Table of Contents
- Schedule A. Disposition of Specially Valued Property or Cessation of Qualified Use
- Schedule B. Involuntary Conversions or Exchanges
- Part II—Tax Computation
- Schedule C. Dispositions to Family Members of the Qualified Heir
- Paid Preparer Authorization
When computing the amounts to enter on Form 706-A, use the same values and estate tax that the executor reported on the Form 706 filed for the decedent. However, if the IRS has completed the audit of the estate tax return, use the agreed values and tax rather than the reported values and tax.
On Schedule A, list every specially valued property interest that the qualified heir disposed of or discontinued use of since the date of the decedent's death and for which a Form 706-A has not been previously filed. Do not list any interests that have already been reported on Schedule A or B of a previously filed Form 706-A. In general, do not list property interests disposed of to family members of the qualified heir. These interests should be listed on Schedule C.
An arm's length transaction is a transaction where there is no bargain or gift element for affection or other reasons.
The amount realized is the sum of the money received plus the FMV of property (other than money) received. For the real property taxes that must be taken into account, see section 1001(b).
Fair market value (FMV) is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
Involuntary conversions of qualified real property (under the rules of section 1033) and exchanges of qualified real property (under the rules of section 1031) are treated similarly when computing the additional estate tax on Form 706-A.
The rules later apply to all qualified heirs, whether or not they made an election, for involuntary conversions and exchanges occurring after 1981.
If you are reporting an involuntary conversion or exchange, you may not use the same Form 706-A to report any cessations or other dispositions that are not involuntary conversions or exchanges. Use a separate Form 706-A for the cessations or other dispositions.
You may report conversions and exchanges together on the same return.
If the qualified heir reinvests all of the involuntary conversion proceeds in qualified replacement property or if the qualified heir exchanges qualified real property solely for qualified exchange property, then there is no additional estate tax.
You should complete Form 706-A, even though there is no tax, to notify the IRS that the involuntary conversion or exchange took place. However, you must complete only Part I, Schedule B, and Schedule A. Write “nontaxable” on line 19 of Part II.
If the cost of the qualified replacement property is less than the amount realized in the involuntary conversion or if other property in addition to qualified exchange property is received in the exchange, the conversion or exchange is partially taxable. You should complete all of Form 706-A and determine the tax using Part II.
List on Schedule A all specially valued property that the qualified heir disposed of or discontinued use of, regardless of whether he or she received replacement or exchange property for it. List on Schedule B only the replacement or exchange property the qualified heir actually received.
Qualified replacement property means any real property that is to be used for the qualified use and that:
Was acquired in an exchange that qualified under section 1031,
Was purchased by the qualified heir within the time specified by section 1033 to replace the qualified property, or
Is real property into which the qualified real property has been converted.
Qualified exchange property means any real property that is to be used for the same qualified use that the property for which it was exchanged was used.
The period of the decedent's or family member's ownership, qualified use, or material participation with respect to replaced or exchanged property is treated as the period of ownership, qualified use, or material participation with respect to the qualified replacement or exchange property. This applies only to that part of the FMV of the replacement or exchange property (at the date of acquisition) that does not exceed the FMV of the replaced or exchanged property (at the date of disposition).
The 10-year recapture period is extended under certain circumstances. See Two-Year Grace Period—Commencement Date earlier.
Enter the total value at the estate tax valuation date of all specially valued property that the executor elected, on the Form 706 filed for the decedent's estate, to value at actual use rather than FMV.
Schedule A-1. If you are not filing this Form 706-A on time, or if the transferee does not enter into the agreement, you must enter the disposition(s) on Schedule A instead of Schedule C.
Form 706-A must be signed. The taxpayer (or person filing on his or her behalf) must verify and sign the declaration on page 1 under penalties of perjury. The taxpayer may use Form 2848, Power of Attorney and Declaration of Representative, to authorize another person to act for him or her before the Internal Revenue Service.
Generally, anyone who is paid to prepare the return must sign the return in the space provided and fill in the Paid Preparer's Use Only area. See section 7701(a)(36)(B) for exceptions.
In addition to signing and completing the required information, the paid preparer must give a copy of the completed return to the taxpayer.
A paid preparer may sign original or amended returns by rubber stamp, mechanical device, or computer software program.
If the organization wants to allow the IRS to discuss its 2013 tax return with the paid preparer who signed it, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the Paid Preparer Use Only section of the return. It does not apply to the firm, if any, shown in that section. If the “Yes” box is checked, the organization is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of its return. The organization is also authorizing the paid preparer to:
Give the IRS any information that is missing from its return,
Call the IRS for information about the processing of its return or the status of any refund or payment(s), and
Respond to certain IRS notices that the organization may have shared with the preparer about math errors, offsets, and return preparation.
The notices will not be sent to the preparer. The organization is not authorizing the paid preparer to receive any refund check, bind the organization to anything (including any additional tax liability), or otherwise represent it before the IRS. If the organization wants to expand the paid preparer’s authorization, see Pub. 947, Practice Before the IRS and Power of Attorney. However, the authorization will automatically end no later than the due date (excluding extensions) for filing the 2013 tax return. If you want to revoke the authorization before it ends, see Pub. 947.
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