3.11.106  Estate and Gift Tax Returns (Cont. 2)

3.11.106.10 
Processing Form 706, United States Estate (and Generation - Skipping Transfer) Tax Return

3.11.106.10.4  (01-01-2014)
Payment of Taxes - Form 706

  1. Tax is due when return is due, unless deferred payment under IRC 6161(a) or 6163 has been granted, or unless executor has properly elected to pay by installments under IRC 6166.

    Note:

    Check non-remit Form 706 returns for presence of a remittance before releasing to Numbering.

  2. See Form 706, Lines 5 and 6 of Page 2 on 1985 and prior revisions, or Lines 3 and 4 on subsequent revisions.

  3. Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, (Part III) can be used to apply for an Extension of Time To Pay estate tax.

  4. Form 4768 (Part II) only applies to Extension of Time To File.

    Reminder:

    The Treasury Department and IRS believe it is reasonable to grant the estates of 2010 Decedents an automatic extension of time to file the estate tax return and an extension of time to pay the estate tax. Accordingly, the Treasury Department and IRS grant the Executor of a 2010 Estate who files a Form 4768 by the due date for filing Form 706 or Form 706-NA both an automatic six month extension of time to file Form 706 or Form 706-NA pursuant to Section 6081, and a six month extension of time to pay the estate tax. The Executor of a 2010 Estate is not required to substantiate on the Form 4768 the reason for requesting an extension of time for payment of the estate tax to receive the six month extension of time to pay the estate tax due. If the Executor (of a 2010 decedent) requests an extension of time to pay for more than six months (on Form 4768), justification needs to be provided.

3.11.106.10.5  (01-01-2014)
Blocking Numbered and Unnumbered Forms 706

  1. All numbered Forms 706 will be assigned Document Locator Numbers (DLNs) and blocked before sending to Document Perfection.

  2. All unnumbered Forms 706 will be numbered after Code and Edit.

3.11.106.10.6  (01-01-2014)
Preliminary Examination

  1. Expedite processing of estate tax returns so that executors can obtain discharge from personal liabilities and final distribution can be made to beneficiaries, examination of the returns is necessary.

3.11.106.10.6.1  (01-01-2014)
Signature - Form 706

  1. Examine for signature of executor indicated on return.

  2. If there are Co-Executors, it is sufficient for only one of the Co-Executors to sign the return.

  3. Letter 501CS may be used to request executors missing signature.

  4. Use Action Code 225 for missing signature.

    If Then
    Signed jurat (declaration) is received Attach it to the return.

3.11.106.10.6.2  (01-01-2014)
Attachments - Form 706

  1. Review and search attachments for any required information, (i.e., POAs, extensions, etc.).

3.11.106.10.6.3  (01-01-2014)
Amended or Supplemental Returns - Form 706

  1. The following information pertains to amended returns:

    Note:

    For Form 706 series returns, do not detach any attachments.

    If Then
    Return is marked, "Amended" , "Revised" , "Adjusted" , "Subsequent" , "Substitute" , "Corrected" , etc. See IRM 3.11.106.5.5.1 Amended Returns.
    Entity cannot be perfected:
    Document is unnumbered with remittance 1. Research IDRS.
    2. If no data found, use Action Code 320 and route to Entity on Form 4227, Intra-SC Reject or Routing Slip.
    Document is numbered Use Action Code 320 and route to Entity on Form 4227.

3.11.106.10.6.4  (01-01-2014)
Received Date - Form 706

  1. See IRM 3.11.106.8, Received Date, for information regarding received date editing.

  2. The following information pertains to the received date:

    If Then
    The IRS received date has not been stamped on the first page of the return 1. A received date must appear on every Form 706.
    2. Enter in MMDDYY format near the dotted lines on Line 8.
    3. Make sure the envelope with the postmark date is stapled to the back of the return.
    4. Determine received date from return or attachments in the following priority (see IRM 3.11.106.8, Received Date).

3.11.106.10.6.5  (01-01-2014)
Date of Birth (DOB)

  1. The following information pertains to editing Date of Birth:

    If Then
    Form 706 for 1983 and subsequent revisions, the Date of Birth block is found on Page 1, Box 4 If Date of Birth is 1900 or earlier, enter "1900" for year and enter month and day.
    The Date of Birth is missing 1. Check death certificate for correct date.
    2. If correct date is unobtainable, leave blank or circle incorrect date.
    Date of Birth is found Edit in MMDDYY format.

3.11.106.10.6.6  (01-01-2014)
Date of Death (DOD)

  1. The following information pertains to editing the Date of Death which can be found on Form 706, Page 1, Box 5:

    If Then
    Date of Death is missing
    1. Check death certificate for Date of Death.
    2. Edit Date of Death in MMDDYY format.
    No death certificate is attached Research IDRS. If DOD cannot be found, continue processing.

3.11.106.10.6.7  (01-01-2014)
Prior Year Revisions - Form 706

  1. If the location of transcription lines on a prior year revision is different from the current year revision, change the transcription lines to correspond with the current year tax form revision. See Exhibit 3.11.106-9 and Exhibit 3.11.106-10.

