trust . . .
3 GST taxes imposed on direct
skips to skip persons other
than this trust and borne by the
property transferred to this
trust . . . . . . . . . . . . . . .
4 GST taxes actually recovered
from this trust (from
Schedule R, Part 2, line 8 or
Schedule R-1, line 6) . . . .
5 Add lines 2 through 4 . . . .
6 Subtract line 5 from line 1 . .
7 Add columns C and D of
line 9 . . . . . . . . . . . . . .
8 Divide line 7 by line 6 . . . .
9 Trust's inclusion ratio. Subtract
line 8 from 1.000 . . . . . . .

Line 10. Special-use allocation. For
skip persons who receive an interest in
section 2032A special-use property, you
may allocate more GST exemption than
the direct skip amount to reduce the
additional GST tax that would be due
when the interest is later disposed of or
qualified use ceases. See
Schedule A-1, above, for more details
about this additional GST tax.
Enter on line 10 the total additional
GST exemption available to allocate to
all skip persons who received any
interest in section 2032A property.

Attach a special-use allocation
statement listing each such skip person
and the amount of the GST exemption
allocated to that person.
If you do not allocate the GST
exemption, it will be automatically
allocated under the deemed allocation
at death rules. To the extent any amount
is not so allocated, it will be
automatically allocated to the earliest
disposition or cessation that is subject
to the GST tax. Under certain
circumstances, post-death events may
cause the decedent to be treated as a
transferor for purposes of Chapter 13.
Line 10 may be used to set aside an
exemption amount for such an event.
Attach a statement listing each such
event and the amount of exemption
allocated to that event.

How To Complete Schedule R-1

Parts 2 and 3.

Filing Schedule R-1. Attach to Form
706 one copy of each Schedule R-1 that
you prepare. Send two copies of each
Schedule R-1 to the fiduciary.

Use Part 2 to figure the GST tax on
transfers in which the property interests
transferred are to bear the GST tax on
the transfers. Use Part 3 to report the
GST tax on transfers in which the
property interests transferred do not
bear the GST tax on the transfers.
Section 2603(b) requires that unless
the governing instrument provides
otherwise, the GST tax is to be charged
to the property constituting the transfer.
Therefore, you will usually enter all of
the direct skips on Part 2.
You may enter a transfer on Part 3
only if the will or trust instrument directs,
by specific reference, that the GST tax
is not to be paid from the transferred
property interests.
Part 2, Line 3. Enter zero on this line
unless the will or trust instrument
specifies that the GST taxes will be paid
by property other than that constituting
the transfer (as described above). Enter
on line 3 the total of the GST taxes
shown on Part 3 and Schedule(s) R-1
that are payable out of the property
interests shown on Part 2, line 1.
Part 2, Line 6. Do not enter more than
the amount on line 5. Additional
allocations may be made using Part 1.
Part 3, Line 3. See the instructions to
Part 2, line 3 above. Enter only the total
of the GST taxes shown on Schedule(s)
R-1 that are payable out of the property
interests shown on Part 3, line 1.
Part 3, Line 6. See the instructions to
Part 2, line 6 above.

Filing due date. Enter the due date of
Form 706. You must send the copies of
Schedule R-1 to the fiduciary before this
date.
Line 4. Do not enter more than the
amount on line 3. If you wish to allocate
an additional GST exemption, you must
use Schedule R, Part 1. Making an entry
on line 4 constitutes a Notice of
Allocation of the decedent's GST
exemption to the trust.
Line 6. If the property interests entered
on line 1 will not bear the GST tax,
multiply line 6 by 40% (0.40).
Signature. The executor(s) must sign
Schedule R-1 in the same manner as
Form 706. See Signature and
Verification, above.

Schedule U—Qualified
Conservation Easement
Exclusion
If at the time of the contribution
of the conservation easement,
CAUTION
the value of the easement, the
value of the land subject to the
easement, or the value of any retained
development right was different than the
estate tax value, you must complete a
separate computation in addition to
completing Schedule U.

!

