Specific Instructions

Part I—General Information

Line 1b.   Enter the taxpayer identification number (TIN) of the surviving spouse. The TIN is the SSN or ITIN.

If trustee files entire return—Lines 2a, 2b, and 2c.   If the trustee is filing the entire return, enter the trustee's information on lines 2a, 2b, and 2c.

Line 2b.   If the trustee/designated filer is an individual, enter his or her SSN. Otherwise, enter the employer identification number (EIN) of the trustee/designated filer.

Line 2c.   Enter the address at which you wish to receive correspondence from the IRS regarding this return. This must be an address for the designated filer, or if the trustee is filing the return, one of the individual trustees who is a U.S. citizen or a trustee that is a domestic corporation.

Line 4a.   Enter the name of the decedent on whose estate tax return the QDOT election was made.

Line 4b.    Enter the SSN of the decedent or, if applicable, the number previously assigned to the decedent's estate by the service center.

Part II—Elections by the Trustee/Designated Filer

If this return is being filed because of the death of the surviving spouse, and any property remaining in the QDOT at that time is includible in the estate of the surviving spouse (or would be includible if the surviving spouse had been a U.S. citizen or resident), then the trustee/designated filer may elect to apply certain estate tax benefits on this return, provided the estate of the surviving spouse would be eligible for these benefits.

Line 1. Alternate valuation.   Unless you elect at the time you file this return to adopt alternate valuation under section 2032, then you must value all property of all trusts listed on Schedule A, Part III on the date of the surviving spouse's death.

Note.

You may not elect alternate valuation for any property reported on Schedule A, Parts I and II.

  You may not elect alternate valuation unless the election will decrease both the value of the Schedule A, Part III property, and the net tax due on the return.

  A designated filer filing for multiple trusts must make this election for all of the Schedule A, Part III property in all of the trusts, taken as a whole. The election cannot be made unless the requirements are met for all of the property.

  You elect alternate valuation by checking “Yes” on line 1 and filing Form 706-QDT. Once made, the election is irrevocable.

  If you elect alternate valuation, you must value all of the property to which the election applies as of the applicable date as follows.
  1. Any property distributed, sold, exchanged, or otherwise disposed of by any method within 6 months after the surviving spouse's death is valued on the date of distribution, sale, exchange, or other disposition, whichever occurs first. Value the property on the date title passed as a result of the sale, exchange, or other disposition.

  2. Any property not distributed, sold, exchanged, or otherwise disposed of within the 6-month period is valued on the date 6 months after the date of the surviving spouse's death.

  3. Any property that is “affected by mere lapse of time” is valued as of the date of the surviving spouse's death. However, you may change the date of death value to account for any change in value that is not due to “mere lapse of time” on the date of its distribution, sale, exchange, or other disposition.

  For additional details, see Part 3—Elections by the Executor in the separate Instructions for Form 706.

Line 2. Special-use valuation of section 2032A.   Under section 2032A, you may elect to value certain farm and closely held business real property at its farm or business use value rather than its FMV. You may elect both special-use valuation and alternate valuation. To elect this valuation, you must check “Yes” on line 2 and complete and attach Schedule A-1 of Form 706 and its required additional statements.

  
You must file Schedule A-1 of Form 706 and its required attachments with Form 706-QDT for this election to be valid.

  The total value of the property valued under section 2032A may not be decreased from FMV by more than $1,090,000 for decedents dying in 2014 . For later years, the IRS will publish the amount in an annual revenue procedure.

  Real property may qualify for the section 2032A election if:
  1. The real property is located in the United States,

  2. The real property is used for farming or in a trade or business,

  3. The real property was acquired from or passed from the surviving spouse to a qualified heir of the surviving spouse,

  4. The real property was owned and used in a qualified manner by the surviving spouse or a member of the surviving spouse's family for 5 of the 8 years before the surviving spouse's death, and

  5. The qualified property is the percentage of the surviving spouse's gross estate specified in section 2032A.

  For definitions and additional information, see section 2032A and the related regulations. Also see the Form 706 instructions for Part 3—Elections by the Executor and the Instructions for Schedule A-1 within the Form 706 itself.

Line 3. Installment payments.   If the gross estate includes an interest in a closely held business, you may be able to elect to pay part of the estate tax in installments under section 6166.

  The maximum amount that can be paid in installments is that part of the estate tax that is attributable to the closely held business. See the separate Instructions for Form 706, under Line 3. Section 6166 Installment Payments,Determine how much of the estate tax may be paid in installments under section 6166.” In general, that amount is the amount of tax that bears the same ratio to the total estate tax that the value of the closely held business included in the gross estate bears to the adjusted gross estate.