3.11.106.10.6.8  (01-01-2014)
County/State of Residence at Time of Death

  1. The decedents residence at time of death is found on Page 1, Part 1, Box 3a.

  2. The following information pertains to county/state of residence at time of death:

    If Then
    Box 3a is blank and it cannot be determined after research of the death certificate Do not correspond with the executor for county/state. If it is missing from the death certificate, edit "Unknown" .
    Box 3a has other information (i.e., street address, PO Box, city, etc.) Circle out erroneous information in Box 3a. One or any combination of the following can be present:
    a. County
    b. State
    c. ZIP code
    Box 3a has a foreign (international) address See Exhibit 3.11.106-24, Foreign Country Codes, for the two digit Country Code to be edited in Box 3a.

3.11.106.10.7  (01-01-2014)
Mathematical Verification - Form 706

  1. Manual math verification of the return is not required. The computer will check the transcribed totals and any changes or corrections will be performed by ERS (Error Resolution System) examiners.

  2. Cincinnati Compliance Services, Estate and Gift Tax Campus Operations will correspond for supporting schedules, if missing, for estates that have a Total Gross Estate of $5,250,000 and over for individuals who died in 2013; $5,120,000 and over for individuals who died in 2012; and $5,000,000 for individuals who died between January 1, 2010, and December 31, 2011.

3.11.106.10.7.1  (01-01-2014)
Tax Computation - Page 1, Part 2, Form 706

  1. All money entries on Form 706, Page 1, can contain up to twelve numeric characters and are edited in dollars and cents. All money entries must be positive.

    Exception:

    Balance Due/Overpayment-negative amounts should be edited with brackets only if the taxpayer does not indicate a negative amount with brackets or a minus (-) sign. Also, Taxable estate (Line 3c) can be a negative amount as well as a positive amount.

    Note:

    Zero is not considered a significant entry unless specifically stated.

  2. Line 1 - Total gross estate. This figure is carried forward from Page 3, Part 5, Line 10. Accept taxpayer's entry.

    Note:

    If blank, zero, dash, or none but there is an entry on Page 3, Part 5, Line 10, edit the appropriate amount to Line 1.

  3. Line 2 - Tentative total allowable deductions. This figure is carried forward from Page 3, Part 5, Line 24 (2012 form revision), Line 22 (2011 form revision). Accept taxpayer's entry.

    Note:

    If blank, zero, dash, or none but there is an entry on Page 3, Part 5, Line 22, edit the appropriate amount to Line 2.

  4. Line 3a - Tentative taxable estate. Accept taxpayer's entry.

  5. Line 3b - State death tax deduction. Accept taxpayer's entry.

    Note:

    For tax year 2005 and subsequent, the credit for State death taxes has been replaced by the State death tax deduction. For returns with dates of death in 2005 or subsequent filed on a 2004 or prior year return, "X" the figure on Line 13.

  6. Line 3c - Taxable estate. If Line 3c is a negative entry, bracket the amount only if the taxpayer does not indicate a negative amount with brackets or a minus (-) sign.

  7. Line 4 - Adjusted taxable gifts. Accept taxpayer's figures.

  8. Line 5 - Net Taxable Estate - Totals of Lines 3 and 4. If this entry is a negative amount, place an "X" to the left of taxpayer's entry. Otherwise, accept taxpayer's entry.

  9. Line 6 - Tentative tax on Line 5. Accept taxpayer's entry.

  10. Line 7 - Total gift tax. Accept taxpayer's entry.

    Exception:

    If Line 7 is greater than Line 6, place an "X" to the left of the taxpayer's entry and enter the amount from Line 6.

    Note:

    If taxpayer brackets entry or uses a minus (-) sign, delete brackets and/or minus sign and continue processing return.

  11. Line 8 - Gross estate tax amount. Accept taxpayer's entry.

  12. Line 9 - (2011 and prior revisions) Maximum unified credit. Verify taxpayer's entry on Line 9 with Unified/Applicable Credit Table below. See IRM 3.11.106.10.7.2, Maximum Unified/Applicable Credit-Form 706, to make sure entry is correct to decedents year of death. If entry does not match decedents year of death, edit correct amount.

    1. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (also known as TRUIRJCA) included provisions affecting the 2011 Form 706 (with a Date of Death in 2011). They include (but are not limited to): The applicable exclusion amount now may consist of (1) a basic exclusion amount of $5,000,000 and, (2) in the case of a surviving spouse, the unused exclusion amount (DSUE), of a predeceased spouse (who died after 12/31/2010). While there is nothing indicated on the 2011 Form 706, the taxpayer is instructed to make a note of the section 2010 election (or state something like, “see statement attached”) and attach copies of the predeceased spouse's timely/completed return, even if there was no tax due, to allow the surviving spouse to use the predeceased spouse's unused exclusion amount.

      Example : Taxpayer husband died 1/3/2011.
      Taxpayer wife died 8/5/2011.


      Husband reported estate tax of $607,529, so his unused credit would be $1,123,271.
      (That's the maximum unified/applicable credit amount of $1,730,800 - $607,529 tax).


