Many changes to estate and gift tax were made by this legislation. Many of these changes are not effective until later years. The changes effective in 2009 and earlier which affect material in this IRM have been incorporated.

Sections 501 - 581, of PL 107-16, involve estate and gift tax legislation. (Refer to Sections 501 - 581 of this act for information not contained in this IRM.)

Taxpayers may call with estate and gift questions regarding an account or concerning tax law.

Account questions generally refer to an extension or return that has already been filed. Examples of account issues include:

Tax law issues generally are unrelated to a filed return. Examples of tax law issues/questions include:

Do not confuse Form 706 U.S." U.S. Estate Tax Return" calls (MFT 52) with Form 1041 "U.S. Income Tax Return for Estates & Trusts" and Trust (MFT 05) calls. There are two distinguishably different "Estates" .

The Estate and Gift Tax Program toll-free telephone number, 866-699-4083, is available for account calls (pertaining to Forms 706 and 709 only) from 7:00 AM until 7:00 PM, local time, Monday through Friday. Route Estate and Gift account calls as follows:

Calls relating to estate and gift tax law issues (non-account related) cannot be transferred by all call sites. However, if your system allows you to transfer the call, transfer to 92135. Otherwise, advise the taxpayer that you are unable to transfer them and that they must call back on 1-800-829-4933. Apologize for any inconvenience.

Form 706 must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate plus adjusted taxable gifts and specific exemption, exceed certain limitations. For decedents dying between 1987 and 1997, Form 706 was required if the total of these amounts exceeded $600,000. The Taxpayer Relief Act of 1997 (TPRA), and most recently PL 107-16, increased this base as follows:

Return and tax are due nine months after date of death, unless an extension of time for filing and/or payment (Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes) has been granted. (Additional information on extensions of time to pay can be found in IRM 4.25.2, Campus Procedures For Estate Tax .)

Route claims and/or amended returns involving non-resident U.S. citizens to Cincinnati Campus through local routing procedures.

Form 706 is filed under the decedent's Social Security Number (SSN). When researching IDRS, input a "V" behind the decedent's SSN (i.e., 000-00-0000V). The MFT is 52 and the tax period consists of six zeros (000000). Although the return is filed under the decedent's SSN, research via BMF command codes such as BMFOL and BRTVU. Also, input a "W" behind the decedent's SSN to research accounts on the invalid segment.

Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, is filed by estate of a nonresident who is not a U.S. citizen.

Both original and amended Forms 706-NA, along with correspondence involving the form, are now filed at the Cincinnati Campus.

Executor of an estate (if decedent at time of death was a citizen or resident of the U.S.) files Form 706-A to report sale or cessation of the qualified use of farm or closely held business property at its farm or business use (qualified use) value rather than its fair market value. (See IRC section 2032A.) The actual election is made by the Executor on Form 706, Schedule A-1. (See Form 706-A, Instructions.) Once made, the election cannot be revoked.

An additional tax is imposed if both criteria below are met:

Additional tax is reported by heir on Form 706-A which must also be filed if there was any involuntary conversion or exchange of the specially valued property (even if conversion or exchange was nontaxable). Form 706-A is due within six (6) months after taxable disposition or cessation of qualified use. Form 4768 is used to request an extension of time to file. Up to six months can be requested by filing.

Tax is imposed on distributions and certain terminations of interests in trusts which are subject to the GST tax.

Form 706-GS(D), Generation-Skipping Transfer Tax Return For Distributions, and Form 706-GS(T), Generation-Skipping Transfer Tax Return For Terminations, are processed as MF returns.

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Route to Estate and Gift Tax Operation. Estate and Gift follows IRM 21.7.5.4.1.8 or 21.7.5.4.1.9 for adjustment procedures.

Trustees or designated filers of a qualified domestic trust (QDT) use Form 706-QDT to figure and report the estate tax due on certain distributions from the QDT. Amount of tax on the value of the property remaining in the QDT on the date of the surviving spouse's death must also be figured.