Use a copy of Schedule U as a
worksheet for this separate
computation. Complete lines 4 through
14 of the worksheet Schedule U.
However, the value you use on lines 4,
5, 7, and 10 of the worksheet is the
value for these items as of the date of
the contribution of the easement, not the
estate tax value. If the date of
contribution and the estate tax values
are the same, you do not need to do a
separate computation.
After completing the worksheet, enter
the amount from line 14 of the
worksheet on line 14 of Schedule U.
Finish completing Schedule U by
entering amounts on lines 4, 7, and 15
through 20, following the instructions
below for those lines. At the top of
Schedule U, enter "worksheet
attached." Attach the worksheet to the
return.
Under section 2031(c), you may elect
to exclude a portion of the value of land
that is subject to a qualified
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conservation easement. You make the
election by filing Schedule U with all of
the required information and excluding
the applicable value of the land that is
subject to the easement on Part
5—Recapitulation, at item 12. To elect
the exclusion, include on Schedule A, B,
E, F, G, or H, as appropriate, the
decedent's interest in the land that is
subject to the exclusion. You must make
the election on a timely filed Form 706,
including extensions.
The exclusion is the lesser of:
The applicable percentage of the
value of land (after certain reductions)
subject to a qualified conservation
easement or
$500,000.
Once made, the election is
irrevocable.

General Requirements
Qualified Land
Land may qualify for the exclusion if all
of the following requirements are met:
The decedent or a member of the
decedent's family must have owned the
land for the 3-year period ending on the
date of the decedent's death.
No later than the date the election is
made, a qualified conservation
easement on the land has been made
by the decedent, a member of the
decedent's family, the executor of the
decedent's estate, or the trustee of a
trust that holds the land.
The land is located in the United
States or one of its possessions.

Member of Family
Members of the decedent's family
include the decedent's spouse;
ancestors; lineal descendants of the
decedent, of the decedent's spouse,
and of the parents of the decedent; and
the spouse of any lineal descendant. A
legally adopted child of an individual is
considered a child of the individual by
blood.

Indirect Ownership of Land
The qualified conservation easement
exclusion applies if the land is owned
indirectly through a partnership,
corporation, or trust, if the decedent
owned (directly or indirectly) at least
30% of the entity. For the rules on
determining ownership of an entity, see
Ownership rules, below.
Ownership rules. An interest in
property owned, directly or indirectly, by
or for a corporation, partnership, or trust
is considered proportionately owned by
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or for the entity's shareholders, partners,
or beneficiaries. A person is the
beneficiary of a trust only if he or she
has a present interest in the trust. For
additional information, see the
ownership rules in section 2057(e)(3).

Qualified Conservation Easement
A qualified conservation easement is
one that would qualify as a qualified
conservation contribution under section
170(h). It must be a contribution:
Of a qualified real property interest,
To a qualified organization, and
Exclusively for conservation
purposes.
Qualified real property interest. A
qualified real property interest is any of
the following:
The entire interest of the donor, other
than a qualified mineral interest;
A remainder interest; or
A restriction granted in perpetuity on
the use that may be made of the real
property. The restriction must include a
prohibition on more than a de minimis
use for commercial recreational activity.
Qualified organization. A qualified
organization includes:
Corporations and any community
chest, fund, or foundation, organized
and operated exclusively for religious,
charitable, scientific, testing for public
safety, literary, or educational purposes,
or to foster national or international
amateur sports competition, or for the
prevention of cruelty to children or
animals, without net earnings benefitting
any individual shareholder and without
activity with the purpose of influencing
legislation or political campaigning,
which
a. Receives more than one-third of its
support from gifts, contributions,
membership fees, or receipts from
sales, admissions fees, or performance
of services, or
b. Is controlled by such an
organization.
Any entity that qualifies under section
170(b)(1)(A)(v) or (vi).
Conservation purpose. An easement
has a conservation purpose if it is for:
The preservation of land areas for
outdoor recreation by, or for the
education of, the public;
The protection of a relatively natural
habitat of fish, wildlife, or plants, or a
similar ecosystem; or
The preservation of open space
(including farmland and forest land)
where such preservation is for the
scenic enjoyment of the general public,
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or under a clearly delineated federal,
state, or local conservation policy and
will yield a significant public benefit.

