IRS Form 706 for 2017: A Comprehensive Filing Checklist
Overview of Form 706 for 2017
The 2017 IRS Form 706 serves as the United States Estate and Generation-Skipping Transfer Tax Return for estates of decedents who died during calendar year 2017. This form is required for estates exceeding the applicable exclusion amount, which was set at $5,490,000 for 2017. The American Taxpayer Relief Act of 2012 permanently established the framework for estate taxation, incorporating annual inflation adjustments, which resulted in the threshold for decedents dying in 2017.
The August 2017 revision of Form 706 reflects important procedural updates, including extended deadlines for late portability elections under Revenue Procedure 2017-34 and provisions for restored exclusion amounts for same-sex spouse transfers under Notice 2017-15. Executors must carefully complete all applicable sections to ensure compliance with federal estate tax requirements and to preserve valuable tax benefits for surviving family members.
Filing Requirements and Deadlines
Form 706 must be filed for estates of United States citizens or residents whose gross estate, combined with adjusted taxable gifts and specific exemptions, exceeds the $5,490,000 filing threshold for 2017. The return is generally due nine months after the date of the decedent’s death. However, executors may request an automatic six-month extension by filing Form 4768 before the original due date.
Even if an estate falls below the filing threshold, executors should consider filing Form 706 to elect portability of the deceased spouse's unused exclusion amount to a surviving spouse. This election allows the surviving spouse to apply the decedent’s unused exclusion amount to future transfers, potentially shielding millions of dollars from estate and gift taxes. Revenue Procedure 2017-34 provides relief for executors who missed the original deadline to elect portability, allowing filing on or before the later of January 2, 2018, or the second anniversary of the decedent’s death.
Checklist for Completing Form 706
1. Assemble Complete Estate Documentation
Gather all documents related to the decedent’s assets and liabilities, including deeds, bank statements, brokerage account statements, insurance policies, business ownership documents, and professional appraisals. Collect documentation for real estate holdings, securities portfolios, mortgages and notes receivable, life insurance proceeds, jointly owned property, transfers made during the decedent’s lifetime, powers of appointment, and annuities.
The death certificate must be attached to the return. If the decedent died testate, a certified copy of the will is also required. Comprehensive documentation ensures accurate valuation and proper reporting on the appropriate schedules.
2. Complete All Required Schedules
Attach all necessary schedules based on the types of assets in the estate. Schedule A reports real estate holdings, Schedule B covers stocks and bonds, Schedule C lists mortgages and notes receivable, Schedule D includes life insurance proceeds on the decedent’s life, Schedule E addresses jointly owned property, Schedule F reports miscellaneous property including household goods and personal effects, Schedule G covers lifetime transfers, Schedule H lists powers of appointment, and Schedule I addresses annuities.
Each schedule requires detailed descriptions and accurate valuations as of the date of death or alternate valuation date if that election is made. If special-use valuation under section 2032A is elected, both Schedule A and Schedule A-1 must be completed.
3. Calculate Values on the Recapitulation Page
Complete Part 5—Recapitulation to summarize the total gross estate by adding the values from all applicable schedules. Then subtract allowable deductions from Schedules J, K, L, M, and O to arrive at the taxable estate. Ensure all amounts are transferred adequately from individual schedules and that calculations are accurate.
The recapitulation provides a comprehensive overview of the estate’s composition and establishes the basis for computing estate tax liability. Executors filing solely to elect portability may use simplified valuation rules for specific marital and charitable deduction property. However, they must still estimate and include these values in the total gross estate.
4. Report Charitable Transfers Accurately
Use Schedule O to report charitable, public, and similar gifts and bequests that qualify for the estate tax charitable deduction under section 2055. Provide the name and address of each charitable beneficiary, the amount of each bequest, and sufficient detail to demonstrate that the transfer qualifies for the deduction.
Eligible recipients include the United States government, state and local governments, qualified religious and charitable organizations, and specific veterans organizations. Properly documented charitable bequests can significantly reduce the taxable estate, but incomplete information may result in the disallowance of the deduction.
5. Execute Proper Signatures and Declarations
The executor must sign and date the return under penalty of perjury, affirming that the information provided is accurate, correct, and complete. If multiple executors are appointed, all are responsible for the return, though only one signature is required if that executor is authorized to act on behalf of the others.
Executors must provide documentation proving their status, such as a certified copy of court orders or letters testamentary. The paid preparer, if applicable, must also sign the return and provide their identifying information. Proper execution is essential for the return to be considered valid and complete.
6. Verify Property Valuations with Supporting Documentation
Ensure that all property values listed on the schedules reflect fair market value as of the date of death or the alternate valuation date if that election is made. For real estate reported on Schedule A, attach detailed legal descriptions and professional appraisals when required. For closely held business interests, provide business valuation reports prepared by qualified appraisers.
For items of tangible personal property reported on Schedule F with individual values exceeding $3,000, attach appraisals from qualified professionals. Life insurance policies must be supported by Form 712 from each insurance company. Accurate valuations supported by credible documentation reduce the risk of IRS examination and potential adjustments.