A QDT applies only in those situations where a decedent's surviving spouse is not a U.S. citizen. A QDT is any trust which qualifies for an estate tax marital deduction under IRC section 2056A, and also meets the following requirements:

If surviving spouse is a beneficiary of more than one QDT from a single decedent and that decedent's executor has so elected, designated filer selected by the executor is liable for filing the return and paying the tax.

A taxable distribution (taxable event) with respect to a QDT is any of the following:

Form 706-QDT is an annual return due on or after January 1, but not later than April 15 of the year following any calendar year in which taxable distributions are made. If surviving spouse has died, Form 706-QDT must be filed within nine months following date of death.

Form 4768 is used to request an extension of time to file.

Form 706–D is used to report and pay additional estate tax (recapture tax) required by IRC section 2057 when certain "taxable events" occur with respect to a qualified family-owned business interest (QFOBI) received by a qualified heir. It is a result of RRA 98. (For definition and examples of taxable events, see the Form 706-D instructions.)

Each qualified heir assumed personal liability for a portion of the additional tax imposed by IRC section 2057 with respect to his/her interest in a QFOBI for which a deduction was taken on Form 706 filed for decedents dying after December 31, 1997 and before January 1, 2004. If a taxable event occurs, or there is an involuntary conversion or exchange of a QFOBI, Form 706–D must be filed.

If a qualified heir reinvests all of the involuntary conversion proceeds in qualified replacement property, or if the qualified heir exchanges qualified property solely for qualified exchange property, then there is no additional estate tax. However, the qualified heir must complete Form 706–D (even though there is no tax) to notify IRS that the involuntary conversion or exchange took place.

Form 706–D is due within six months after the taxable disposition, disqualifying act, or cessation of qualified use of the QFOBI, unless an extension of time has been granted. Form 4768 is used to request an extension of time to file. Circle "Form 706–D" at the top. Form 706–D is filed at the same campus where the Form 706 for the decedent's estate was filed. Interest is due on the tax on Form 706–D from the due date of Form 706.

The tax period is determined from the earliest date shown on Schedule A, Form 706–D, Column C.

Forms 706–D are processed NMF as MFT 53, tax class 6, document code 84, blocking series 650–699. Amended Forms 706–D are Category A and must be referred to Estate and Gift for any adjustment action. (Follow standard NMF procedures and IRM 21.7.12, Non-Master File (NMF) Adjustments, to adjust tax, penalty, and interest.) The volume of Forms 706–D is extremely minimal.

Form 709 is used to report transfers of real or personal property subject to the federal gift and GST taxes. All gift and GST taxes are computed and filed on a calendar year basis. The tax is imposed on the donor, the person giving the gift. The donee is the recipient of the gift.

Form 709 is due on or after January 1, but no later than April 15 of the year following the calendar year when the gifts were made. If donor dies during the year gifts were made, executor must file Form 709 not later than the earlier of:

Form 709 is required for the following:

Form 709 is not required for outright gifts to a spouse who is a U.S. citizen regardless of the amount of gifts. Also, Form 709 is not required if the only gifts made during the year were deductible as gifts to charities as long as the entire interest was transferred. If only a partial interest was transferred, or the transfer was to someone other than a charity, Form 709 must be filed.

Transfers not subject to the gift tax are:

Only individuals are required to file gift tax returns. If a trust, estate, partnership, or corporation makes a gift, the individuals, beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes. Gifts made to an individual are not taken as deductions on the donor’s individual income tax return and they are not included as income on the recipient’s income tax return. Only income derived from gifts is subject to income tax.

Form 709-A, United States Short Form Gift Tax Return, was obsoleted effective October 2003. If you receive a current Form 709–A, return it to the taxpayer with the appropriate letter, advising the taxpayer that the form is obsolete and to file Form 709.

Prior to October 2003, Form 709-A was filed by certain married couples instead of Form 709 to report non-taxable gifts they consented to split. A joint Form 709-A was not allowable.