Specific Instructions
Line 1
If the land is reported as one or more
item numbers on a Form 706 schedule,
simply list the schedule and item
numbers. If the land subject to the
easement is only part of an item,
however, list the schedule and item
number and describe the part subject to
the easement. See the Instructions for
Schedule A — Real Estate for
information on how to describe the land.

Line 3
Using the general rules for describing
real estate, provide enough information
so the IRS can value the easement.
Give the date the easement was
granted and by whom it was granted.

Line 4
Enter on this line the gross value at
which the land was reported on the
applicable asset schedule on this Form
706. Do not reduce the value by the
amount of any mortgage outstanding.
Report the estate tax value even if the
easement was granted by the decedent
(or someone other than the decedent)
prior to the decedent's death.
Note. If the value of the land reported
on line 4 was different at the time the
easement was contributed than that
reported on Form 706, see the Caution
at the beginning of the Schedule U
Instructions.

Line 5
The amount on line 5 should be the date
of death value of any qualifying
conservation easements granted prior
to the decedent's death, whether
granted by the decedent or someone
other than the decedent, for which the
exclusion is being elected.
Note. If the value of the easement
reported on line 5 was different at the
time the easement was contributed than
at the date of death, see the Caution at
the beginning of the Schedule U
Instructions.

Line 7
You must reduce the land value by the
value of any development rights
retained by the donor in the conveyance
of the easement. A development right is
any right to use the land for any
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commercial purpose that is not
subordinate to or directly supportive of
the use of the land as a farm for farming
purposes.
Note. If the value of the retained
development rights reported on line 7
was different at the time the easement
was contributed than at the date of
death, see the Caution at the beginning
of the Schedule U Instructions.
You do not have to make this
reduction if everyone with an interest in
the land (regardless of whether in
possession) agrees to permanently
extinguish the retained development
right. The agreement must be filed with
this return and must include the
following information and terms:
1. A statement that the agreement is
made under section 2031(c)(5);
2. A list of all persons in being
holding an interest in the land that is
subject to the qualified conservation
easement. Include each person's name,
address, tax identifying number,
relationship to the decedent, and a
description of their interest;
3. The items of real property shown
on the estate tax return that are subject
to the qualified conservation easement
(identified by schedule and item
number);
4. A description of the retained
development right that is to be
extinguished;
5. A clear statement of consent that
is binding on all parties under applicable
local law:
a. To take whatever action is
necessary to permanently extinguish
the retained development rights listed in
the agreement and
b. To be personally liable for
additional taxes under section 2031(c)
(5)(C) if this agreement is not
implemented by the earlier of:
• The date that is 2 years after the
date of the decedent's death or
• The date of sale of the land subject
to the qualified conservation
easement;
6. A statement that in the event this
agreement is not timely implemented,
that they will report the additional tax on
whatever return is required by the IRS
and will file the return and pay the
additional tax by the last day of the 6th
month following the applicable date
described above.
All parties to the agreement must
sign the agreement.

For an example of an agreement
containing some of the same terms, see
Part 3 of Schedule A-1 (Form 706).

Line 10
Enter the total value of the qualified
conservation easements on which the
exclusion is based. This could include
easements granted by the decedent (or
someone other than the decedent) prior
to the decedent's death, easements
granted by the decedent that take effect
at death, easements granted by the
executor after the decedent's death, or
some combination of these.
Use the value of the easement
as of the date of death, even if
CAUTION
the easement was granted prior
to the date of death. But, if the value of
the easement was different at the time
the easement was contributed than at
the date of death, see the Caution at the
beginning of the Schedule U
Instructions.

!

Explain how this value was
determined and attach copies of any
appraisals. Normally, the appropriate
way to value a conservation easement
is to determine the FMV of the land both
before and after the granting of the
easement, with the difference being the
value of the easement.
Reduce the reported value of the
easement by the amount of any
consideration received for the
easement. If the date of death value of
the easement is different from the value
at the time the consideration was
received, reduce the value of the
easement by the same proportion that
the consideration received bears to the
value of the easement at the time it was
granted. For example, assume the value
of the easement at the time it was
granted was $100,000 and $10,000 was
received in consideration for the
easement. If the easement was worth
$150,000 at the date of death, you must
reduce the value of the easement by
$15,000 ($10,000/$100,000 ×
$150,000) and report the value of the
easement on line 10 as $135,000.