      Wife reports estate tax of $2,044,738, so she opts to use the deceased spouse's unused portion of $1,123,271, making her total unified/applicable credit amount $2,854,071.
      (That's the maximum unified/applicable credit of $1,730,800 + $1,123,271 DSUE, which is more than her estate tax due), thus bringing her to $.00 estate tax due.

    2. If a taxpayer reports a Date of Death in 2012, but files on a 2011 or prior form, edit a "d" to the right of Line 9 and continue processing.

  13. Line 9a - (2012 and subsequent) Basic exclusion amount. Accept taxpayer's entry.

  14. Line 9b - (2012 and subsequent) Deceased spousal unused exclusion (DSUE) amount from predeceased spouse(s). This figure is carried forward from Part 6 - Portability of Deceased Spousal Unused Exclusion, Section D.

  15. Line 9c - (2012 and subsequent) Applicable exclusion amount. This figure is the total of Line 9a and Line 9b.

  16. Line 9d - (2012 and subsequent) Applicable credit amount. Verify taxpayer's entry on Line 9d with the Unified/Applicable Credit Table below. See IRM 3.11.106.10.7.2, Maximum Unified/Applicable Credit-Form 706, to make sure entry is correct to decedents year of death. If entry does not match decedents year of death, edit correct amount.

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  17. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  18. Line 11 - Allowable unified/applicable credit. This is computed by subtracting Line 10 (Adjusted unified/applicable credit) from the Line 9d (Maximum unified/applicable credit amount). Accept the taxpayer's entry.

    Note:

    If blank, zero, dash, or none but there are entries on Line 9d and/or 10, edit the appropriate amount to Line 11, based on the date of decedents death. See IRM 3.11.106.10.3.1, Due Date-Form 706.

  19. Line 12 - Balance after unified/applicable credit. Accept taxpayer's entry.

  20. Line 13 - Credit for foreign death taxes. Accept taxpayer's entry.

  21. Line 14 - Credit for tax on prior transfers. Accept taxpayer's entry.

  22. Line 15 - Total credits. Accept taxpayer's entry.

  23. Line 16 - Net estate tax. Accept taxpayer's entry.

  24. Line 17 - Generation-skipping transfer (GST) tax. Accept taxpayer's entry.

  25. Line 18 - Total transfer tax. If Line 18 on the form is blank and there are entries on Lines 16 through 17, compute and enter Line 18.

  26. Line 19 - Prior payments. Accept taxpayer's entry.

  27. Line 20 - Balance due (or overpayment). Edit negative amounts in brackets (refunds) only if the taxpayer does not indicate a negative amount with brackets or a minus (-) sign.

    Note:

    Delete penalty and interest from the total and edit the balance due to the left of the original entry. Otherwise, accept taxpayer's entry.

3.11.106.10.7.2  (01-01-2014)
Maximum Unified/Applicable Credit - Form 706

  1. The following table contains information for the unified/applicable credit and exemption equivalent for estates of citizens and residents:

    Year of Death Unified/Applicable Credit Exemption Equivalent
    1987 thru 1997 192,800 600,000
    1998 202,050 625,000
    1999 211,300 650,000
    2000 and 2001 220,550 675,000
    2002 and 2003 345,800 1,000,000
    2004 and 2005 555,800 1,500,000
    2006 thru 2008 780,800 2,000,000
    2009 1,455,800 3,500,000
    2010 and 2011* 1,730,800* 5,000,000
    2012* 1,772,800* 5,120,000
    2013* 2,045,800* 5,250,000
    * Note: See paragraph 12a above for 2011 and subsequent Forms 706 (with a Date of Death in 2011, 2012, etc.). 2011 and subsequent amounts can be greater than table amount because of the Portability election.

3.11.106.10.7.3  (01-01-2014)
Schedule T, Qualified Family-Owned Business Interest Deduction - Form 706 (2003 and Prior)

  1. The Qualified Family-Owned Business Interest Deduction was repealed for decedents dying on or after January 1, 2004. The following information and instructions pertain to returns with dates of death prior to January 1, 2004.

  2. Under Section 2057, taxpayers may elect to deduct the value of certain family-owned business interests from the gross estate. Schedule T should be filed with the taxpayer attaching all required statements and deducting the value of the qualifying business interests on Part 5, Recapitulation, Page 3, Line 22. Lines 17 through 22 are totaled on Line 23 and entered by the taxpayer on Line 2 of the tax computation, Part 2.

  3. The Taxpayer Relief Act of 1997 replaced the unified credit amount with an applicable credit amount, effective for the estates of decedents dying, and gifts made, after December 31, 1997. If the estate is claiming a Qualified Family-Owned Business Interest deduction (QFOBI), the Unified Credit and the amount of Schedule T will be coordinated before the taxpayer completes computing his/her Line 11 (Page 1) entry. This may result in a lower Allowable unified credit amount (applicable credit amount) on Line 11 than the amount listed. (See IRM 3.11.106.10.7.1, Tax Computation-Page 1, Part 2, Form 706.)

