Form 706 Filing Guide for Tax Year 2010
Understanding Form 706 for 2010 Decedents
Form 706, the United States Estate and Generation-Skipping Transfer Tax Return, serves as the primary document for reporting estate tax obligations for deceased U.S. citizens and residents. The tax year 2010 presented unique circumstances for estate taxation due to significant legislative changes that created unprecedented options for executors and estate administrators.
The 2010 Tax Law Environment
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, enacted on December 17, 2010, retroactively reinstated the federal estate tax for decedents who died during calendar year 2010. This legislation established a $5,000,000 applicable exclusion amount with a corresponding unified credit of $1,730,800 and set the maximum estate tax rate at 35 percent. The generation-skipping transfer tax rate for 2010 was set at zero percent, providing favorable treatment for transfers to grandchildren or other individuals who are not direct descendants of the transferor.
Before this December 2010 legislation, the estate tax had been effectively repealed for calendar year 2010 under the Economic Growth and Tax Relief Reconciliation Act of 2001. The retroactive reinstatement created a unique situation where executors gained the option to choose between two distinct tax regimes for 2010 estates.
The Carryover Basis Election Alternative
Executors of estates for decedents who died in 2010 received a special election opportunity under section 301 of the Tax Relief Act. This election allowed estates to apply modified carryover basis treatment under section 1022 by filing Form 8939 instead of Form 706. When this election was made, the estate avoided federal estate tax entirely but accepted limitations on the step-up in basis for inherited assets.
The carryover basis election represented a strategic choice that required careful analysis of each estate’s specific circumstances, comparing the potential estate tax liability under the reinstated system against the future income tax consequences of reduced basis adjustments for heirs.
Filing Requirements and Deadlines
For 2010 decedents, Form 706 was required when the gross estate, plus adjusted taxable gifts and specific exemption amounts, exceeded $5,000,000. Executors who chose not to make the carryover basis election by filing Form 8939 were obligated to file Form 706 if the estate met this threshold requirement.
The filing deadline structure for 2010 estates contained special provisions. For decedents who died between January 1, 2010, and December 16, 2010, the IRS established September 19, 2011, as the filing due date. This extended timeline accommodated the retroactive nature of the tax reinstatement and provided executors sufficient time to prepare returns under the newly established rules. Executors could request an automatic six-month extension of time to file by submitting Form 4768.
Payment of estate and generation-skipping transfer taxes followed the same deadline schedule. For decedents dying between January 1, 2010, and December 16, 2010, payment was due September 19, 2011. Executors could request extensions for payment or elect installment payment under section 6166 for estates heavily concentrated in closely held business interests.
10-Step Filing Checklist for Form 706 Tax Year 2010
Step 1: Determine Filing Obligation and Election Strategy
Verify the decedent’s date of death falls within calendar year 2010 and calculate whether the gross estate plus adjusted taxable gifts exceeds the $5,000,000 filing threshold. Evaluate whether the carryover basis election under Form 8939 provides greater benefit than filing Form 706 under the reinstated estate tax system.
Consider the estate tax liability at 35 percent in relation to the future income tax consequences of a limited basis step-up for inherited assets. Document the executor’s authority through certified copies of court appointment documents or letters testamentary.
Step 2: Collect Comprehensive Estate Documentation
Gather all documentation demonstrating asset values as of the date of death. Obtain professional appraisals for real estate, business interests, and other assets requiring expert valuation. Collect statements for financial accounts, brokerage accounts, retirement plans, and life insurance policies. Secure copies of all gift tax returns (Form 709) previously filed by the decedent to support the computation of adjusted taxable gifts. Obtain the official death certificate and certified copy of the will if the decedent died testate.
Step 3: Complete General Information Sections
Enter the decedent’s complete identifying information on page one, including full legal name, social security number, date of birth, and date of death. Provide the legal residence address and county of domicile at the time of death, along with the year it was established. List all executors with their names, addresses, social security numbers, and telephone contact information. Identify the probate court, case number, and jurisdiction where the will was admitted, or estate administration commenced.
Step 4: Report Real Estate Holdings
Complete Schedule A for all real property owned by the decedent or in which the decedent held any interest at death. Provide detailed descriptions, including street addresses for urban property or legal descriptions with township and range information for rural parcels. Report the fair market value based on professional appraisals, attaching copies of all appraisal reports. Include rental income due or accrued at the date of death.
If property is subject to mortgages for which the estate is liable, report the full property value and separately deduct the mortgage on Schedule K. If electing special-use valuation under section 2032A for qualified farm or closely held business real property, complete and attach Schedule A-1 with all required supporting documentation and signed agreements from qualified heirs.
