Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

No items found.

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

Heading

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Frequently Asked Questions

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

Form 706 is the federal tax return used to report and calculate estate taxes when someone passes away. Think of it as the final tax accounting for everything a person owned at death. The executor (the person legally responsible for handling the deceased person's affairs) uses this form to tell the IRS about the value of the deceased person's estate and to figure out if any federal estate tax is owed.

For deaths occurring in 2010 specifically, this form serves a dual purpose: it calculates both the estate tax under Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax under Chapter 13. The generation-skipping transfer tax applies when assets pass directly to grandchildren or others who are two or more generations younger than the deceased, potentially skipping a level of estate taxation.

The form covers everything the deceased person owned or had an interest in at death, including real estate (even property located outside the United States), bank accounts, stocks and bonds, life insurance proceeds, jointly owned property, certain gifts made during the person's lifetime, annuities, and property over which the deceased had control through legal arrangements like powers of appointment.

When You’d Use It (Late/Amended)

Original Filing

You must file Form 706 if the deceased person was a U.S. citizen or resident who died in 2010 and whose gross estate (plus certain lifetime gifts) exceeded $5,000,000. For most deaths in 2010, the standard deadline was nine months after the date of death. However, the IRS granted special relief for 2010 estates: for anyone who died between January 1, 2010, and December 16, 2010, the filing deadline was extended to September 19, 2011.

Late Filing

If you missed the deadline, you could request a six-month extension by filing Form 4768 before the original due date. The IRS may waive late-filing penalties if you can demonstrate "reasonable cause" for the delay—meaning you had a good reason beyond your control, such as serious illness, natural disaster, or unavoidable delays in gathering estate documentation. However, you must provide this explanation only after receiving a penalty notice; don't attach explanations to your original filing.

Amended Returns

If you discover errors after filing, you need to file a supplemental Form 706. Write "Supplemental Information" across the top of page one and attach copies of pages 1, 2, and 3 from your original return. Common reasons for amendments include discovering additional assets, correcting property valuations, or fixing calculation errors. If the IRS has already selected your return for examination, send the corrections directly to the examining office rather than filing a new return.

Key Rules for 2010

The $5 Million Exemption

For executors who chose to file Form 706, the applicable exclusion amount was $5,000,000 with a maximum tax rate of 35%. This meant the first $5 million of the estate passed tax-free, and only amounts above that threshold faced taxation—at a significantly lower rate than in previous years (when rates reached 45% or higher).

The Alternative Choice

Executors could instead elect "modified carryover basis treatment" by filing Form 8939 rather than Form 706. Under this alternative, the estate would pay no federal estate tax at all, regardless of size. However, there was a trade-off: beneficiaries would generally receive less favorable tax treatment when they later sold inherited assets. This carryover basis option was the only choice available for estates above $5 million that wanted to avoid estate tax.

Generation-Skipping Transfer Tax

For 2010, the GST tax rate was zero, meaning transfers that skipped a generation faced no additional federal tax burden—a significant benefit for families transferring wealth to grandchildren or establishing multi-generation trusts.

State Death Tax Deduction

Unlike earlier years when estates could claim a credit for state estate taxes, 2010 estates could only claim a deduction. This meant state death taxes reduced the taxable estate amount rather than providing a dollar-for-dollar credit against federal tax owed—generally less favorable for taxpayers.

Special Valuation Ceiling

The maximum reduction in estate value available through special-use valuation (primarily for family farms and businesses) was capped at $1,000,000 for 2010 deaths.

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Calculate whether the gross estate plus adjusted taxable gifts exceeds $5,000,000. If not, no filing is required unless you choose to file Form 8939 to elect out of estate taxation entirely. Remember, the gross estate includes everything worldwide that the deceased owned or controlled.

Step 2: Obtain Executor Documentation

The IRS requires proof that you have legal authority to act as executor. Gather a certified copy of the court order appointing you, the will (if one exists), or other legal documentation establishing your role. Simply stating you're the executor is not sufficient.