  4. DO NOT attempt to compute the Coordinated Applicable Credit or Schedule T amount. If the Schedule T is attached to the return, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

3.11.106.10.7.4  (01-01-2014)
Green-Rockered Amount - Line 20

  1. Green-Rockered Money Amount on Line 20. The purpose of green rockering tax due amounts is to show that money was received with the return. If the amount contains penalty and/or interest:

    1. X-out the rockered amount.

    2. Delete the penalty and interest from the total.

    3. Edit the balance due to the left of the original entry.

    4. Edit a received date if one is not present (must have a received date, especially if it's a Federal Tax Deposit (FTD)).

      Note:

      The return MUST have a received date (especially if an FTD penalty is involved).

3.11.106.10.8  (01-01-2014)
Deferment of Payment (Extension of Time to Pay) - Form 706

  1. Under certain conditions, the IRC provides relief from immediate payment of estate tax due on returns of deficiency determinations. The deferred portion can constitute all or only a portion of tax due. Form 4768 is used to apply for an extension of time to file and/or time to pay.

    If Then
    Balance due return is filed with an original Form 4768 attached (Form 4768 signed date is same date, or within a short timeframe of Form 706 signed date and no indication of approval or disapproval) 1. Indicate at the top of the return "Extension Pending" .
    2. Forward original Form 4768, along with the explanation for requesting the extension, to Cincinnati Compliance Services, Estate and Gift Tax Campus Operation. Keep a copy of the Form 4768 and explanation with the Form 706.

    Reminder:

    The Treasury Department and IRS believe it is reasonable to grant the estates of 2010 Decedents an automatic extension of time to file the estate tax return and an extension of time to pay the estate tax. Accordingly, the Treasury Department and IRS grant the Executor of a 2010 Estate who files a Form 4768 by the due date for filing Form 706 or Form 706-NA both an automatic six month extension of time to file Form 706 or Form 706-NA pursuant to Section 6081, and a six month extension of time to pay the estate tax. The Executor of a 2010 Estate is not required to substantiate on the Form 4768 the reason for requesting an extension of time for payment of the estate tax to receive the six month extension of time to pay the estate tax due. If the Executor (of a 2010 decedent) requests an extension of time to pay for more than six months (on Form 4768), justification needs to be provided.

3.11.106.10.8.1  (01-01-2014)
IRC 6163

  1. The following information pertains to IRC 6163:

    If Then
    Balance due return is filed with statement attached requesting an extension of time to pay under IRC 6163 reversionary or remainder interest Photocopy Pages 1, 2, and 3 of Form 706 and route to Cincinnati Compliance Services, Estate and Gift Tax Campus Operation.
    Balance due return is filed with no statement attached and the box (Page 2, Part 3, Line 4) is checked "YES" Photocopy Pages 1, 2, and 3 of Form 706 and route to Cincinnati Compliance Services, Estate and Gift Tax Campus Operation.
    Balance due return is filed with approved Form 4768 filed under Section 6166 or 6163, and a PIC (Payment Indicator Code) 1 Photocopy the first page of the return, Form 4768 and route to Cincinnati Compliance Services, Estate and Gift Tax Campus Operation.

3.11.106.10.8.2  (01-01-2014)
IRC 6166

  1. The following information pertains to a taxpayer's request for installment payments under IRC 6166:

    If Then
    There is a balance due on Line 20, Page 1, of Form 706, and either of the following conditions are present:
    1. "Yes" box on Line 3 and/or Line 4, Part 3, Page 2, of Form 706, is checked

    2. IRC "6166" is noted anywhere on the return or an attachment

    Edit Action Code 370 and route the return to Cincinnati Compliance Services, Estate and Gift Tax Campus Operation on Form 4227, Intra-SC Reject or Routing Slip. (See Figure 3.11.106-7.)

    Note:

    Cincinnati Compliance Services, Estate and Gift Tax Campus Operation will prepare Form 4349, Computation of Estate Tax Due With Return and Annual Installment.

    Figure 3.11.106-7

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Installment Agreement

3.11.106.10.9  (01-01-2014)
Payment Indicator Code (PIC) - Form 706

  1. A one digit code called "Payment Indicator Code (PIC)" is used to identify the various types of payments. Edit this code in the right margin of Line 20, Part 2, Page 1.

  2. Valid codes are "0" and "1" . This is a required entry on every Form 706.

    Exception:

    Do not edit a PIC on amended Forms 706.

    Type of Return Code Payment Indicator
    Any 0 No Installment Privileges. Payment Indicator will follow normal BMF settlement procedures and will generate a CP-191.
    Balance Due Only 1 Requests Section 6166 or 6163. Form 706, Page 2, Part 3, Line 3 or Line 4 checked "YES" .
  3. Edit a PIC on every Form 706 in the following priority:

    Type of Return Section 6166 or 6163 (Page 2, Part 3, Line 3 or Line 4 or attachment) Code
    Balance Due Only Yes 1
    Any No 0
  4. Code "1" (Balance due return only) when:

    1. Taxpayer requests installment privileges under IRC 6166.

    2. Taxpayer requests payment postponed under IRC 6163.

  5. Code "0" when (4) above does not apply.

    Note:

    The only PICs now used will be "0" or "1" . With the new transaction code used by Cincinnati Compliance Services, Estate and Gift Tax Campus Operation, there will no longer be a need for PIC "2" or "3" .