Line 15
If a charitable contribution deduction for
this land has been taken on
Schedule O, enter the amount of the
deduction here. If the easement was
granted after the decedent's death, a
contribution deduction may be taken on
Schedule O, if it otherwise qualifies, as
long as no income tax deduction was or

will be claimed for the contribution by
any person or entity.

each Schedule PC must be included
with Form 706.

Line 16

Note. Filing a section 2053 protective
claim for refund on Schedule PC will not
suspend the IRS’ review and
examination of Form 706, nor will it
delay the issuance of a closing letter for
the estate.

Reduce the value of the land by the
amount of any acquisition indebtedness
on the land at the date of the decedent's
death. Acquisition indebtedness
includes the unpaid amount of:
Any indebtedness incurred by the
donor in acquiring the property;
Any indebtedness incurred before the
acquisition if the indebtedness would
not have been incurred but for the
acquisition;
Any indebtedness incurred after the
acquisition if the indebtedness would
not have been incurred but for the
acquisition and the incurrence of the
indebtedness was reasonably
foreseeable at the time of the
acquisition; and
The extension, renewal, or
refinancing of acquisition indebtedness.

Schedule PC—Protective
Claim for Refund

A protective claim for refund preserves
the estate’s right to a refund of tax paid
on any amount included in the gross
estate which would be deductible under
section 2053 but has not been paid or
otherwise will not meet the requirements
of section 2053 until after the limitations
period for filing the claim has passed.
See section 6511(a).
Only use Schedule PC for
section 2053 protective claims
CAUTION
for refund being filed with Form
706. If the initial notice of the protective
claim for refund is being submitted after
Form 706 has been filed, use Form 843,
Claim for Refund and Request for
Abatement, to file the claim.

!

Schedule PC may be used to file a
section 2053 protective claim for refund
by estates of decedents who died after
December 31, 2011. It will also be used
to inform the IRS when the contingency
leading to the protective claim for refund
is resolved and the refund due the
estate is finalized. The estate must
indicate whether the Schedule PC being
filed is the initial notice of protective
claim for refund, notice of partial claim
for refund, or notice of the final
resolution of the claim for refund.
Because each separate claim or
expense requires a separate
Schedule PC, more than one
Schedule PC may be included with
Form 706, if applicable. Two copies of
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Initial Notice of Claim

The first Schedule PC to be filed is the
initial notice of protective claim for
refund. The estate will receive a written
acknowledgment of receipt of the claim
from the IRS. If the acknowledgment is
not received within 180 days of filing the
protective claim for refund on
Schedule PC, the fiduciary should
contact the IRS at (866) 699-4083 to
inquire about the receipt and processing
of the claim. A certified mail receipt or
other evidence of delivery is not
sufficient to confirm receipt and
processing of the protective claim for
refund.
Note. The written acknowledgment of
receipt does not constitute a
determination that all requirements for a
valid protective claim for refund have
been met.

In general, the claim will not be
subject to substantive review until the
amount of the claim has been
established. However, a claim can be
disallowed at the time of filing. For
example, the claim for refund will be
rejected if:
The claim was not timely filed;
The claim was not filed by the
fiduciary or other person with authority
to act on behalf of the estate;
The acknowledgment of the penalties
of perjury statement (on page 1 of Form
706) was not signed; or,
The claim is not adequately
described.
If the IRS does not raise such a
defect when the claim is filed, it will not
be precluded from doing so in the later
substantive review.
The estate may be given an
opportunity to cure any defects in the
initial notice by filing a corrected and
signed protective claim for refund before
the expiration of the limitations period in
section 6511(a) or within 45 days of
notice of the defect, whichever is later.

