What Form 706-NA Is For

Form 706-NA, officially titled "United States Estate (and Generation-Skipping Transfer) Tax Return Estate of nonresident not a citizen of the United States," is the IRS form used when someone who was neither a U.S. citizen nor a U.S. resident dies owning property located in the United States. Think of it as the specialized estate tax form for foreign nationals who held American assets at the time of their death.

Unlike Form 706 (which U.S. citizens and residents use), Form 706-NA focuses exclusively on U.S.-situated property—meaning assets physically located in America or tied to U.S. sources. The form serves two primary tax purposes: calculating regular estate tax and computing generation-skipping transfer (GST) tax, which applies when wealth passes to grandchildren or others two or more generations younger than the decedent, bypassing the immediate next generation.

The distinction between who files Form 706 versus Form 706-NA is crucial: if the deceased person was domiciled (permanently living) in the United States at death, even without citizenship, they would use Form 706. Form 706-NA is specifically and only for those who were neither U.S. citizens nor U.S. residents when they died.

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When You’d Use Form 706-NA

Initial Filing Requirement

You must file Form 706-NA if the total value of the deceased person's U.S.-situated assets at death, plus any gift tax exemption used and adjusted taxable gifts, exceeds $60,000. This $60,000 threshold is dramatically lower than the $5.43 million filing threshold that applied to U.S. citizens and residents in 2015, making it much more likely that a nonresident alien's estate will need to file.

Filing Deadline

The standard deadline is 9 months after the date of death. For someone who died on March 15, 2015, the return would be due December 15, 2015. You can request an extension using Form 4768, which grants an automatic additional 6 months (for a total of 15 months from the date of death).

Late Returns

If you missed the deadline without filing an extension, you should still file as soon as possible to minimize penalties. The IRS imposes failure-to-file penalties (typically 5% per month of unpaid tax, up to 25%) and failure-to-pay penalties (0.5% per month). Late filing is always better than never filing.

Amended Returns

If you need to correct or supplement information after filing, you file another Form 706-NA with "Supplemental Information" written across the top of page 1. Include a detailed statement explaining what changed, provide supporting documentation, and attach copies of pages 1-4 from your original return. Common reasons include discovering additional assets, correcting valuation errors, or claiming treaty benefits not originally claimed.

IRS.gov

Key Rules or Details for 2015

Filing Threshold

$60,000 (not indexed for inflation, so this amount has remained constant since the rule was established)

Unified Credit

Nonresident aliens filing Form 706-NA receive a unified credit of only $13,000, which effectively exempts approximately $60,000 worth of U.S. assets from taxation. This is vastly smaller than the $5.43 million exemption available to U.S. citizens and residents in 2015.

What Counts as U.S.-Situated Property

• Real estate physically located in the United States (houses, land, commercial buildings)
• Tangible personal property in the U.S. (cars, jewelry, artwork, boats)
• Stock in U.S. corporations (whether publicly traded or privately held)
• Debt obligations of U.S. persons, U.S. states, or political subdivisions

What Does NOT Count

• Bank deposits with U.S. banks (specifically exempt by statute)
• Certain portfolio debt obligations issued after July 18, 1984
• Proceeds of life insurance on the decedent's life

Tax Treaty Considerations

If the deceased person's home country has an estate tax treaty with the United States, the estate may qualify for a higher exemption amount or exemptions for specific assets. In 2015, countries like Canada, the United Kingdom, Germany, and others had such treaties. You must claim treaty benefits on the return and typically attach documentation showing what was filed with the foreign country.

Generation-Skipping Transfer Tax (2015)

Any transfers that skip a generation (such as leaving assets directly to grandchildren) may trigger an additional GST tax at a flat 40% rate in 2015, though the same small exemption applies.

IRS.gov

Step-by-Step (High Level)

Step 1: Determine Filing Requirement

Calculate the total fair market value of U.S.-situated assets at date of death. If over $60,000 (including adjusted taxable gifts), filing is required.

Step 2: Gather Documentation

Collect death certificates, property deeds, stock certificates, bank statements, appraisals, the decedent's will, and documentation of any lifetime gifts of U.S. property.

Step 3: Value All Assets

Determine fair market value for each U.S. asset as of the date of death. You may need professional appraisers for real estate, closely-held businesses, or valuable personal property.

Step 4: Complete the Return

Fill out Form 706-NA, including detailed schedules listing all U.S. property. Schedule A lists U.S. real estate, while Schedule B is used to calculate the proportionate unified credit based on worldwide estate value compared to U.S. estate value.

Step 5: Calculate Allowable Deductions

You can deduct funeral expenses, administration costs, debts, and mortgages. Charitable deductions are allowed for gifts to U.S.-qualified charities. Marital deductions are severely limited and generally only available if the surviving spouse is a U.S. citizen.

Step 6: Apply Credits and Calculate Tax

Apply the unified credit and any treaty benefits. The tax is calculated using the same estate tax rate schedule as for U.S. residents (ranging from 18% to 40% in 2015).