3.11.106.10.10  (01-01-2014)
Penalty and Interest Codes (P&I) - Form 706

  1. See IRM 3.11.106.2.9, Penalty and Interest Code, for description of codes.

  2. See IRM 3.11.106.10.3.1, Due Date-Form 706, for description of due dates.

3.11.106.10.11  (01-01-2014)
Form 706, Page 4, Part 6, Section 6 correction procedures

  1. In the past, Form 706 was only coded and edited on Page 1 of the return. Beginning in tax year 2013 (PY2014), Page 4, Part 6, Section C of the return will also need to be coded and edited. Changes were made to the DSUE calculation in a circulation of Form 706 received on September 23, 2013. As a result of the increase in the tax rates under ATRA, dividing the total gift tax paid or payable by 40% caused an error in the DSUE calculation (due to the increase in the tax rate). Additional changes were also incorporated into the instructions, specifically the Line 7 worksheet which is submitted with the Form 706 (the worksheet is NOT edited or transcribed). Line 2 was changed to "Reserved" , so Code and Edit should enter a zero on Line 2 of Form 706, Page 4, Part 6, Section C. Due to budget constraints, programming was not able to be completed so this is the work around. ISRP is going to be instructed to field release through the line (so "0" will populate on the ERS screens. ERS is instructed to make sure the line shows zero.

3.11.106.11  (01-01-2014)
Processing Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return (Estate of nonresident not a citizen of the United States)

  1. These instructions cover the processing of Form 706-NA.

3.11.106.11.1  (01-01-2014)
Filing Requirements - Form 706-NA

  1. Form 706-NA returns are filed at CSPC.

  2. The following information pertains to filing requirements:

    1. If the decedent died prior to November 1, 1966, Form 706-NA was required for gross estates exceeding $2,000.

    2. If the decedent died prior to December 31, 1976, Form 706-NA was required for the estate of a nonresident (not a citizen of the U.S.) whose gross estate situated in the U.S. exceeded $30,000 at Date of Death.

    3. If the decedent died after December 31, 1976, Form 706-NA is required for estate of nonresident (not a citizen of the U.S.) if part of the gross estate situated in the U.S. exceeded $60,000 at Date of Birth reduced by $60,000 at Date of Death (DOD) reduced by amount of adjusted taxable gifts per IRC 2001(b) made by decedent after December 31, 1976, or aggregate amount allowed as a specific exemption per IRC 2521(b) (before its repeal by the Tax Reform Act of 1976) with respect to gifts made by decedent after September 8, 1976.

  3. If a pre-1977 Form 706-NA has been filed, attach current revision of form to return and enter data for transcription lines onto current form.

  4. Examiners will perform the following preliminary examination:

    If Then
    Decedent is an "expatriate" The return is not subject to tax rates of a nonresident not a citizen of the U.S., but subject to Table A, Form 706. U.S. "expatriate" is one who lost U.S. citizenship within 10 years before Date of Death (DOD) and for whom it is reasonable to assume that the main purpose in doing so was to avoid U.S. taxes.
    Page 2, Line 6b is checked "yes" See IRM 3.11.106.11.11, Expatriate Indicator-Form 706-NA.
    A person who is a citizen of the U.S., by reason of birth in the U.S., established residence in a possession of the U.S. and died after September 2, 1958 1. Under IRC 2208, this person is considered a U.S. citizen.
    2. His/her estate is subject to tax imposed by IRC 2001 and the Form 706 should be used instead of Form 706-NA.
    3. Edit Action Code 610.
    4. If it is a numbered return, use Form 4227, Intra-SC Reject or Routing Slip, and indicate the return should be renumbered as a Form 706.
    5. If it is an unnumbered return, give it to your manager for inclusion in the Form 706 batch. Delete "-NA" from title of the form.
    6. This can be verified by checking (Nationality) and "Citizenship Domicile at time of death" blocks.

3.11.106.11.2  (01-01-2014)
Death Tax Treaty Countries

  1. Death tax treaties (or, for Canada, an income tax treaty with a death tax protocol) are in effect with Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, Norway, South Africa, Sweden, Switzerland, and United Kingdom.

  2. If items on the return are based on the provisions of a death tax treaty or protocol, it may be necessary for the filer to attach a statement disclosing that it is treaty based. However, if a statement is not attached, continue processing.

3.11.106.11.3  (01-01-2014)
Due Date - Form 706-NA

  1. The following information pertains to the due date of Form 706-NA:

    1. If decedent died before January 1, 1971, the return is due the 15th calendar month after decedents death.

    2. If decedent died after December 31, 1970, the return is due the day of the ninth calendar month after the decedents death.

      Exception:

      If the date of death is between January 1, 2010, and December 17, 2010 (inclusively); the return due date is September 19, 2011, as mandated in the Extender's Legislation (PL 111-312).

