Form 706-NA Tax Year 2012: Complete IRS-Accurate Checklist for Nonresident Not-a-Citizen Decedents
Year Uniqueness Statement
Form 706-NA for 2012 (filed for decedents dying December 31, 2011–January 1, 2013) differs fundamentally from Form 706 by limiting the executor’s exemption to $60,000 (not indexed annually) and taxing only U.S.-situs property while requiring worldwide estate valuation for deduction calculations. The unified credit cap is $13,000; marital and charitable deductions face strict citizenship and use restrictions, and portability elections remain unavailable for nonresident decedents, unlike those of U.S. citizens.
The 2012 tax year marked the continued application of the estate tax exemption freeze at rates established after 2010, with no inflation indexing of the $60,000 nonresident threshold. Form 706-NA itself underwent no major redesign in 2012; however, the companion Form 706 (Rev. August 2012) added Part 6, addressing the Portability of Deceased Spousal Unused Exclusion (DSUE), a feature expressly unavailable to nonresident non-citizen decedents.
Form-Specific Restrictions and Requirements
Form 706-NA applies exclusively to decedents who were neither domiciled in nor citizens of the United States at the date of death. The form taxes only property located in the United States; property situated outside the U.S. is reported but not included in the taxable estate. Marital and charitable deductions are severely restricted: the marriage deduction applies only if the surviving spouse is a U.S. citizen or if property passes to a Qualified Domestic Trust (QDOT) under section 2056A, with Schedule M (Form 706) required; charitable deductions apply only to transfers to domestic entities or for U.S. use, with Schedule O (Form 706) required.
No marital deduction is allowed for gifts to a noncitizen spouse during life (Form 709 is used for lifetime gifts). The maximum unified credit of $13,000 is reduced dollar-for-dollar by any unified credit previously used against gift tax.
Ten-Step Compliance Checklist for Form 706-NA, Tax Year 2012
1. Determine Filing Requirement Based on Threshold Amount
You must file Form 706-NA if the date of death value of the decedent’s U.S.-situated assets, together with gift tax specific exemption and adjusted taxable gifts, exceeds the 2012 filing threshold of $60,000. This threshold is not adjusted for inflation and remains fixed for all nonresident decedents regardless of their home country or worldwide asset value.
Calculate the total by summing (a) the gross estate located in the United States (real property, U.S. corporate stock, debt obligations of U.S. persons, insurance proceeds, and other tangible or intangible property physically or legally situated in the U.S.), (b) the gift tax specific exemption allowed for gifts made between September 9, 1976, and December 31, 1976, and (c) adjusted taxable gifts made after December 31, 1976. If this combined amount exceeds $60,000, filing is mandatory.
2. Gather and Document All U.S.-Situs Property with Death Date Valuations
Prepare a comprehensive list of all property physically or legally located in the United States in which the decedent held any interest at death, including real estate, U.S. corporate stock (provide CUSIP numbers), debt obligations of U.S. corporations or the U.S. government, bank deposits in U.S. branches, life insurance proceeds payable to beneficiaries other than the estate, joint property with right of survivorship, community property (to the extent of the decedent’s interest), dower or curtesy interests, and property transferred within three years of death under section 2035.
For each asset, determine the fair market value as of the date of death in U.S. dollars. For closely held or inactive corporate stock, attach balance sheets nearest the valuation date and statements of net earnings, operating results, and dividends paid for each of the five preceding years.
3. Determine Allowable Deductions and Obtain Required Form 706 Schedules
From the gross U.S. estate, calculate deductions allowable whether or not incurred or paid in the United States: funeral expenses, administration expenses, claims against the estate, unpaid mortgages and liens on included property (limited to the mortgaged property’s value), and losses from theft or casualty during administration.
If claiming a marital deduction, verify that the surviving spouse is a U.S. citizen at the date of death or that the property qualifies for a Qualified Domestic Trust election under section 2056A; if so, obtain and complete Schedule M (Form 706) and attach both the schedule and a detailed computation showing the marital deduction amount.
If claiming a charitable deduction, verify the transfer is to a domestic entity or is for use in the United States; if so, obtain and complete Schedule O (Form 706) and attach it with a detailed statement of the charitable deduction computation.
4. Confirm Nonresident Status and Gather Citizenship Documentation
Obtain and attach the decedent’s death certificate to Form 706-NA. If the decedent died testate (with a valid will), attach a certified copy of the will. If certification is unavailable, attach a copy accompanied by a written explanation of why certification is not possible.
Confirm that the decedent was neither domiciled in nor a citizen of the United States at the date of death; a “green card” holder (lawful permanent resident for income tax purposes) may still be classified as a nonresident for estate tax purposes if not domiciled in the U.S.
Answer “Yes” or “No” to question 6a on Part III of Form 706-NA regarding whether the decedent was ever a U.S. citizen or resident; if “Yes,” answer question 6b regarding whether citizenship or residency was lost within ten years of death and before June 17, 2008.
5. Establish Property Valuations and Gather Appraisals or Fair Market Value Documentation
For all U.S.-situs property, determine fair market value as of the date of death. For real property, obtain a professional appraisal or a detailed listing with comparable sales or income approach documentation. For stocks and bonds, use closing prices on the date of death; if no closing price is available, use the average of the highest and lowest quoted selling prices, or obtain a broker’s valuation; provide the CUSIP number and exchange for each security.