  If you check this line to make a protective election, you should attach a notice of protective election as described in Regulations section 20.6166-1(d). If you check this line to make a final election, you should attach the notice of election described in Regulations section 20.6166-1(b).

  In computing the adjusted gross estate under section 6166(b)(6) for purposes of determining whether an election may be made under section 6166, the net amount of any real estate in a closely held business must be used.

  For definitions and additional information, see section 6166 and the related regulations. Also see the Form 706 instructions for Part 3—Elections by the Executor and Line 3. Section 6166 Installment Payments for a chart on how to calculate the amount of tax which may be paid in installments under section 6166.

Bond or lien.   The IRS may require that an estate furnish a surety bond when granting the installment payment election. In the alternative, the executor may consent to elect the special lien provisions of section 6324A, in lieu of the bond. The IRS will contact you regarding the specifics of furnishing the bond or electing the special lien. The IRS will make this determination on a case-by-case basis, and you may be asked to provide additional information.

  If you elect the lien provisions, section 6324A requires that the lien be placed on property having a value equal to the total deferred tax plus four years of interest. The property must be expected to survive the deferral period, and does not necessarily have to be property of the estate. In addition, all of the persons having an interest in the designated property must consent to the creation of this lien on the property pledged.

Line 4. Spousal election.   If the surviving spouse has become a U.S. citizen, the QDOT tax will not apply to any distributions made after the surviving spouse became a citizen as long as either:
  • The surviving spouse had been a U.S. resident at all times after the death of the decedent and before becoming a citizen, or

  • No QDOT tax had been imposed on any distributions prior to the surviving spouse becoming a citizen.

  You should file a final Form 706-QDT to notify the IRS that the QDOT tax no longer applies for this reason.

  If the surviving spouse does not meet either of the conditions above, the QDOT tax will still not apply to distributions after he or she becomes a citizen if the surviving spouse elects both:
  • To treat any distributions that were subject to QDOT tax as taxable gifts for purposes of determining the estate or gift tax under sections 2001 and 2501, respectively, for the year the surviving spouse became a citizen and all subsequent years and

  • To treat any of the decedent's unified credit (applicable credit amount) that was used to reduce the QDOT tax on taxable distributions as use of the surviving spouse's own unified credit for purposes of determining the spouse's available unified credit under section 2505 for the year he or she became a citizen and for all subsequent years.

  To make these elections, check “Yes” on line 4 and attach notification of the election to this return.

Schedule B

Part I—General Information

If the trustee is filing the entire return, the trustee needs to complete only lines 1a and 1b of this part of Schedule B (but all of Parts II through VI). When completing Part I on page 1, enter the remaining trustee's information on lines 2a, 2b, and 2c.

Line 1b.   All trusts filing Form 706-QDT must have an EIN. A trust that does not have an EIN should apply for one on Form SS-4, Application for Employer Identification Number. You can get Form SS-4, and other IRS tax forms and publications, by calling 1-800-TAX-FORM (1-800-829-3676)  
or by accessing the IRS website at  
www.irs.gov.

  Send the completed Form SS-4 to the Internal Revenue Service Center listed under Where To File, earlier. If the EIN has not been received by the filing time for Form 706-QDT, write “Applied for” on line 1b.

Line 2a.   You must enter on this line either the name of an individual trustee who is a U.S. citizen or a trustee that is a domestic corporation. If there is more than one trustee, enter the one to be contacted by the IRS. List the names of all additional trustees on a sheet of paper attached to this return. Include the SSN or EIN of all U.S. citizens or domestic corporations.

Line 2b.   Enter the SSN or EIN, as applicable, of the trustee listed on  
line 2a.

Part II—Taxable Distributions From Prior Years

Enter here the total of all taxable distributions that were or should have been reported on previously filed Forms 706-QDT.

Part III—Current Taxable Distributions

Enter here the total amount of corpus distributed during the calendar year or other period covered by this return and before the date of death of the surviving spouse. Include as a distribution on this line any QDOT estate tax paid during the calendar year out of the QDOT. Include all distributions even if the hardship exemption is being claimed.

Also, include as distributions in this part any reportable payments to the surviving spouse from nonassignable annuities and other arrangements when the executor has filed with the estate tax return for the decedent's estate an agreement to pay section 2056A estate tax on such distributions. For details, see Regulations section 20.2056A-4(c).

Column a. Date of distribution.   The date of distribution is the date on which the title to the distributed property passed from the trustee to the surviving spouse.

Column b. Description.   Include in the description the name of the individual(s) to whom the distribution was made.

Real estate.

Describe the real estate in enough detail so that the IRS can easily locate it for inspection and valuation. For each parcel of real estate, report the location and, if the parcel is improved, describe the improvements. For city or town property, report the street number, ward, subdivision, block and lot, etc. For rural property, report the township, range, landmarks, etc.