Step 3: Gather Asset Information and Death Certificate

You must attach the death certificate to Form 706. Compile complete information about all estate assets, including real estate deeds, bank statements, brokerage account statements, life insurance policies (Form 712 statements), and documentation of any debts or liabilities. Obtain professional appraisals for valuable assets like real estate, businesses, art, or collectibles.

Step 4: Complete Required Schedules

Form 706 includes multiple schedules (A through U) for different asset types and deductions. File only the schedules relevant to the estate:

Schedule A for real estate
Schedule B for stocks and bonds
Schedule C for mortgages and notes
Schedule D for life insurance
Schedule E for jointly owned property

Each schedule requires detailed descriptions and valuations.

Step 5: Calculate Tax and Credits

Using Part 2 of the form, calculate the tentative estate tax using the unified rate schedule, then subtract allowable credits including the $5,000,000 applicable exclusion amount ($1,730,800 credit equivalent). Account for any gift taxes previously paid on lifetime transfers and any state death taxes paid.

Step 6: Make Elections and File

Decide whether to elect alternate valuation (valuing assets six months after death rather than at death date), special-use valuation for farms or businesses, or installment payment of estate tax under Section 6166. Mail the completed return with all attachments to the IRS Cincinnati Service Center. Payment is due with the return or arrangements must be made for extended payment.

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Executors often miss assets, particularly small bank accounts, forgotten insurance policies, or jointly held property that's actually includible in the estate.
Solution: Conduct a thorough search of the deceased's financial records, contact their accountant and attorney, and check state unclaimed property databases.

Improper Valuations

Using outdated appraisals, "ballpark" estimates, or non-comparable sales can lead to significant valuation penalties. The IRS imposes a 20% penalty for undervaluations of 65% or less of actual value, increasing to 40% for gross understatements (40% or less of actual value).
Solution: Obtain qualified, written appraisals from credentialed professionals dated as close to the date of death as possible.

Missing Documentation

Filing without required attachments causes processing delays and may invalidate elections.
Solution: Use the checklist on page 43 of the instructions to verify all required documents (e.g., Form 712, certified will, appraisals, Form 709s) are included before mailing.

Incorrect Gift Tax Reconciliation

Executors frequently make errors calculating "adjusted taxable gifts"—lifetime gifts that affect the available estate tax exemption.
Solution: Locate all Forms 709 filed by the deceased, and if any were audited by the IRS, use the finally determined amounts.

Failing to Document Executor Status

The IRS requires formal proof of executor authority; self-declarations are insufficient.
Solution: Attach court appointment documents, certified will copies, or—if no formal appointment exists—documentation showing you qualify under state law to administer the estate.

State Death Tax Documentation Errors

Claiming the state death tax deduction without proper substantiation can lead to disallowance.
Solution: Obtain and attach certificates from each state showing total tax imposed, penalties and interest, discounts allowed, actual amount paid, and payment date.

What Happens After You File

Initial Processing

The IRS receives your return at its Cincinnati Service Center, where it undergoes initial processing to ensure completeness. Missing pages or unsigned returns will be returned to you.

Examination Selection

The IRS typically decides whether to audit a Form 706 within six months of filing. High-value estates, unusual deductions, or significant discrepancies between reported values and IRS databases increase audit likelihood.

Audit Process

If your return is selected, an IRS estate tax specialist will contact you requesting additional documentation or clarification. The examination can take months or even years for complex estates.

Estate Tax Closing Letter

After the IRS completes its review, you can request an Estate Tax Closing Letter (Letter 627) by submitting Form 2854 with a user fee. Alternatively, you can request an account transcript showing similar confirmation.

Payment and Refunds

If you owe additional tax, you'll receive a notice with payment instructions. If you overpaid, the IRS will issue a refund. Interest accrues on any unpaid tax from the original due date forward.

Statute of Limitations

The IRS generally has three years from when you file Form 706 to assess additional estate tax, six years for substantial underreporting, and no limit in cases of fraud or non-filing.

FAQs

Do I need to file Form 706 even if no estate tax is due?

For 2010, you must file if the gross estate plus adjusted taxable gifts exceeds $5,000,000, even if deductions reduce tax owed. Many executors of smaller estates filed voluntarily to establish property values or make portability elections (though portability began in 2011).