    3. An application for extension of time for filing (Form 4768) may be granted even if application is made later than 9 months after Date of Death. Unless executor is abroad, extended due date for filing estate tax return may not be later than 15 months from date of decedents death.

      Reminder:

      The Treasury Department and IRS believe it is reasonable to grant the estates of 2010 Decedents an automatic extension of time to file the estate tax return and an extension of time to pay the estate tax. Accordingly, the Treasury Department and IRS grant the Executor of a 2010 Estate who files a Form 4768 by the due date for filing Form 706 or Form 706-NA both an automatic six month extension of time to file Form 706 or Form 706-NA pursuant to Section 6081, and a six month extension of time to pay the estate tax. The Executor of a 2010 Estate is not required to substantiate on the Form 4768 the reason for requesting an extension of time for payment of the estate tax to receive the six month extension of time to pay the estate tax due. If the Executor (of a 2010 decedent) requests an extension of time to pay for more than six months (on Form 4768), justification needs to be provided.

      Note:

      Receipt and Control will sort and forward Forms 4768 directly to the Cincinnati Compliance Services, Estate and Gift Tax Campus Operation. If a Form 4768 is received in Code and Edit, route to Cincinnati Compliance Services, Estate and Gift Tax Campus Operation.

3.11.106.11.4  (01-01-2014)
Payment Of Tax - Form 706-NA

  1. The following information pertains to payment of tax:

    1. Unless deferred payment under IRC 6161(a) or 6163(b) has been granted, tax is due when the return is filed.

    2. Form 706-NA filers do not have the same privilege that Form 706 filers have for installment payment of balance due under IRC 6166.

3.11.106.11.5  (01-01-2014)
Entity Perfection - Form 706-NA

  1. The entity of the return includes the name, address and Taxpayer ID Number.

3.11.106.11.5.1  (01-01-2014)
Name Control

  1. Underline the name control as stated below. Refer to Document 7071-A, Name Control Job Aid for Individual Master File (IMF) Taxpayers, for specific instructions.

    If Then
    Form 706-NA valid characters are: alpha, hyphen or blank Underline the decedents last name.
    Blanks are present Blanks may be present only in the last 2 positions of name control.

3.11.106.11.5.2  (01-01-2014)
Executor's Name

  1. The following information pertains to the executors name:

    If Then
    There are 2 or more executors names listed on the return Underline the first executors name. Circle out remaining name(s).
    Editing the name of executor 1. Edit the name of executor on Box 9a if the executor is in the U.S.
    2. Edit the name of the executor on Box 11a if the executor is outside the U.S.
    3. If 1. and 2. above do not apply, edit the attorneys name for the estate on Box 10a if inside the U.S. and Box 12a if outside the U.S.

3.11.106.11.5.3  (01-01-2014)
Executor's Address

  1. The following information pertains to the executors address:

    If Then
    Editing the address 1. Edit the address on Box 9b if the executor is in the U.S.
    2. Edit the executors address on Box 11b if the executor is outside the U.S.
    A PO Box and street address are present 1. Perfect the address.
    2. Input TC014.
    More than one street address is present Underline the first address, City, State and ZIP Code. Circle out remaining address(es).
    Address contains information other than a street address or PO Box 1. Underline the complete address, abbreviate as much as possible.
    2. Edit Major City Codes, if applicable.
    3. See Exhibit 3.11.106-22 for determining ZIP code.

3.11.106.11.6  (01-01-2014)
Return Examination - Form 706-NA

  1. The following information pertains to examining the return:

3.11.106.11.6.1  (01-01-2014)
Decedent's Identity

  1. Name of decedent and minimum address of decedent (name of country) at time of death.

3.11.106.11.6.2  (01-01-2014)
Taxpayer ID Number (SSN, TIN, or ITIN)

  1. The following information pertains to the Taxpayer Identification (ID) Number (Social Security Number (SSN), Taxpayer Identification Number (TIN), or Individual Taxpayer Identification Number (ITIN)):

    If Then
    A return does not contain an SSN, TIN, or ITIN 1. Check with Entity to secure temporary numbers for all returns without SSNs, TINs, or ITINs in the block.
    2. Most returns will be blank or have invalid numbers (such as a Canadian SSN).
    Return is numbered 1. Edit Action Code 320.
    2. Attach Form 4227, Intra-SC Reject or Routing Slip, and route to Entity.
    Return is unnumbered Remove from the pack, attach Form 4227, and route to Entity.

3.11.106.11.6.3  (01-01-2014)
Executor's Identity

  1. The following information pertains to the executors identity:

    If Then
    U.S. executor is not present (name and complete address of executor in the U.S. should be shown on all returns) 1. Check attachments for missing information. If not found:
    a. Use the foreign executor.
    b. If there is not a foreign executor, use the U.S. Attorney.
    c. If no U.S. Attorney, use the foreign attorney.
    d. If missing, use Action 211 for correspondence.
    e. If no reply, use CCC "3" - Enter this code when no reply is received for taxpayer correspondence to suppress credit interest from being generated.