Form 709-A was filed if all of the following requirements were met:

Form 709-A was a calendar year return due on or after January 1, but not later than April 15 of the year following the year the nontaxable split gifts were made. An extension of time to file a calendar year income tax return also extended the time to file Form 709–A.

The Estate and Gift tax examiner employee must input TC 290 $.00 in appropriate BS to release the "–A " freeze on amended or corrected returns.

Sec. 101 of PL 107-134, Victims of Terrorism Tax Relief Act of 2001, amended IRC section 692 (relating to income taxes of members of Armed Forces on death) to include specified terrorist victims by adding (d)(4). This section defines a " specified terrorist victim" to mean any decedent who:

Sec. 103 addresses the Estate Tax provisions of PL 107–134 of the bill. IRC section 2201 was amended to provide special rates for qualified decedents, unless the executor elects not to have this section apply.

"Qualified decedent" means any specified terrorist victim (as defined in IRC section 692(d)(4)) or any citizen or resident of the U.S. dying while in active services of the Armed Forces of the U.S., if they:

The provisions under IRC Section 2201 also apply to Form 706-NA, which is processed at the Cincinnati Campus. This situation could arise if, for example, a foreign national died in the attacks and had U.S. holdings subject to the estate tax.

The Military Family Tax Relief Act of 2003 amended IRC section 2201(b) to include any astronaut whose death occurs in the line of duty and applies to the estate of decedents dying after December 31, 2002. This includes the Columbia Space Shuttle Heroes.

The following special rate schedule, Rate Schedule Under the Victims of Terrorism Tax Relief Act of 2001, must be used for qualified decedents:

Tentative tax is reduced by the tax that would have been payable on adjusted taxable gifts, if any. It is also computed using the rate schedule above.

Credits against the tax, including the unified credit under IRC section 2010 (computed using the IRC section 2001(c) rate schedule), and the State death tax credit under IRC section 2011, then apply to reduce or eliminate the amount of estate tax payable.

The statute of limitations for claiming a refund for the estates of victims of the Oklahoma City bombing was waived for one year from the date of enactment of this bill. Refunds of credits were allowed if claims were filed before the close of the one-year period beginning January 23, 2002 and ending on January 22, 2003. Procedures for processing amended returns with expired ASED/RSED are provided in section 21.7.5.5.5.

Original or amended Forms 706 filed under the Victims of Terrorism Tax Relief Act of 2001 are processed at the Cincinnati Campus. Original Forms 706 should be mailed to the Cincinnati Submission Processing Center. Amended Forms 706 filed under the Victims of Terrorism Tax Relief Act of 2001 must be mailed to:

Estate and Gift Tax Operation
201 W. Rivercenter Blvd.
Covington, KY 41011
Attention: Stop 824G

If amended Killed in Terrorist Activities (KITA) Forms 706 and Form 706–NA are received at any other campus, transfer the case using Form 3210, Document Transmittal, to the Estate and Gift Tax Operation, at the address above.

Write one of the following across the top of the first page of each return:

Original KITA returns are coded with Computer Condition Code (CCC) "B" . This allows the tax to be computed using the special rate schedule.

Expedite all processing of KITA claims and returns.

KITA returns must include a copy of the death certificate as proof of death.

All KITA cases must be controlled on IDRS within three business days after receipt in Estate and Gift using IDRS category code "KITA" .

All contact with the executor/surviving spouse must be made through the appropriate designated employee.

Taxpayer inquiries on KITA cases must receive a reply within three (3) business days.

All time expended in support of the KITA program is reported under Program Code 82385. This code is valid for all functions.

The statute of limitations for claiming a refund for the estates of victims of the Oklahoma City bombing was waived for one year beginning on January 23, 2002 (the date of enactment of this bill) and ending on January 22, 2003. Refunds or credits are allowed if claims are filed before the close of the one-year period. .

Additional information can be found in Publication 3920, Tax Relief for Victims of Terrorist Attacks, and IRM 21.6.6.4.19, Federal Income Tax Forgiveness for Certain United States (U.S.) Military and Civilian Employees and Other Individuals.