Related Ancillary Expenses

If a Section 2053 protective claim for
refund has been adequately identified
on Schedule PC, the IRS will presume
that the claim includes certain expenses
related to resolving, defending or
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satisfying the claim. These ancillary
expenses may include attorneys’ fees,
court costs, appraisal fees, and
accounting fees. The estate is not
required to separately identify or
substantiate these expenses; however,
each expense must meet the
requirements of section 2053 to be
deductible.

the date of the last payment. The estate
may also notify the IRS (not more than
annually) as payments are being made
and possibly qualify for a partial refund
based on the amounts paid through the
date of the notice.

Notice of Final Resolution of
Claim

Complete Part 1 by providing
information that is correct and complete
as of the time Schedule PC is filed. If
filing an updated Schedule PC with a
supplemental Form 706 or as notice of
final resolution of the protective claim for
refund, be sure to update the
information from the original filing to
ensure that it is accurate. Be particularly
careful to verify that contact information
(addresses and telephone numbers)
and the reason for filing Schedule PC
are indicated correctly. If the fiduciary is
different from the executor identified on
page 1 of Form 706 or has changed
since the initial notice of protective claim
for refund was filed, attach letters
testamentary, letters of administration,
or similar documentation evidencing the
fiduciary's authority to file the protective
claim for refund on behalf of the estate.
Include a copy of Form 56, Notice
Concerning Fiduciary Relationship, if it
has been filed.

When an expense that was the subject
of a section 2053 protective claim for
refund is finally determined, the estate
must notify the IRS that the claim for
refund is ready for consideration. The
notification should provide facts and
evidence substantiating the deduction
under section 2053 and the resulting
recomputation of the estate tax liability.
A separate notice of final resolution
must be filed with the IRS for each
resolved section 2053 protective claim
for refund.
There are two means by which the
estate may notify the IRS of the
resolution of the uncertainty that
deprived the estate of the deduction
when Form 706 was filed. The estate
may file a supplemental Form 706 with
an updated Schedule PC and including
each schedule affected by the
allowance of the deduction under
section 2053. Page 1 of Form 706
should contain the notation
“Supplemental Information – Notification
of Consideration of Section 2053
Protective Claim(s) for Refund” and
include the filing date of the initial notice
of protective claim for refund. A copy of
the initial notice of claim should also be
submitted.
Alternatively, the estate may notify
the IRS by filing an updated Form 843,
Claim for Refund and Request for
Abatement. Form 843 must contain the
notation “Notification of Consideration of
Section 2053 Protective Claim(s) for
Refund,” including the filing date of the
initial notice of protective claim for
refund, on page 1. A copy of the initial
notice of claim must also be submitted.
The estate should notify the IRS of
resolution within 90 days of the date the
claim or expense is paid or the date on
which the amount of the claim becomes
certain and no longer subject to
contingency, whichever is later.
Separate notifications must be
submitted for every section 2053
protective claim for refund that was filed.
If the final section 2053 claim or
expense involves multiple or recurring
payments, the 90-day period begins on
Instructions for Schedules

Specific Instructions
Part 1. General Information

Part 2. Claim Information
For a protective claim for refund to be
properly filed and considered, the claim
or expense forming the basis of the
potential 2053 deduction must be
clearly identified. Using the check boxes
provided, indicate whether you are filing
the initial claim for refund, a claim for
partial refund or a final claim. On the
chart in Part 2, give the Form 706
schedule and item number of the claim
or expense. List any amounts claimed
under exceptions for ascertainable
amounts (Regulations section
20.2053-1(d)(4)), claims and
counterclaims in related matters
(Regulations section 20.2053-4(b)), or
claims under $500,000 (Regulations
section 20.2053-4(c)). Provide all
relevant information as described
including, most importantly, an
explanation of the reasons and
contingencies delaying the actual
payment to be made in satisfaction of
the claim or expense. Complete
columns E and F only if filing a notice of
partial or final resolution. Show the
amount of ancillary or related expenses
to be included in the claim for refund
and indicate whether this amount is
estimated, agreed upon, or has been
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paid. Also show the amount being
claimed for refund.
Note. If you made partial claims for a
recurring expense, the amount
presently claimed as a deduction under
section 2053 will only include the
amount presently claimed, not the
cumulative amount.

