Form 706 (2010): How to File a U.S. Estate and GST Tax

Why 2010 Is Unique
Form 706 for 2010 reflects unprecedented estate tax rules, including a $5,000,000
exclusion with a 35% maximum rate, an optional Section 1022 election to opt out of
estate tax (accepting a modified carryover basis instead), the first-time portability of
deceased spousal unused exclusion (DSUE), and a zero percent generation-skipping
transfer tax rate. The filing deadline is September 19, 2011—not the standard
nine-month date—due to congressional action after December 17, 2010. Executors
choosing Section 1022 opt-out file Form 8939 by January 17, 2012 (extended from
November 15, 2011, per IRS Notice 2011-76), receiving up to $1,300,000 general basis
allocation plus $3,000,000 for spousal property, but forfeiting stepped-up basis and
Form 706 filing.

SEVEN-STEP FORM 706 FILING CHECKLIST

1. Step 1: Determine Filing Requirement and Election Path

   File Form 706 if gross estate plus adjusted taxable gifts plus specific exemption
   exceeds $5,000,000, OR to elect portability of unused spousal exemption regardless of
   estate size. Filing deadline: September 19, 2011. If choosing Section 1022 opt-out, file
   Form 8939 by January 17, 201,2, instead; do not file Form 706. Use Form 4768 for
   automatic six-month extension (extended deadline: March 19, 2012).

2. Step 2: Gather Identification and Appointment Documents

   Attach a certified death certificate. Confirm decedent’s Social Security Number and
   domicile (actual residence at death, not hospital address). If a U.S. citizen or resident,
   use Form 706; if a nonresident noncitizen, use Form 706-NA. Provide a certified copy of
   the will and codicils (testate) or court order (intestate). Obtain proof of the executor’s
   appointment; the executor’s statement alone is insufficient. If there are multiple
   executors, name all of them on Form 706. Attach Form 2848 if the authorizing
   representative.

3. Step 3: Value All Assets and Complete Asset Schedules

   Document the fair market value of the entire gross estate as of the date of death.

   Complete appropriate schedules: Schedule A (real estate), Schedule B (stocks/bonds),
   Schedule C (cash/mortgages), Schedule D (life insurance—obtain Form 712 from each
   insurer), Schedule E (jointly owned property), Schedule F (miscellaneous property). If
   electing alternate valuation under Section 2032, value the property six months after
   death (or earlier sale/distribution date); obtain both date-of-death and alternate values.

   Include transfers under Sections 2035–2038 on Schedule G if applicable.

4. Step 4: Calculate Adjusted Taxable Gifts

   Add all taxable gifts made after December 31, 1976, reported on Form 709 or Form
   709-A, plus unreported gifts exceeding the annual exclusion. Complete Worksheet TG
   to recompute gift tax payable using Table A—Unified Rate Schedule as in effect on date
   of death (not date of gift); use 2010 rates (35% maximum) to refigure prior gift taxes.

   Include the total on line 4.

• Schedule J & K: List funeral expenses, executor commissions, attorney fees,
• Schedule M (Marital Deduction): Describe property passing to the surviving
• Schedule O (Charitable Deduction): List property passing to qualified
• Schedule L: Claim losses during administration and expenses not subject to

5. Step 5: Itemize Deductions—Debts, Expenses, Marital, and Charitable

   and administration costs (Schedule J). Document all debts, mortgages, and liens
   (Schedule K). For state death taxes, deduct actual state inheritance taxes paid;
   attach a certified state tax authority statement showing total tax, discounts,
   penalties, interest, and payment date.
   spouse qualifying under Section 2056. For the QTIP election under Section
   2056(b)(7), complete Schedule M and attach the trust instrument. For a non-U.S.
   citizen spouse, property must pass to a qualified domestic trust (QDOT) by the
   filing date; complete Schedule M(D) and attach the QDOT agreement.
   charitable organizations; reduce by any estate tax, state death tax, or GST tax
   payable from charitable property.
   claims if applicable.

6. Step 6: Compute Estate Tax and Apply Credits

   Complete Part II—Tax Computation. Enter taxable estate (line 1). Compute tentative tax
   using Table A—Unified Rate Schedule (35% maximum for amounts over $1,000,000).

   Subtract recomputed gift taxes using date-of-death rates (line 7). Claim unified credit of
   $1,730,800 for 2010 decedents (line 9d). If decedent received DSUE from predeceased
   spouse, include in applicable exclusion amount. Enter net estate tax due (line 9f); if zero
   or negative, no estate tax owed.

• Part 6—Portability: Complete to elect transfer of deceased spouse’s unused
• Special Elections: If electing special-use valuation under Section 2032A,
• Assembly and Filing: The executor signs under penalty of perjury; the paid
• Full IRS transcript retrieval (Wage & Income + Account)
• Professional tax form review
• Preparation & filing support
• Tax relief options if you owe the IRS

7. Step 7: Elect Portability, Special Valuations, and Sign/File

   exclusion amount (DSUE) to the surviving spouse, making it available for the
   survivor’s later transfers. This election requires a timely Form 706 filing
   regardless of estate size.
   complete Schedule T. If electing conservation easement exclusion under Section
   2031©, complete Schedule U.
   preparer must sign, date, and provide their PTIN. Assemble pages 1–3, then
   schedules with entries only (A–U as applicable). Attach certified death certificate,
   will, Form 712 for each policy, trust instruments, state death tax certificate, Form
   706-CE (foreign death tax credit if applicable). File by September 19, 2011, via
   certified mail or private delivery service (FedEx/UPS); no electronic filing
   available.

   KEY 2010 FORM CHANGES
   Part 1 now emphasizes decedent’s domicile (actual residence) and requires
   documentation proving the executor’s appointment. Part 2, Line 7 requires
   recomputation of gift tax using date-of-death rates, not amounts paid initially. Part 6
   (new for 2010) allows portability election of DSUE to the surviving spouse.

   COMPLIANCE NOTES
   State death tax credit was repealed for decedents dying after December 31, 2004; only
   deduction allowed. Section 1022 opt-out is available only for 2010 decedents and
   precludes Form 706 filing. Nonresident noncitizens cannot claim the marital deduction

   unless property passes to QDOT. Penalties apply for late filing (20% substantial
   understatement, 40% gross understatement) unless reasonable cause is shown after
   notice. September 19, 2011, is a fixed deadline; a six-month extension via Form 4768
   moves the deadline to March 19, 2012. No further automatic extension is available.

   If you’re missing tax documents or want to ensure the numbers you enter match IRS records,
   we can help.