Lesson 12: Complete Guide to Form 706

Welcome to Lesson 12 in our comprehensive Exploring Federal Estate Tax Law series. In this lesson, we'll delve into the intricacies of Form 706, which is used for filing Federal Estate Tax Returns.

What is Form 706?

Form 706, also known as the United States Estate (and Generation-Skipping Transfer) Tax Return, is the form used to compute and report the federal estate tax and any applicable generation-skipping transfer (GST) taxes.

Who Should File Form 706?

The executor of the estate is responsible for filing Form 706. If there is no executor, the person in custody of the decedent's property must file the form.

Key Sections of Form 706

Form 706 consists of several schedules and parts, each designed to collect specific information about the estate. The main sections include:

  • Part 1: Decedent and Executor Information
  • Part 2: Tax Computation
  • Part 3: Elections by the Executor
  • Part 4: General Information
  • Schedules A-U: Detailed asset and deduction information

Example: Filling Out Basic Information

Below is an example of how to fill out the basic information section in Part 1 of Form 706:

Filing Deadlines

Form 706 must be filed within nine months after the decedent's date of death. Extensions can be requested using Form 4768, which you can learn more about in our Lesson 13: Filing Deadlines and Extensions.

Common Mistakes to Avoid

  • Failing to report all assets
  • Omitting deductions
  • Incorrectly valuing assets

For more details on common errors, refer to Lesson 14: Common Mistakes in Filing.

Example: Estate Distribution

The following diagram illustrates a simple estate distribution:

graph TD;
    A["Decedent"] -->|Bequeaths| B["Heir 1"];
    A -->|Bequeaths| C["Heir 2"];
    A -->|Bequeaths| D["Charity"];
    B --> E["Receives Property A"];
    C --> F["Receives Property B"];
    D --> G["Receives Property C"];

Calculating the Tax

The tax calculation on Form 706 involves determining the value of the gross estate, subtracting allowable deductions, and applying the applicable estate tax rates.

Example: Tax Calculation Formula

The estate tax is calculated using the following formula:

$$Tax\_Due = (Gross\_Estate - Deductions) \times Tax\_Rate$$

Resources and Further Reading

For more detailed instructions on how to complete Form 706, you can refer to the official IRS instructions. For a foundational understanding of related topics, check out other lessons in our series, such as Lesson 5: Calculating the Gross Estate and Lesson 6: Adjustments to Gross Estate.

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