Stocks and bonds.

For stocks, give:

  • Number of shares;

  • Whether common or preferred;

  • Issue;

  • Par value, where needed for valuation;

  • Price per share;

  • Exact name of corporation;

  • Principal exchange upon which sold, if listed on an exchange; and

  • CUSIP number (defined below).

For bonds, give:

  • Quantity and denomination;

  • Name of obligor;

  • Date of maturity;

  • Interest rate;

  • Interest due date;

  • Principal exchange, if listed on an exchange; and

  • CUSIP number.

If the stock or bond is unlisted, show the company's principal business office.

The CUSIP (Committee on Uniform Security Identification Procedure) number is a nine-digit number that is assigned to all stocks and bonds traded on major exchanges and many unlisted securities. Usually the CUSIP number is printed on the face of the stock certificate. If the CUSIP number is not printed on the certificate, it may be obtained through the company's transfer agent.

Other personal property.

Any personal property distributed must be described in enough detail that its value can be ascertained by the IRS.

Column c. Value.   The value of a distribution is its FMV on the date of distribution. FMV is the price at which the property would change hands between a willing buyer and a willing seller, when neither is forced to buy or to sell, and both have reasonable knowledge of all the relevant facts. FMV may not be determined by a forced sale price, nor by the sale price of the item in a market other than that in which the item is most commonly sold to the public. The location of the item must be taken into account whenever relevant.

Stocks and bonds.

The FMV of a stock or bond (whether listed or unlisted) is the mean between the highest and lowest selling prices quoted on the valuation date. If only the closing selling prices are available, then the FMV is the mean between the quoted closing selling price on the valuation date and on the trading day before the valuation date. If there were no sales on the valuation date, figure the FMV as follows.

  1. Find the mean between the highest and lowest selling prices on the nearest trading day before and the nearest trading day after the valuation date. Both trading days must be reasonably close to the valuation date.

  2. Prorate the difference between the mean prices to the valuation date.

  3. Add or subtract (whichever applies).

See the instructions for Schedule B of Form 706 for additional information on valuing stocks and bonds.

Column d. Amount of hardship exemption claimed.   Distributions to the surviving spouse on account of hardship are exempt from the QDOT tax. Enter in column d the amount of any distribution for which the hardship exemption is being claimed. Do not enter any amount here that has not been included in the amount listed in column c. Also, if the surviving spouse is the beneficiary of more than one QDOT, you may not claim the hardship exemption unless the decedent's executor selected a designated filer. See Designated Filer, earlier.

Part IV—Taxable Property in Trust at Death of Surviving Spouse

You must report in Part IV all property remaining in the QDOT on the date of death of the surviving spouse (or the date the trust failed to qualify as a QDOT, if applicable). This includes both corpus and undistributed income.

Interest accrued to the date of the surviving spouse's death on bonds, notes, and other interest bearing obligations is property of the QDOT on the date of death. Rent accrued to the date of the surviving spouse's death on leased real and personal property is property of the QDOT on the date of death.

Outstanding dividends that were declared to stockholders of record on or before the date of the surviving spouse's death are considered property of the QDOT on the date of death. Ordinary dividends declared to stockholders of record after the date of the surviving spouse's death are not property of the QDOT on the date of death. However, if you have elected alternate valuation on line 1 of Part II, page 1, and dividends are declared to stockholders of record after the date of the surviving spouse's death so that the shares of stock at the later valuation date do not reasonably represent the same property at the date of the surviving spouse's death, include those dividends (except dividends paid from earnings of the corporation after the date of the surviving spouse's death) in the alternate valuation.

If there is not enough space to list all of the property, attach additional sheets of the same size, using the same format as Part IV.

Column a. Item no.   Assign a separate item number to each separate type of property. For example, you can include under a single item number all stock of the same issuer and type, but must list separate types (for example, preferred and common) under separate item numbers.

Column b. Description.   See the instructions under Part III—Current Taxable Distributions, Column b. Description, earlier.

Column c. Alternate valuation date.   If this return involves only one trust, enter the alternate valuation date only if you answered “Yes” to question 1 of Part II—Elections by the Trustee/Designated Filer.

  If the designated filer is filing this return for multiple trusts, the individual trustees will complete Part IV, but only the designated filer can elect alternate valuation. To allow the designated filer to make this decision, the trustee must provide on an attachment to Schedule B both the regular and the alternate value (and the alternate valuation date) for all assets, unless the designated filer has notified the trustee that this is not required.

Column d. Value.   See the instructions under Column c. Value for Part III, earlier.

Parts V and VI—Marital and Charitable Deductions

Marital and charitable deductions are allowable for any property that both remained in the QDOT on the date of the surviving spouse's death and was includible in the gross estate of the surviving spouse (or would have been includible if the surviving spouse had been a U.S. citizen or resident).