7. Make Appropriate Elections in Part 3
Review the elections available in Part 3—Elections by the Executor and determine which are beneficial for the estate. These may include the alternate valuation election under section 2032 to value assets six months after death, the special-use valuation election under section 2032A for qualified farm or business real property, the election to pay estate tax in installments under section 6166 for estates with substantial closely held business interests, and elections regarding conservation easement exclusions under section 2031(c) reported on Schedule U.
Each election has specific requirements and deadlines that must be satisfied for the election to be valid. Special-use valuation can significantly reduce estate tax by valuing qualifying property based on its actual use rather than its highest and best use.
8. Calculate Generation-Skipping Transfer Tax
Complete Schedule R to calculate any generation-skipping transfer tax owed by the estate on direct skips to skip persons. A direct skip occurs when property passes from the decedent to a person two or more generations below the decedent, such as a grandchild, or to certain trusts for their benefit.
Calculate the GST tax by applying the maximum estate tax rate to the taxable amount after considering the GST exemption available for 2017, which equals the basic exclusion amount of $5,490,000. Schedule R-1 may also be required if the estate includes trusts that are subject to the generation-skipping transfer tax. Proper allocation of the GST exemption can preserve wealth for younger generations while minimizing transfer tax liability.
9. Compute Credits and Calculate Tax Liability
Calculate all applicable credits that reduce the estate tax liability. The unified credit based on the $5,490,000 basic exclusion amount provides an applicable credit amount of $2,141,800 for 2017. Additionally, compute credits for state death taxes paid, which are reported on Part 2 line 3b as a deduction rather than a credit.
Foreign death taxes paid may qualify for a credit on Schedule P if the estate includes property located in foreign countries. Prior transfer credits on Schedule Q apply if the property was inherited from someone who died within ten years before or two years after the current decedent. Properly claiming all available deductions and credits minimizes the estate’s tax burden.
10. Address Portability in Part 6
Complete Part 6—Portability of Deceased Spousal Unused Exclusion if the decedent had a surviving spouse. Filing a timely and complete Form 706 automatically elects to transfer any deceased spousal unused exclusion amount to the surviving spouse unless the executor affirmatively opts out by checking the box in Section A of Part 6.
Section C calculates the DSUE amount portable to the decedent’s surviving spouse, while Section D reports any DSUE amount the decedent received from one or more predeceased spouses. Even estates below the filing threshold should consider filing solely to preserve portability for the surviving spouse. Executors who missed the original deadline may qualify for relief under Revenue Procedure 2017-34.
Key 2017 Form Updates and Special Considerations
Portability Provisions and Extensions
The 2017 Form 706 includes Part 6—Portability of Deceased Spousal Unused Exclusion, which allows the estate to elect portability of any unused exclusion amount to the surviving spouse. This election is automatic upon timely filing of a complete and properly prepared Form 706, even if the estate is not otherwise required to file.
Revenue Procedure 2017-34 provides an essential extension for executors who did not have a filing requirement but failed to timely file Form 706 to make the portability election. These executors may file on or before the later of January 2, 2018, or the second anniversary of the decedent’s death. The form must state at the top that it is filed pursuant to Revenue Procedure 2017-34 to elect portability under Section 2010(c)(5)(A).
Restored Exclusion for Same-Sex Spouse Transfers
Notice 2017-15 introduced procedures allowing executors to restore exclusion amounts that were utilized in taxable gifts to same-sex spouses made before the Supreme Court’s decision in United States v. Windsor. If a decedent made a taxable gift during the decedent’s lifetime to the decedent’s same-sex spouse that resulted in a reduction of the decedent’s available applicable exclusion amount, the estate may restore that exclusion.
Similarly, any generation-skipping transfer exemption amount allocated to gifts whose generation assignment changed as a result of Notice 2017-15 will be deemed void. These provisions ensure equitable treatment of same-sex married couples for estate and gift tax purposes.
Special Use Valuation Requirements
Estates electing special-use valuation under section 2032A for qualified farm or business real property must complete both Schedule A and Schedule A-1, attaching all required documentation. This includes agreements signed by all qualified heirs accepting personal liability for potential recapture tax, detailed descriptions of the property and its qualified use, evidence of material participation by the decedent or family members for at least five of the eight years preceding death, and calculations demonstrating that the property meets the statutory percentage requirements.
The maximum reduction in value under section 2032A for 2017 was $1,120,000. Special-use valuation can substantially reduce estate tax by valuing qualifying property based on its actual use rather than its highest and best use.
Marital and Charitable Deductions
Schedule M reports bequests and property interests passing to the surviving spouse that qualify for the marital deduction under section 2056. Qualified terminable interest property elections are made by listing the property on Schedule M and including its value. If the surviving spouse is not a United States citizen, the marital deduction generally requires that property pass through a qualified domestic trust.
Schedule O reports charitable bequests qualifying for the charitable deduction under section 2055. Both schedules require careful documentation and proper valuation. For estates filing solely to elect portability with gross estates below the basic exclusion amount, simplified valuation rules under Regulations section 20.2010-2(a)(7)(ii) allow estimated values for specific marital and charitable deduction property.
This comprehensive checklist provides executors and tax professionals with a structured approach to completing Form 706 for 2017 estates, ensuring compliance with applicable laws while maximizing available tax benefits for heirs and beneficiaries.
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.
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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.