3.11.106.11.6.4  (01-01-2014)
Signature

  1. The following information pertains to examining signatures on returns:

    If Then
    Examining for missing signature There must be at least one executor signature for property held in the U.S.
    Attorney's name and address are shown in block of entity section of return 1. Attorney must also sign the return.
    2. Accept foreign executors signature.
    3. Use Action code 225 and Letter 501CS for missing signature. Request that reply be sent to Examination Division.

3.11.106.11.6.5  (01-01-2014)
Date of Birth

  1. The following information pertains to Date of Birth (DOB):

    If Then
    Date of Birth is 1900 or earlier 1. Enter "1900" for year and enter month and date of month.
    2. Edit DOB in MMDDYYYY format.
    Date of Birth is missing, or obviously wrong 1. Check attachments for correct date.
    2. If correct date is unobtainable, leave blank and circle incorrect date.

3.11.106.11.6.6  (01-01-2014)
Date of Death

  1. The following information pertains to Date of Death (DOD):

    If Then
    Date of Death is missing 1. Check death certificate for Date of Death.
    2. Edit Date of Death in MMDDYY format.
    No death certificate is attached 1. Research IDRS.
    2. If DOD cannot be found, continue processing.

3.11.106.11.6.7  (01-01-2014)
Received Date

  1. See IRM 3.11.106.8 for information regarding received date editing.

3.11.106.11.6.8  (01-01-2014)
Attachments

  1. Documents and letters will be enclosed with Form 706-NA. Correspond on numbered returns using Action Code 211 and approved Campus Correspondex. Examine Page 2, Part III of Form 706-NA for the following items:

3.11.106.11.6.8.1  (01-01-2014)
Copy of Will

  1. If Question 1a, "Did the decedent die testate?" , is checked "Yes" and a copy of the will is not attached, continue processing.

3.11.106.11.6.8.2  (01-01-2014)
Balance Sheet and Profit & Loss Statement

  1. The following information pertains to balance sheets and profit and loss statement:

    If Then
    Page 2, Part III, answer to Box 3 is checked "Yes" 1. Balance Sheet and Profit & Loss Statement must be submitted.
    2. Correspond using approved Campus Correspondex only if requesting other information.
    3. Otherwise, notate at the top of the return.
    4. Examination will initiate action to obtain missing documents, if necessary.

3.11.106.11.6.8.3  (01-01-2014)
Transfers

  1. The following information pertains to transfers:

    If Then
    Page 2, Part III, answer to box 7 or 8 is checked "Yes" Schedule G (Form 706) must be attached.
    Schedule G (Form 706) is not attached Correspond.

3.11.106.11.6.8.4  (01-01-2014)
Expatriate Source

  1. The following information pertains to expatriates:
    If the box on Page 2, Part III, Line 6b, is checked "Yes" , the decedent is considered an "Expatriate" and is not subject to the rates of a nonresident (not a citizen of the U.S.) if the decedent died prior to November 11, 1990.

3.11.106.11.6.8.5  (01-01-2014)
Missing Documents

  1. The following information pertains to missing documents:

    If Then
    Documents are missing 1. Initiate action, prepare Form 3696, Correspondence Action Sheet.
    2. Use Action Code 211, if a numbered return.
    3. Request missing document using approved Campus Correspondex.
    4. Prepare Form 3696 and attach to the front of the return in the entity area.
    5. Continue processing return and do not float return to top of block.

3.11.106.11.7  (01-01-2014)
Amended Returns - Form 706-NA

  1. See IRM 3.11.106.5.5.1, Amended Returns.

3.11.106.11.8  (01-01-2014)
Mathematical Verification - Form 706-NA

  1. Manual math verification of the return is not required. The computer will check the transcribed totals and any changes or corrections will be performed by Error Resolution System (ERS) examiners.

  2. Cincinnati Compliance Services, Estate and Gift Tax Campus Operations will correspond for supporting schedules, if missing, for estates that have a Total Gross Estate of $5,250,000 and over for individuals who died in 2013; $5,120,000 and over for individuals who died in 2012; and $5,000,000 for individuals who died between January 1, 2010, and December 31, 2011.

3.11.106.11.8.1  (01-01-2014)
Tax Computation - Form 706-NA

  1. All money entries on Form 706-NA, Page 1, can contain up to twelve numeric characters and are edited in dollars and cents. All money entries must be positive.

    Exception:

    Balance Due/Overpayment-negative amounts should be edited with brackets. Also, Line 3 can be a negative amount as well as a positive amount.

  2. Line 1 - Taxable estate. Verify that the amount is carried forward from Schedule B, Line 9, correctly.

  3. Line 2 - Total taxable gifts. Accept taxpayer's entry.

  4. Line 3 - Total. Add Lines 1 and 2. If Line 3 is a negative entry, bracket the amount only if the taxpayer does not indicate a negative amount with brackets or a minus (-) sign.