Step 7: Submit Payment and Return

Mail the completed return to the IRS address specified in the instructions (typically the Cincinnati campus for international returns) along with payment if tax is due.

Common Mistakes and How to Avoid Them

Mistake #1: Not Filing Because Under U.S. Citizen Threshold

Many executors mistakenly apply the $5.43 million U.S. citizen exemption. Remember: the threshold for nonresident aliens is only $60,000.
Solution: Always check which form applies based on citizenship and residency status, not just asset value.

Mistake #2: Misclassifying U.S.-Situs Property

Confusion about which assets count as "situated in the U.S." is common. For example, assuming all U.S. investments are taxable when bank accounts are actually exempt.
Solution: Consult the specific Form 706-NA instructions or a tax professional to properly classify each asset.

Mistake #3: Failing to Claim Treaty Benefits

Estates from treaty countries often miss valuable exemptions.
Solution: Research whether the decedent's home country has an estate tax treaty with the U.S. and affirmatively claim benefits with proper documentation.

Mistake #4: Using Date-of-Purchase Values Instead of Date-of-Death Values

Assets must be valued at their fair market value on the date of death, not what was originally paid.
Solution: Obtain professional appraisals dated at or near the date of death.

Mistake #5: Incomplete Reporting of Worldwide Estate

Schedule B requires disclosure of the decedent's entire worldwide estate to calculate the proportionate credit.
Solution: Compile complete information about all assets wherever located, not just U.S. property.

Mistake #6: Missing Deadlines

The 9-month deadline comes quickly, especially when dealing with international coordination.
Solution: File Form 4768 for an automatic 6-month extension early in the process.

What Happens After You File

Processing Time

The IRS typically takes 6-12 months to process Form 706-NA, though complex estates or those selected for examination may take longer.

Estate Tax Closing Letter

After the IRS completes its review, you can request a closing letter (Form 627) for a $67 fee, or obtain a free account transcript that serves the same purpose. This document confirms the IRS has accepted the return and formally closes the estate tax matter. Many banks and courts require this before releasing assets or closing probate.

Audit Selection

The IRS examines a higher percentage of estate tax returns than income tax returns, particularly those with values near the filing threshold or those involving substantial real estate or closely-held business interests. International estates face somewhat higher scrutiny.

If Selected for Audit

An IRS estate tax examiner will contact the executor or their representative, typically requesting additional documentation about asset valuations, deductions claimed, or the decedent's residency status. You have the right to professional representation (attorney, CPA, or enrolled agent).

Payment Plans

If estate taxes are owed but the estate lacks liquid assets, you may qualify for an installment agreement or, in cases involving closely-held businesses, special payment deferrals under IRC Section 6166.

Refunds

If you overpaid or the IRS adjusts values downward, refund checks are issued to the estate (not to individual beneficiaries) and can take several months to process.

IRS.gov

FAQs

Q1: Does Form 706-NA apply if the deceased had a green card but lived abroad?

Having a green card doesn't automatically make someone a U.S. resident for estate tax purposes. The key question is domicile—where did the person intend to permanently live? If they were living abroad with no intention of returning to the U.S., they likely use Form 706-NA. However, this is a highly fact-specific determination that often requires professional advice.

Q2: Are stocks in my U.S. brokerage account subject to estate tax?

Yes. Stock in U.S. corporations is considered U.S.-situs property regardless of where the shares are physically held. However, cash in U.S. bank accounts and certain portfolio debt obligations are not taxable.

Q3: Can I avoid U.S. estate tax by holding U.S. stocks through a foreign corporation?

While holding U.S. assets through foreign entities can sometimes provide estate tax benefits, the IRS has complex rules to prevent abuse. This strategy requires careful planning with international tax professionals and must be implemented before death.

Q4: What if the deceased person's country has a tax treaty with the United States?

Treaties can provide significant benefits, including higher exemption amounts or complete exemptions for certain assets. You must affirmatively claim treaty benefits on Form 706-NA and provide supporting documentation, including typically a copy of any return filed with the treaty partner country.

Q5: Do I need to report the deceased person's foreign assets?

Yes, Schedule B requires disclosure of the worldwide gross estate to calculate the proportionate unified credit. However, only U.S.-situated property is actually taxed.

Q6: Can the surviving spouse inherit U.S. property tax-free?

Generally, no. The unlimited marital deduction available to U.S. citizens does not apply to nonresident aliens. However, if the surviving spouse is a U.S. citizen, the marital deduction may be available. For non-citizen spouses, a Qualified Domestic Trust (QDOT) may provide limited deferral.

Q7: How long should I keep records after filing?

The IRS generally has three years to audit a return, but this extends to six years if substantial undervaluation occurs. Best practice is to retain all estate tax records for at least seven years after filing.

Important Note

This summary provides general information about Form 706-NA for deaths occurring in 2015. Tax laws are complex and fact-specific. Executors handling nonresident alien estates should consult qualified tax professionals familiar with international estate taxation. For current forms and the most up-to-date information, visit IRS.gov.