Form 706-NA (2022): Nonresident Estate Tax Checklist
Scope and purpose (what this checklist is for)
This checklist serves as a corrected reference guide for preparing Form 706-NA for a decedent who was not domiciled in the United States and not a U.S. citizen at death. It focuses on federal estate tax law.
The guidance applies to nonresident alien decedents and emphasizes compliance with transfer taxes administered by the Internal Revenue Service, including estate tax and generation-skipping transfer tax, where applicable.
Scope and key boundaries (what Form 706-NA is and is
not)
1) What Form 706-NA is used for
Form 706-NA is used to compute U.S. estate tax and, when relevant, generation-skipping transfer tax based on property treated as situated in the United States. The return applies only to the U.S. situs portion of the estate and does not impose federal estate taxes on worldwide assets of nonresident alien decedents.
It operates within the Internal Revenue Code and Treasury Regulations governing U.S. transfer taxes, requiring careful identification of taxable property and the proper application of valuation methods.
2) What Form 706-NA generally focuses on reporting
The return focuses on the U.S. gross estate, meaning assets classified as U.S. situs property for estate tax purposes, valued at fair market value as of death. However, certain deductions, limitations, or death tax treaties may require reference to non-U.S. information to compute allowable amounts correctly.
Accordingly, preparers should not assume that only U.S. asset data is ever required, particularly when deductions, credits, or treaty positions are asserted.
3) Portability election limitation
Form 706-NA is not a vehicle for making a portability election or transferring a deceased spousal unused exclusion amount to a surviving spouse. Portability election concepts apply to
Form 706 for U.S. citizens or residents, not to NRNC estates.
Including portability election language or steps in a Form 706-NA filing would be incorrect and should be avoided entirely.
4) Individual income tax exclusions do not apply
Form 706-NA does not incorporate individual income tax programs, credits, or reconciliations, including stimulus payments, ACA items, or income-based tax credits. These provisions are unrelated to estate tax and generation-skipping transfer tax reporting.
The return should remain limited to estate management and wealth transfer taxation concepts governed by federal estate tax law.
Step-by-step corrected checklist
Step 1: Confirm NRNC status based on citizenship and domicile
Confirm the decedent was not a United States citizen and was not domiciled in the United
States at death, applying domicile principles rather than residency labels. Document facts such as green card status, immigrant visa history, substantial presence test outcomes, community affiliations, voting registration, and driver’s license records.
The output of this step should be a written conclusion confirming NRNC classification for U.S.
estate tax purposes, retained in the file for audit or inquiry support.
Step 2: Determine whether a Form 706-NA filing is required
Identify U.S. situs assets and evaluate whether the $60,000 filing threshold is exceeded, subject to applicable adjustments. Do not assume filing is required merely because any U.S. property exists.
Document whether a return is required or not required, including a brief memo explaining the filing requirements analysis under the Internal Revenue Code.
Step 3: Build the U.S. situs asset inventory
Prepare a detailed inventory of gross estate assets classified as U.S. situs property, including residential property, tangible personal property, U.S. securities, and other includible interests.
Classification must follow statutory situs rules rather than account labels or custodian location.
Exclude assets not treated as U.S. situs, such as certain bank deposits or life insurance on the
NRNC decedent’s life, documenting the situs rationale for each inclusion or exclusion.
Step 4: Gather fair market value documentation
For each U.S. situs asset, collect valuation support establishing fair market value at the date of death, including appraisals, brokerage statements, or other accepted valuation methods.
Maintain documentation showing valuation assumptions, sources, and dates.
Estate tax valuation is FMV-driven, and cost basis reporting is generally not required unless specifically requested for disclosure or explanatory purposes.
Step 5: Apply the correct NRNC estate tax credit framework
Do not apply the basic exclusion amount used for U.S. citizens or residents when computing estate taxes for NRNC estates. Instead, use the limited unified credit framework applicable to nonresident alien decedents, often sheltering only a modest portion of U.S. situs assets.
If Death Tax Treaties are considered, ensure consistent application and documentation, supported by treaty text and Revenue Procedure 2022-32 where relevant.
Step 6: Prepare Form 706-NA schedules accurately
Complete Schedule A for U.S. real property, Schedule B for stocks and bonds treated as U.S.
situs, Schedule C for cash and receivables, and Schedule F for other U.S. situs property. Each schedule should reflect precise descriptions and fair-market-value amounts.
Only schedules applicable to the estate’s facts should be completed, but all required schedules must be included to support the gross estate calculation.
Step 7: Evaluate deductions and limitations
Identify allowable deductions, including funeral expenses, administration expenses, debt obligations, and charitable deduction items, recognizing that NRNC estates face specific limitations. Apply proportional or statutory limits as required by Form 706-NA instructions.
If a qualified domestic trust structure or a treaty provision affects the availability of a deduction, document the analysis and attach the required supporting schedules or statements.
Step 8: Address generation-skipping transfer tax only if triggered
Assess whether transfers from the U.S. gross estate involve a generation-skipping trust, direct skip, or taxable distribution requiring GST reporting. Complete GST components only when the facts trigger generation-skipping transfer tax obligations.
Avoid mischaracterizing grandfathered trusts or estate tax inclusion period concepts, and document GST exemption analysis carefully when applicable.
Step 9: Final assembly, signature, and administrative review
Verify internal consistency, mathematical accuracy, and cross-referencing between schedules and summary sections before finalizing the return. Attach appraisals or valuation explanations when necessary to support reported values.
Ensure the executor or authorized representative signs the return, using the appropriate identifier rather than assuming a Social Security number is required.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: File timely and retain records
File the return by the filing deadline, generally nine months after death, or request an extension of time using Form 4768 when appropriate. Confirm the correct mailing address using current
IRS guidance for Form 706-NA.
Retain copies, tracking ID information, and proof of timely filing to support later requests for an
IRS transfer certificate, TC 421 processing, or an estate tax closing letter.
Common pitfalls to avoid
Do not file automatically because any U.S. asset exists, do not reference portability election concepts, and do not apply resident exclusion amounts to NRNC estates. Avoid assuming situs based solely on physical location, or reporting life insurance on the NRNC’s life as U.S.
property.
Also, avoid requiring cost basis for estate valuation schedules and ensure filing requirements are supported by documented analysis.
Closing note
This checklist is intended as a practical compliance reference for the preparation of Form
706-NA and estate management. For complex international estate planning, treaty analysis, or disputed situs classifications, professional advice from experienced tax attorneys is strongly recommended.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