  5. Line 4 - Tentative tax on Line 3. Accept taxpayer's entry.

  6. Line 5 - Tentative Tax on Line 2. Accept taxpayer's entry.

  7. Line 6 - Gross estate tax. Accept taxpayer's entry.

  8. Line 7 - Unified/Applicable credit. Accept taxpayer's entry.

  9. Line 8 - Balance after unified/applicable credit. Accept taxpayer's entry.

  10. Line 9 - Other credits. Verify that the amount brought over from the schedule is correct.

  11. Line 10 - Credit for tax on prior transfers. Verify that amount on Line 10 is correctly brought forward from Schedule Q, Form 706. Accept taxpayer's entry.

  12. Line 11 - Total credits. Accept taxpayer's entry.

  13. Line 12 - Net estate tax. Accept taxpayer's entry.

  14. Line 13 - Total generation-skipping transfer tax. Verify that amount is correctly brought forward from Schedule R, Form 706 (Part 2, Line 10). Accept taxpayer's entry.

  15. Line 14 - Total transfer taxes. Accept taxpayer's entry.

  16. Line 15 - Earlier payments. If blank, leave blank; otherwise, accept taxpayer's entry.

  17. Line 16 - Balance Due/Overpayment. Edit negative amounts in brackets (refunds) only if the taxpayer does not indicate a negative amount with brackets or a minus (-) sign.

3.11.106.11.9  (01-01-2014)
Payment Indicator Code (PIC) - Form 706-NA

  1. Deferment of payment will be granted similar to Form 706 (See IRM 3.11.106.10.8, Deferment of Payment (Extension of Time to Pay)-Form 706).

  2. Use a one digit Payment Indicator Code (PIC) to identify returns where a deferment was submitted.

  3. If the taxpayer has no balance due or made a request for installment payments or has not requested an extension or a refund, edit code "0" .

  4. Since there cannot be any IRC 6166 installments and Treasury Bonds are no longer being accepted as payment of estate tax by Examination, the only payment indicator codes applicable to Form 706-NA are 0 and 6.

  5. Enter code to the right of Line 16-Balance due on Form 706-NA. This is a required entry on Form 706-NA.

    Exception:

    Do not edit a PIC on amended Forms 706-NA.

  6. Payment Indicator Codes:

    Code Condition
    0 If there is no entry on Line 15.
    6 If there is an entry on Line 15.

3.11.106.11.10  (01-01-2014)
Penalty and Interest Code (P&I) - Form 706-NA

  1. Insert P&I Code in upper right margin of the return. See IRM 3.11.106.2.9, Penalty and Interest Code, for description of codes. See IRM 3.11.106.11.3, Due Date-Form 706-NA, for due dates.

3.11.106.11.11  (01-01-2014)
Expatriate Indicator - Form 706-NA

  1. The following information pertains to the expatriate indicator:

    If Then
    The box on Page 2, Line 6b is checked "Yes" Place a code "1" preceded by "Exp" in the lower left hand margin of Page 1.

    Exception:

    IRC 2208 or 2001 is notated

    The Form 706-NA must be converted to a Form 706.
    A numbered return 1. Edit Action Code 610.
    2. Attach Form 4227, Intra-SC Reject or Routing Slip, and route to be batched and renumbered as a Form 706.
    An unnumbered return Convert Form 706-NA to a Form 706 and route to be batched and processed as a Form 706.

3.11.106.12  (01-01-2014)
Processing Form 706-A, United States Additional Estate Tax Return

  1. The following information pertains to processing Form 706-A, United States Additional Estate Tax Return:

3.11.106.12.1  (01-01-2014)
Background

  1. As a result of the Tax Reform Act of 1976, Public Law 81-666, Section 2032A of the Internal Revenue Code permits the executor of an estate, if the decedent died after December 31, 1976, to make an election to value the decedents real property on the basis of its actual use, rather than its fair market value determined according to its highest and best, or most valuable use.

  2. Section 2032A also provides that all persons with an interest in the property must enter into a written agreement consenting to personal liability for any additional tax imposed in the event the property is sold or disposed of, or no longer qualifies for the special farm or business use.

  3. An additional estate tax is imposed if the disposition or cessation was within 15 years after the decedents death, if the decedent died before January 1, 1982, or within 10 years of decedents death if the decedent died after December 31, 1981 (and before the death of the qualified heir), the qualified heir disposes of any interest in the specially valued real property (other than to a member of his/her family), or the qualified heir ceases to use the specially valued real property. The tax is not imposed more than once for any one interest.

  4. The qualified heir must file Form 706-A if any additional estate tax is due. Form 706-A must be filed within 6 months after the taxable disposition or cessation of the qualified use unless an extension of time has been granted.

  5. For tax periods after 8112 all taxpayers who have exchanges or involuntary conversions, even if they are nontaxable, must file Form 706-A.

  6. The 15-year rule for the estates of decedents dying before 1982 expired in 1997. Lines 16 through 19 that were on the March 1997 Form 706-A have been deleted. These lines were used only if the decedent died before January 1, 1982, and the taxable event occurred more than 120 months after the commencement date. The lines on the Form 706-A have been re-numbered.

  7. Form 4768 may be filed to apply for an extension of time to file.


More Internal Revenue Manual