For closely held corporate stock and partnership interests, attach appraisals, financial statements for the five preceding years, and any relevant buy-sell agreements or valuation formulas. For deposits with U.S. banks, obtain account statements as of the date of death showing balances and interest accrued. For U.S. life insurance, get Form 712 (Life Insurance Statement) from the insurance company for each policy included in the gross estate.
6. Calculate the Taxable Estate and Allowable Unified Credit
On Schedule B (or the equivalent lines on Form 706-NA Part IV for 2012), compute: line 1 (gross U.S.-situs estate from Schedule A), line 2 (total of property located outside the United States, if any, documented but not subject to U.S. tax), line 3 (entire gross estate worldwide), line 4 (deductions allowable under section 2106, documented on attached schedules), line 5 (taxable estate equals line 3 minus line 4).
The unified credit allowable is the lesser of (a) the computed tax on line 6 of Part II (Tax Computation) or (b) the maximum unified credit of $13,000, reduced by any unified credit previously used against the decedent’s gift tax. Any amount of unified credit previously allowed against gift tax must be subtracted dollar-for-dollar from the estate’s unified credit.
7. Identify and Complete All Required Schedules and Attachments
Complete Part V of Form 706-NA, listing all U.S.-situs property with description, CUSIP number or EIN where applicable, and values; transfer the total to line 1 of Part IV (U.S. gross estate). If property outside the U.S. is owned, document the total value and transfer to line 2 of Part IV, but do not list individual foreign assets on Part V unless a treaty provision requires it.
If claiming any deduction or credit requiring Form 706 schedules, obtain and attach the completed schedules from Form 706: Schedule M (marital deduction), Schedule O (charitable deduction), Schedule G (lifetime transfers), Schedule Q (prior transfer credit), Schedule U (qualified conservation easement exclusion), and Schedule E or H if applicable. Attach Schedule R (Form 706) if the generation-skipping transfer tax applies.
8. Gather Proof of Decedent’s Status and Foreign Tax Paid
If the decedent was a U.S. citizen but not a U.S. resident (expatriate or citizen abroad), attach a copy of the inventory of property and schedule of liabilities, claims, and administration expenses filed with a foreign probate court, certified by an official of that court. Attach a copy of any estate or inheritance tax return filed with a foreign jurisdiction, certified by an official of the foreign tax department.
If no foreign return was required, attach an inventory setting forth the decedent’s assets and their values at the date of death with an explanation of how the worldwide estate figure was computed. If any state estate or inheritance taxes were paid or are payable on property included in the U.S. gross estate, obtain a certificate from the taxing authority and attach this certificate to Form 706-NA.
9. Prepare Form 706-NA, Complete All Parts, Sign, and Verify Completeness
Complete Part I with the decedent’s name, U.S. taxpayer ID number (if any), place of death, domicile at death, citizenship (nationality), date of death, date of birth, and place of birth. Enter the executor’s name, address, and title on Part I; if there are multiple executors, list all names, Social Security numbers, and addresses on Page 1 or continuation sheets.
Complete Part III (General Information) by answering “Yes” or “No” to all questions regarding the decedent’s U.S. property, business engagement, safe deposit boxes, joint property ownership, prior citizenship or residency, lifetime transfers, trusts, and powers of appointment. Complete Part II (Tax Computation) by entering line 1 (taxable U.S. estate from Part IV), line 2 (total taxable gifts), line 3 (total), and computing the tentative tax using the unified rate schedule for 2012.
10. File the Return within Nine Months of Death and Maintain Complete Documentation
File Form 706-NA within nine months after the date of death. An automatic six-month extension of time to file is available by filing Form 4768 on or before the original due date, which extends the filing deadline to 15 months after the date of death. If an executor is out of the country, a second extension of up to six additional months may be requested by filing a second Form 4768, accompanied by a written statement of explanation.
The correct amount of estate tax is due by the nine-month deadline; extensions of time to file do not extend the time to pay the tax. Attach all required documents to Form 706-NA: death certificate, certified will (if testate), all Form 706 schedules, appraisals, balance sheets, foreign tax certificates, valuation documentation, and Form 712s for life insurance. Keep complete copies of all supporting documentation for a minimum of seven years.
2012 Form 706-NA Line and Section Changes
The August 2013 revision of Form 706-NA instructions (applicable to 2012 deaths) did not redesign the form itself; however, the instructions clarified several provisions in light of post-2010 estate tax changes. Most significantly, the 2013 instructions reaffirmed that the $60,000 filing threshold for nonresidents remains unadjusted and unindexed, in contrast to the $5,120,000 exemption available to U.S. citizens in 2012 under Form 706. The maximum unified credit for nonresidents is fixed at $13,000, with no portability election available to surviving spouses.
Schedule A-1 (special-use valuation) is not available to nonresidents; however, Schedule U (qualified conservation easement exclusion) IS available and may be attached to Form 706-NA to elect the section 2031(c) exclusion for qualified conservation easements, as stated in the Form 706-NA instructions: “Under section 2031(c), you may elect to exclude a portion of the value of land that is subject to a qualified conservation easement. You make the election by attaching Schedule U (Form 706).”
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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.