Part 3. Other Schedules PC and
Forms 843 Filed by the Estate
On the chart in Part 3, provide
information on other protective claims
for refund that have been previously
filed on behalf of the estate (if any),
whether on other Schedules PC or on
Form 843. When the initial claim for
refund is filed, only information from
Form(s) 843 need be included in Part 3.
However, when filing a partial or final
claim for refund, complete Part 3 by
including the status of all claims filed by
or on behalf of the estate, including
those filed on other Schedules PC with
Form 706. For each such claim, give the
place of filing, date of filing and amount
of the claim.

Continuation Schedule

When you need to list more assets or
deductions than you have room for on
one of the main schedules, use the
Continuation Schedule at the end of
Form 706. It provides a uniform format
for listing additional assets from
Schedules A through I and additional
deductions from Schedules J, K, L, M,
and O.

Please remember to:
Use a separate Continuation
Schedule for each main schedule you
are continuing. Do not combine assets
or deductions from different schedules
on one Continuation Schedule.
Make copies of the blank schedule
before completing it if you expect to
need more than one.
Use as many Continuation Schedules
as needed to list all the assets or
deductions.
Enter the letter of the schedule you
are continuing in the space at the top of
the Continuation Schedule.
Use the Unit value column only if
continuing Schedule B, E, or G. For all
other schedules, use this space to
continue the description.
Carry the total from the Continuation
Schedules forward to the appropriate
line on the main schedule.

If continuing

Report

Where on Continuation Schedule

Schedule E, Pt. 2

Percentage includible

Alternate valuation date

Schedules J, L, M

Continued description of deduction

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

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 non-tax 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:
Form
706
Schedule A
Schedule A-1
Schedule B
Schedule C
Schedule D
Schedule E
Schedule F
Schedule G
Schedule H
Schedule I
Schedule J
Schedule K
Schedule L
Schedule M
Schedule O
Schedule P
Schedule Q
Worksheet for Schedule Q
Schedule R
Schedule R-1
Schedule U
Continuation Schedule

Recordkeeping
1 hr., 25 min.
---33 min.
19 min.
19 min.
6 min.
39 min.
26 min.
26 min.
26 min.
13 min.
26 min.
13 min.
13 min.
13 min.
19 min.
6 min.
---6 min.
19 min.
6 min.
19 min.
19 min.

Learning about the law
or the form
1 hr., 50 min.
15 min.
31 min.
9 min.
1 min.
6 min.
6 min.
8 min.
21 min.
6 min.
30 min.
6 min.
9 min.
4 min.
34 min.
12 min.
15 min.
12 min.
6 min.
45 min.
46 min.
26 min.
1 min.

Preparing the form
3 hr., 42 min.
12 min.
1 hr., 15 min.
16 min.
13 min.
13 min.
36 min.
18 min.
12 min.
12 min.
15 min.
16 min.
18 min.
15 min.
25 min.
21 min.
18 min.
15 min.
58 min.
1 hr., 10 min.
35 min.
29 min.
13 min.

Copying, assembling, and
sending the form to the IRS
48 min.
20 min.
1 hr., 3 min.
20 min.
20 min.
20 min.
20 min.
20 min.
13 min.
13 min.
20 min.
20 min.
20 min.
20 min.
20 min.
20 min.
13 min.
13 min.
20 min.
48 min.
20 min.
20 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 send us comments from www.irs.gov/formspubs/. Click on “More Information” and then on
“Comment on Tax Forms and Publications.” You can also send your comments to the Internal Revenue Service, Tax Forms
and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this
address. Instead, see Where To File.

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Instructions for Schedules

Index
Funeral Expenses 31
2032A 10
2044 16
6163 15
6166 13
A
Address, executor 5
Administration Expenses 31
Alternate valuation 9
Amending Form 706 3
Annuities 29
Applicable Credit Adjustment 9
Applicable Credit Amount 9
Authorized Representative 15
B
Bonds 21
C
Canadian marital credit 9
Charitable Deduction 37
Claim for refund 48
Close Corporations 16
Conservation Easement 46
Continuation Schedule 49
Credit for foreign death taxes 38
Credit for tax on prior transfers 39
D
Death certificate 4
Debts of the decedent 33
Deductions 17
Direct skips 42
Disclaimer, qualified 38
Documents, supplemental 4
DSUE 17
E
Election 12, 15
Election, lump sum distribution 31
Estimated Values 18
Executor 3, 5
F
Foreign Accounts 16
Foreign Death Taxes 38
Forms and publications,
obtaining 4