What was the unique 2010 estate tax choice, and how did executors decide?

Executors could choose between paying estate tax (Form 706) or electing out entirely (Form 8939) under modified carryover basis rules. The decision required comparing immediate estate tax vs. future capital gains tax exposure.

Can I value assets at a date other than the date of death?

Yes. You can elect "alternate valuation," which values all assets six months after death (or on distribution date if earlier), but only if it reduces both the gross estate and total tax owed. This election is irrevocable and must apply to all assets.

What if we can't pay the estate tax within nine months?

Options include:

Filing Form 4768 for a six-month payment extension.
Electing installment payments under Section 6166 for closely held businesses.
Requesting postponement under Section 6163 for certain remainder interests.

What penalties apply for errors or late filing?

Late filing: 5% per month (up to 25%).
Late payment: 0.5% per month (up to 25%).
Valuation understatement: 20% penalty (40% for gross understatements).
Interest accrues on unpaid amounts even if penalties are waived.

How long does the estate need to keep Form 706 records?

Keep all Form 706 documentation permanently. Beneficiaries may need it decades later to establish basis for capital gains. Some elections also create long-term reporting obligations.

Where can I get help preparing Form 706?

Form 706 is complex. Consider hiring:

An estate tax attorney
A CPA with estate/trust expertise
An enrolled agent

IRS publications that help include:

Publication 559: Survivors, Executors, and Administrators
Publication 950: Introduction to Estate and Gift Taxes

Call the IRS Estate and Gift Tax Helpline: 866-699-4083

Sources:
All information is derived from official IRS publications, including Form 706 Instructions (Rev. July 2011) for 2010 decedents, About Form 706, and IRS Estate Tax FAQs, all available at IRS.gov.

‍

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

When You’d Use It (Late/Amended)

Original Filing

Late Filing

Amended Returns

Key Rules for 2010

The $5 Million Exemption

The Alternative Choice

Generation-Skipping Transfer Tax

State Death Tax Deduction

Special Valuation Ceiling

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Step 2: Obtain Executor Documentation

Step 3: Gather Asset Information and Death Certificate

Step 4: Complete Required Schedules

Step 5: Calculate Tax and Credits

Step 6: Make Elections and File

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Improper Valuations

Missing Documentation

Incorrect Gift Tax Reconciliation

Failing to Document Executor Status

State Death Tax Documentation Errors

What Happens After You File

Initial Processing

Examination Selection

Audit Process

Estate Tax Closing Letter

Payment and Refunds

Statute of Limitations

FAQs

Do I need to file Form 706 even if no estate tax is due?

What was the unique 2010 estate tax choice, and how did executors decide?

Can I value assets at a date other than the date of death?

What if we can't pay the estate tax within nine months?

What penalties apply for errors or late filing?

How long does the estate need to keep Form 706 records?

Where can I get help preparing Form 706?

Thank you for submitting!

Frequently Asked Questions

Related Articles

Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return – 2010 Edition

What the Form Is For

When You’d Use It (Late/Amended)

Original Filing

Late Filing

Amended Returns

Key Rules for 2010

The $5 Million Exemption

The Alternative Choice

Generation-Skipping Transfer Tax

State Death Tax Deduction

Special Valuation Ceiling

Step-by-Step Filing (High Level)

Step 1: Determine If Filing Is Required

Step 2: Obtain Executor Documentation

Step 3: Gather Asset Information and Death Certificate

Step 4: Complete Required Schedules

Step 5: Calculate Tax and Credits

Step 6: Make Elections and File

Common Mistakes and How to Avoid Them

Incomplete Asset Discovery

Improper Valuations

Missing Documentation

Incorrect Gift Tax Reconciliation

Failing to Document Executor Status

State Death Tax Documentation Errors

What Happens After You File

Initial Processing

Examination Selection

Audit Process

Estate Tax Closing Letter

Payment and Refunds

Statute of Limitations

FAQs

Do I need to file Form 706 even if no estate tax is due?

What was the unique 2010 estate tax choice, and how did executors decide?