What Form 706 (2013) Is For
Form 706 (2013) reports the total fair market value of a decedent’s estate, including real estate, securities, cash, and business interests, to determine federal estate tax liability. It also calculates the generation-skipping transfer tax when assets pass to beneficiaries two or more generations younger. Executors file this form to compute the taxable estate, apply deductions, and claim the DSUE amount if electing portability for a surviving spouse under federal estate tax law.
When You’d Use Form 706 (2013)
Executors must file Form 706 within nine months after the decedent’s date of death if the gross estate plus lifetime gifts and adjusted taxable gifts exceed the exemption threshold for 2013, or to elect portability of the DSUE amount. A six-month extension, also known as an automatic six-month extension, may be requested using Form 4768 if additional time is needed. However, payment of tax remains due by the original due date, and interest will be applied to unpaid balances.
Key Rules or Details for 2013
- Basic exclusion amount: The federal estate tax exemption for 2013 was $5,250,000, meaning that most estates with a value below this amount generally did not owe federal estate tax to the United States Treasury.
- Applicable credit amount: The credit of $2,045,800 offsets tax owed on the taxable estate and is applied after calculating the tentative tax based on the total estate value.
- Top estate tax rate: The maximum rate of forty percent applies to estate value exceeding the exemption amount after all deductions and adjustments are considered.
- Portability election: Executors can elect portability to transfer the deceased spouse's unused exclusion to a surviving spouse by timely filing a complete Form 706 within the due date or extension period.
- State Death Tax Deduction: Estates may deduct any state estate or inheritance tax paid, rather than claiming a credit, thereby reducing the taxable value reported on the estate tax return.
- Special-use valuation: Qualified real property, such as farms or closely held businesses, may be valued based on its actual use rather than its market potential, which can lower the tax owed if the property meets federal estate requirements.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Gather Records
Executors should obtain the death certificate, will, appraisals, bank and brokerage statements, life insurance Form 712, and prior gift tax returns. Collecting these items early helps determine fair market value for all assets, including securities and real property. Work with a financial advisor or appraiser to ensure all values reflect accurate market data on the decedent’s date of death.
Step 2: Determine Fair Market Value
Establish the fair market value of each asset on the date of death, including cash, securities, and business interests. Executors may use the alternate six-month valuation if it reduces both estate value and federal estate tax owed. This determination should be supported with appraisals and documentation, especially for unique or illiquid assets.
Step 3: Complete Schedules and Compute Estate Tax
Executors must file form schedules detailing assets, deductions, and taxable gifts to calculate the gross estate and determine the tax owed. Schedules A through M cover assets and deductions, while Part 2 computes total estate tax and credits. If generation-skipping transfers apply, complete Schedule R. Verify that all lifetime gifts have been reported and that tax bills and payments are accurate.
Step 4: Sign, Pay, and File Form 706
The executor signs under penalty of perjury, ensures all attachments are complete, and makes the check payable to the United States Treasury. Payment and filing must be made to the appropriate address—such as the IRS facility on Pershing Road, Kansas City—by the due date. Use a private delivery service for timely proof of mailing if close to the deadline.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Missing deadlines: Executors who file late risk penalties and interest. To avoid this, mark the nine-month due date immediately and request an automatic six-month extension well in advance if needed.
- Not electing portability: Some married couples lose the DSUE amount because the executor failed to elect portability on time. File Form 706 even if the estate owes no tax to preserve the benefit.
- Incomplete lifetime gifts: Executors sometimes overlook prior taxable gifts. Confirm with the IRS or check family records to ensure all lifetime gifts were reported correctly and reconcile them on the estate tax return.
- Valuation errors: Incorrect fair market value calculations can trigger penalties. Use qualified appraisers for real property, business interests, and securities to support reported values on the tax return.
- Missing documents: Returns without death certificates, certified wills, or Forms 712 cause delays. Include all required items and confirm that each attachment matches the filing requirement to prevent rejection.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After submission, the Internal Revenue Service typically processes the estate tax return within six to eight weeks, followed by a detailed review. Executors should expect correspondence if additional documents or clarifications are required. Some estates may receive an estate tax closing letter once the estate is accepted for tax purposes. If the IRS audits the decedent’s estate, the executor should cooperate fully and may consult a financial advisor to handle complex valuation or deduction issues.
FAQs
Do I need to file Form 706 (2013) if no estate tax is due?
Executors may still need to file Form 706 (2013) to elect portability and preserve the deceased spouse's unused exclusion for a surviving spouse. Filing ensures that any remaining exemption transfers are for use against future estate or gift tax liabilities.
How is fair market value determined for an estate tax return?
Fair market value reflects what a willing buyer would pay a willing seller at the decedent’s death. Executors must use reliable appraisals or comparable market data to establish accurate values for all assets in the decedent’s estate.
What is the due date, and can I request an extension?
The due date for Form 706 is nine months after the date of death. Executors may request an automatic six-month extension by filing Form 4768, but estate tax payment must still be made by the original date.
How does the deceased spousal unused exclusion (DSUE benefit a surviving spouse?
The DSUE amount allows a surviving spouse to apply any unused exemption from the deceased spouse’s estate to their estate tax return, reducing future estate or gift tax owed.
How do I elect portability on a federal estate tax return?
To elect portability, file Form 706 completely and on time, ensuring all schedules are included. The executor must affirm portability or opt out in Part 6, as specified in the 2013 IRS revenue procedure.
What can I expect after filing Form 706 with the IRS?
Executors should expect acknowledgment from the IRS after processing and may later receive an estate tax closing letter. The review period varies depending on the estate's complexity and valuation accuracy.
What happens if the decedent was not a citizen of the United States?
If the decedent was not a citizen or resident, different filing requirements may apply under federal estate tax rules. Executors should consult a financial advisor or IRS guidance before they file Form 706.
For more resources on filing or understanding prior-year IRS forms, visit our guide on Business Income Tax Forms.