Q
QDOT 36
QTIP 36
Qualified heir 11
Qualified real property 11

G
General Information 15
General Instructions 2
Gross estate 2, 16
GST 42

R
Recapitulation 16
Residents of U. S. Possessions 2
Reversionary or Remainder
Interests 15
Rounding off to whole dollars 4

I
Inclusion ratio for trust 45
Installment payments 13
Insurance 24
J
Joint Property 24
L
Liens 33
Losses 33
Lump sum distribution election 31
M
Marital Deduction 34
Material participation 11
Member of family 11
Mortgages and liens 33
N
Nonresident Noncitizens 2
P
Part 1. Decedent and Executor 5
Part 2. Tax Computation 5
Part 3. Elections by the
Executor 9
Part 4. General Information 15
Part 5. Recapitulation 16
Part 6. Portability of Deceased
Spousal Unused Exclusion 17
Partnership Interests 16
Paying the Tax 3
Penalties 4
Portability 17
Powers of appointment 28
Private delivery services 3
Protective Claim for Refund 48
Publications, obtaining 4
Purpose of Form 2

S
Schedule A, Real Estate 18
Schedule A-1, Section 2032A
Valuation 19
Schedule B, Stocks and Bonds 21
Schedule C, Mortgages, Notes,
and Cash 23
Schedule D, Insurance on
Decedent's Life 24
Schedule E, Jointly Owned
Property 24
Schedule F, Miscellaneous
Property 25
Schedule G, Transfers During
Decedent's Life 26
Schedule H, Powers of
appointment 28
Schedule I, Annuities 29
Schedule J, Funeral Expenses and
Expenses Incurred in
Administering Property Subject
to Claims 31
Schedule K, Debts of the
Decedent and Mortgages and
Liens 32
Schedule L, Net Losses During
Administration and Expenses
Incurred in Administering
Property Not Subject to
Claims 33
Schedule M, Bequests to Surviving
Spouses 34
Schedule O, Charitable, Public,
and Similar Gifts and
Bequests 37
Schedule P, Credit for Foreign
Death Taxes 38
Schedule PC, Protective Claim for
Refund 48

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Schedule Q, Credit for Tax on Prior
Transfers 39
Schedules R and R-1,
Generation-Skipping Transfer
Tax 42
Schedule U, Qualified
Conservation Easement
Exclusion 46
Section 2035(a) transfers 26
Section 2036 transfers 26
Section 2037 transfers 26
Section 2038 transfers 26
Signature and verification 3
Social security number 5
Special Rule – Portability 18
Special-Use Valuation 10, 19
Specific Instructions 4
Stocks 21
T
Table A, Unified Rate Schedule 5
Table of Estimated Values 17
Tax Computation 5
Terminable Interests 35
Total Credits 9
Transfers, valuation rules 27
Trusts 16
U
U. S. Citizens or Residents 2
Unified Credit (Applicable Credit
Amount) 9
Unified credit adjustment 9
V
Valuation methods 11
Valuation rules, transfers 27
W
What's New 1
When To File 3
Which Estates Must File 2
Worksheet, inclusion ratio for
trust 45
Worksheet for Schedule Q 40
Worksheet TG-Taxable Gifts
Reconciliation 6

Checklists for Completing Form 706
To ensure a complete return, review the following checklists 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.
Copy of Line 7 worksheet, if applicable.
Form 712, if any policies of life insurance are included on the return.
Form 706-CE, if claiming a foreign death tax credit.

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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 4 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?
Completed Part 6, section A if the estate elects not to transfer any deceased spousal unused exclusion (DSUE)
amount to the surviving spouse?
Completed Part 6, section C if the estate elects portability of any DSUE amount?
Completed Part 6, section D and included a copy of the Form 706 of any predeceased spouse(s) from whom a
deceased spousal unused exclusion (DSUE) amount was received and applied?

-53-