What Is IRS Form 706, Who Must File, Related Forms

rbv2 53 5bfc2b8ac9e77c0058770499

What Is Kind 706: United States Property (and Technology-Skipping Switch) Tax Return?

Kind 706: United States Property (and Technology-Skipping Switch) Tax Return is an Inner Income Service (IRS) kind utilized by an executor of a decedent’s property to calculate the property tax owed, based on Chapter 11 of the Inner Income Code (IRC). The tax is levied on all the taxable property, not simply on the share a selected beneficiary receives. Executors additionally use Kind 706 to calculate the generation-skipping switch tax (GSTT) imposed by Chapter 13 of the IRC.

Key Takeaways

  • Kind 706 is utilized by an executor of a decedent’s property to calculate property tax owed, based on Chapter 11 of the Inner Income Code (IRC), and to calculate the generation-skipping switch tax (GSTT) imposed by Chapter 13 of the IRC.
  • Kind 706 should be filed on behalf of a deceased U.S. citizen or resident whose gross property, adjusted taxable items, and particular exemptions exceed $12.06 million in 2022 (adjusted to $12.92 million in 2023, to account for inflation).
  • Kind 706-GS(D) is used to calculate taxes due on belief distributions topic to the generation-skipping switch tax (GSTT).

Kind 706 is utilized by an executor of an property to calculate the quantity of tax owed on estates valued at greater than $12.06 million if the decedent died in 2022 ($12.92 million in 2023).

Kind 706 additionally helps executors decide the general worth of an property previous to distributing any belongings to beneficiaries as outlined within the decedent’s will or belief. The IRS treats any inheritance on a stepped-up valuation—or a step-up foundation. Meaning the associated fee foundation is adjusted to the truthful market worth of the inherited property as of the date of loss of life.

Utilizing the stepped-up valuation methodology permits heirs to reduce capital beneficial properties taxes. The tactic additionally permits for a cleaner valuation course of by way of limiting the variety of administrative duties related to the property. 

Who Can File Kind 706?

Kind 706 should be filed by the executor of the property of each U.S. citizen or resident:

  • Whose gross property, adjusted taxable items, and particular exemptions complete greater than the exclusion quantity: $12.06 million for decedents who died in 2022 ($12.92 million in 2023), or
  • Whose executor elects to switch the “deceased spousal unused exclusion” (DSUE) quantity to the surviving partner, whatever the dimension of the decedent’s gross property.

To find out if the property exceeds the exclusion quantity, add collectively quantities 1, 2, and three under.

  1. The adjusted taxable items made by the decedent after Dec. 31, 1976
  2. The entire particular exemption allowed underneath Part 2521 (as in impact earlier than its repeal by the Tax Reform Act of 1976) for items made by the decedent after Sept. 8, 1976
  3. The decedent’s gross property valued as of the date of loss of life

The gross property consists of:

The IRS makes use of a stepped-up valuation methodology in figuring out the worth of an property.

Kind 706 is on the market on the IRS webpage.

Associated Types

Kind 706-NA, United States Property (and Technology-Skipping Switch) Tax Return, is used to calculate property tax and GSTT legal responsibility for nonresident alien decedents.

Kind 706-GS(D), Technology-Skipping Switch Tax Return for Distributions, is used to calculate taxes due on belief distributions topic to the GSTT. Any skip one that receives a taxable distribution coming from a belief should use Kind 706-GS(D) to calculate and report the tax due.

A generation-skipping switch tax (GST) is a switch of cash or property, both as an inheritance or a present, to somebody who is 2 or extra generations under the grantor. The one that receives the inheritance or reward is named the “skip particular person.” Whereas a skip particular person is usually a grandchild, it may very well be anybody who’s at the very least 37½ years youthful than the grantor.

The GSTT is imposed on items and inheritances {that a} skip particular person receives. This ensures that taxes are paid at every generational stage. The GSTT has the identical lifetime exemption because the federal property and reward taxes—$12.06 million for 2022 ($12.92 million for 2023).

Trustees should report taxable distributions to skip individuals utilizing Kind 706-GS(D-1), Notification of Distribution From a Technology-Skipping Belief. Notice that trustees should additionally present the skip particular person with the knowledge wanted to determine the tax due on the distribution.

The place to Mail Kind 706

You will need to file a paper Kind 706 to report property or GSTT inside 9 months of the date of the decedent’s loss of life. Should you can’t file Kind 706 by the due date, you’ll be able to apply for an computerized six-month extension utilizing Kind 4768, Utility for Extension of Time to File a Return and/or Pay U.S. Property (and Technology-Skipping Switch) Taxes.

File Kind 706 on the following handle:

  • Division of the Treasury, Inner Income Service, Kansas Metropolis, MO 64999

Should you’re utilizing a personal supply service (together with DHL Specific, FedEx, and UPS), ship Kind 706 to:

  • Inner Income Submission Processing Heart, 333 W. Pershing Highway, Kansas Metropolis, MO 64108

Should you’re submitting an amended Kind 706, use the next handle (even should you’re utilizing a personal supply service):

  • Inner Income Service Heart, Attn: E&G, Cease 824G, 7940 Kentucky Drive, Florence, KY 41042-2915

The property tax and the GSTT are due inside 9 months of the date of the decedent’s loss of life. Make checks payable to “United States Treasury” and observe the decedent’s identify, Social Safety quantity, and “Kind 706” on the test. Alternatively, you’ll be able to pay on-line by way of the Digital Federal Tax Funds System (EFTPS).

See also  Filing Status Definition