Do not make an entry in Parts V and VI unless there is an entry in Part IV of Schedule B. Also, the sum of the total of the amounts entered in Parts V and VI cannot exceed the total of the amount entered in Part IV of Schedule B.

For details on the marital and charitable deductions, see the instructions for Schedule M and Schedule O of Form 706, as applicable.

Schedule A

When a designated filer is filing Form 706-QDT for more than one trust, use Schedule A to summarize the Schedule B amounts provided by the trustees. Under “EIN of QDOT” (that is, column a of Parts II, III, and IV), enter the EIN of the appropriate trust. If the trustee is filing the return, simply transfer the totals from Schedule B to the corresponding “Total” lines on  
Schedule A.

Part III—Tax Computation (Page 1 of Form 706-QDT)

Line 7.   Enter the amount of the taxable estate from one of the following as filed for the decedent's estate or as finally determined by the IRS.
  • Part 2—Tax Computation, line 3 of Form 706 (for estates of decedents dying before January 1, 2005).

  • Part 2—Tax Computation, line 3c of Form 706 (for estates of decedents dying on or after January 1, 2005).

  • Part II—Tax Computation, line 1 of Form 706-NA.

Lines 10 and 11.   Using the same revision of Form 706 or Form 706-NA on which the executor filed the decedent's estate tax return, recompute the decedent's net estate tax by substituting the amounts on line 9 and line 8 of this Form 706-QDT for the decedent's taxable estate from one of the following.
  • Part 2—Tax Computation, line 3 of Form 706 (for estates of decedents dying before January 1, 2005).

  • Part 2—Tax Computation, line 3c of Form 706 (for estates of decedents dying on or after January 1, 2005).

  • Part II—Tax Computation, line 1 of Form 706-NA.

  Prior year versions of Forms 706 and 706-NA can be obtained by calling 1-800-TAX-FORM (1-800-829-3676) or by accessing the IRS website at  
www.irs.gov.

  Note that as a result of the recomputation, some items other than the taxable estate might be different from what was on the decedent's actual estate tax return. If the decedent's estate did not fully use its unified credit, additional unified credit may be allowable in the recomputation.

  If the decedent's estate claimed a credit for tax on prior transfers and the credit was limited by section 2013(c), the recomputed credit may be different than on the return as filed.

  Also, if the decedent's estate claimed a credit for state death taxes (for decedents dying before January 1, 2005) or a credit for foreign death taxes and the amount of the credit that could be claimed was limited by section 2011(b) (prior to its repeal on January 1, 2005) or section 2014(b), respectively, the recomputed credit may be different.

  If the final determination of the tax due on the estate of the decedent has not been made at the time this return is filed, you must compute the tax on these lines using the highest rate of tax (see Table of Maximum Tax Rates below) in effect at the time of the decedent's death.

  Also, if there is more than one QDOT with respect to any decedent, you must compute the tax on lines 10 and 11 using the highest rate of tax (see Table of Maximum Tax Rates below) in effect at the time of the decedent's death unless all of the following conditions are met.
  • The decedent's executor has designated a single person to be responsible for filing Form 706-QDT for all of the trusts (designated filer).

  • The designated filer is either an individual who is a U.S. citizen or is a domestic corporation.

  • The designated filer meets the requirements of all applicable regulations.

  Further, if the return is being filed because of the death of the surviving spouse, then in computing line 10, any foreign death taxes paid by the estate of the surviving spouse may be used in determining the allowable credits in recomputing the decedent's estate tax, if all of the following conditions are met.
  1. This return is being filed because of the death of the surviving spouse.

  2. Any property remaining in the QDOT at that time is includible in the estate of the surviving spouse (or would be includible if the surviving spouse had been a U.S. citizen or resident).

  3. The credit is allowable (or would be allowable if the surviving spouse had been a U.S. citizen or resident) to the estate of the surviving spouse with respect to the property referred to in (2), above.

  4. The taxes were actually paid to a foreign jurisdiction.

  For details on claiming this credit, see the Instructions for Form 706. If you claim the foreign death tax credit, you must complete and attach Schedule P of Form 706.

  

Table of Maximum Tax Rates

If the decedent died The maximum tax rate is
After December 31, 2004 but before January 1, 2006 47%
After December 31, 2005 but before January 1, 2007 46%
After December 31, 2006 but before January 1, 2010 45%
After December 31, 2009 but before January 1, 2013 35%*
After December 31, 2012 40%
* Special rules can apply for 2010. For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010.

Line 14.   Make the check payable to “United States Treasury.” Please write the surviving spouse's SSN (or ITIN, if applicable) and “Form 706-QDT” on the check to assist us in posting it to the proper account.


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