Step 5: Report Stocks, Bonds, and Securities
Complete Schedule B for all corporate stocks, bonds, mutual funds, and other securities owned by the decedent. Provide the CUSIP number for each security to facilitate IRS verification. For publicly traded securities, determine fair market value using the mean between the highest and lowest selling prices on the date of death. For closely held business interests, attach detailed appraisals explaining valuation methodologies and any discounts applied for lack of marketability or minority interest positions.
Step 6: Report Cash, Notes, and Other Financial Assets
Complete Schedule C for mortgages, notes, and cash holdings. List all bank accounts with institution names, account numbers, and balances as of the date of death. Report any notes receivable owed to the decedent, including the debtor’s name, principal amount, interest rate, payment terms, and current value. Include any contracts for deed or seller-financed real estate transactions.
Step 7: Report Life Insurance Proceeds
Complete Schedule D for all life insurance in the decedent’s life, regardless of beneficiary designation. Attach Form 712, Life Insurance Statement, for every policy included in the gross estate. Report the full death benefit for policies owned by the decedent or in which the decedent possessed any incidents of ownership within three years of death. Include policies payable to the estate and policies where the decedent transferred ownership within the three-year lookback period.
Step 8: Report Additional Assets and Transfers
Complete Schedule E for jointly owned property, identifying each co-owner and reporting the includible portion based on contribution rules or presumptions for property owned with persons other than the surviving spouse. Complete Schedule F for other miscellaneous property including vehicles, personal effects, collections, digital assets, and business interests. This schedule must be filed with every Form 706 even if no assets are reported. Complete Schedule G if the decedent made any transfers during life that remain includible in the gross estate under sections 2035, 2036, 2037, or 2038, such as retained life estates, revocable transfers, or transfers with retained powers.
Step 9: Calculate Allowable Deductions
Complete Schedule J for funeral expenses and costs incurred in administering property subject to claims. Include executor commissions, attorney fees, court costs, and appraisal fees that are actually paid or will be paid and are allowable under local law. Complete Schedule K for debts of the decedent existing at death and mortgages or liens against property. Provide creditor names, dates debts were incurred, amounts, and verification that claims are enforceable against the estate. Complete Schedule L for losses incurred during administration from casualties or theft and expenses for property not subject to claims.
Complete Schedule M for the marital deduction if property passes to the surviving spouse in a qualifying form. Provide detailed descriptions of all property interests passing to the surviving spouse and identify whether interests qualify as qualified terminable interest property requiring a QTIP election. Complete Schedule O for charitable bequests to qualified organizations, attaching evidence of the recipient organization’s tax-exempt status.
Step 10: Compute Tax Liability and Complete Required Elections
Calculate the tentative taxable estate by subtracting total allowable deductions from the gross estate. Add adjusted taxable gifts made after December 31, 1976, to determine the tax base. Apply the unified rate schedule from Table A to compute the tentative tax, then subtract gift taxes previously paid on post-1976 gifts. Apply the maximum unified credit of $1,730,800 and any allowable credits for state death taxes paid, foreign death taxes paid, or tax on prior transfers. Calculate the final estate tax due.
Complete Part 3 to make any elections available to the estate. The alternate valuation election may be made only if it decreases both the value of the gross estate and the total estate and generation-skipping transfer taxes payable. The section 6166 election permits installment payment of estate tax attributable to closely held business interests meeting specific qualification requirements. Complete Schedule U if electing the qualified conservation easement exclusion for land subject to perpetual conservation restrictions, with a maximum exclusion of $500,000.
Important Limitations for 2010 Estates
Estates electing to file Form 706 for 2010 decedents operate under the Tax Relief Act provisions with the $5,000,000 exclusion amount and 35 percent maximum rate. The generation-skipping transfer tax rate is zero percent for 2010, eliminating GST tax liability for direct skips and other GST taxable events. Prior taxable gifts must be calculated using the rate schedule in effect at the decedent’s date of death rather than the rates applicable when gifts were originally made.
Special-use valuation under section 2032A has a maximum reduction of $1,000,000 for 2010. The two percent portion of estate tax payable in installments under section 6166 is computed using $1,340,000 for 2010 estates.
Filing Location and Documentation
Form 706 for 2010 decedents should be mailed to the Department of the Treasury, Internal Revenue Service Center, Cincinnati, Ohio 45999. The return must include the death certificate, a certified copy of the will if the decedent died testate, all required schedules based on the asset composition of the gross estate, Form 712 for all life insurance policies, and any additional supporting documentation, including appraisals, prior gift tax returns, and evidence of deductions claimed.
The executor’s signature under penalties of perjury is required. If multiple executors are appointed, all are responsible for the return, although only one signature is required for the document to be valid. Paid preparers must sign in the right place and give their name and other identifying information. The election between filing Form 706 under the reinstated estate tax system or filing Form 8939 to elect carryover basis treatment represented the most significant strategic decision for 2010 estates, requiring a comprehensive analysis of the specific circumstances affecting each estate’s optimal tax outcome.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
