Form 706 (Draft) - United States Estate (And Generation-Skipping Transfer) Tax Return - 2016 Page 15
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55In general, that amount is the amount of
made by the decedent in the 3-year
one partner or shareholder if it is
tax that bears the same ratio to the total
period ending on the date of death.
community property or held by a
estate tax that the value of the
husband and wife as joint tenants,
Passive assets. In determining the
closely-held business included in the
tenants in common, or as tenants by the
value of a closely-held business and
gross estate bears to the adjusted gross
entirety.
whether the 35% requirement is met, do
estate.
Property owned directly or indirectly
not include the value of any passive
by or for a corporation, partnership,
Bond or lien. The IRS may require that
assets held by the business. A passive
estate, or trust is treated as owned
an estate furnish a surety bond when
asset is any asset not used in carrying
DRAFT AS OF
proportionately by or for its
granting the installment payment
on a trade or business. Any asset used
shareholders, partners, or beneficiaries.
election. In the alternative, the executor
in a qualifying lending and financing
For trusts, only beneficiaries with
may consent to elect the special lien
business is treated as an asset used in
present interests are considered.
provisions of section 6324A, in lieu of
carrying on a trade or business; see
the bond. The IRS will contact you
section 6166(b)(10) for details. Stock in
The interest in a closely-held farm
regarding the specifics of furnishing the
another corporation is a passive asset
business includes the interest in the
June 16, 2016
bond or electing the special lien. The
unless the stock is treated as held by
residential buildings and related
IRS will make this determination on a
the decedent because of the election to
improvements occupied regularly by the
case-by-case basis, and you may be
treat holding company stock as
owners, lessees, and employees
asked to provide additional information.
business company stock; see Holding
operating the farm.
company stock, later.
If you elect the lien provisions,
Holding company stock. The
section 6324A requires that the lien be
If a corporation owns at least 20% in
executor may elect to treat as business
placed on property having a value equal
value of the voting stock of another
company stock the portion of any
to the total deferred tax plus 4 years of
corporation, or the other corporation
holding company stock that represents
interest. The property must be expected
had no more than 45 shareholders and
direct ownership (or indirect ownership
to survive the deferral period, and does
at least 80% of the value of the assets of
through one or more other holding
not necessarily have to be property of
each corporation is attributable to
companies) in a business company. A
the estate. In addition, all people with an
assets used in carrying on a trade or
holding company is a corporation
interest in the designated property must
business, then these corporations will
holding stock in another corporation. A
consent to the creation of this lien.
be treated as a single corporation, and
business company is a corporation
the stock will not be treated as a passive
carrying on a trade or business.
Percentage requirements. To qualify
asset. Stock held in the other
for installment payments, the value of
In general, this election applies only
corporation is not taken into account in
the interest in the closely-held business
to stock that is not readily tradable.
determining the 80% requirement.
that is included in the gross estate must
However, the election can be made if
be more than 35% of the adjusted gross
Interest in closely held business.
the business company stock is readily
estate (the gross estate less expenses,
For purposes of the installment payment
tradable, as long as all of the stock of
indebtedness, taxes, and losses –
election, an interest in a closely-held
each holding company is not readily
Schedules J, K, and L of Form 706 (do
business means:
tradable.
not include any portion of the state
Ownership of a trade or business
For purposes of the 20% voting stock
death tax deduction)).
carried on as a proprietorship,
requirement, stock is treated as voting
An interest as a partner in a
Interests in two or more closely-held
stock to the extent the holding company
partnership carrying on a trade or
businesses are treated as an interest in
owns voting stock in the business
business if 20% or more of the total
a single business if at least 20% of the
company.
capital interest was included in the
total value of each business is included
If the executor makes this election,
gross estate of the decedent or the
in the gross estate. For this purpose,
the first installment payment is due
partnership had no more than 45
include any interest held by the
when the estate tax return is filed. The
partners, or
surviving spouse that represents the
5-year deferral for payment of the tax,
Stock in a corporation carrying on a
surviving spouse's interest in a business
as discussed later under Time for
trade or business if 20% or more in
held jointly with the decedent as
payment, does not apply. In addition,
community property or as joint tenants,
value of the voting stock of the
the 2% interest rate, discussed later
tenants by the entirety, or tenants in
corporation is included in the gross
under Interest computation, will not
common.
estate of the decedent or the
apply. Also, if the business company
corporation had no more than 45
stock is readily tradable, as explained
Value. The value used for meeting
shareholders.
above, the tax must be paid in five
the percentage requirements is the
The partnership or corporation must
installments.
same value used for determining the
be carrying on a trade or business at the
gross estate. Therefore, if the estate is
Determine how much of the estate
time of the decedent's death. For further
valued under alternate valuation or
tax may be paid in installments un-
information on whether certain
special-use valuation, you must use
der section 6166. To determine
partnerships or corporations owning real
those values to meet the percentage
whether the election may be made, you
property interests constitute a
requirements.
must calculate the adjusted gross
closely-held business, see Rev. Rul.
estate. (See, Line 3
Transfers before death. Generally,
2006-34, 2006-26 I.R.B. 1171, available
Worksheet —Adjusted Gross Estate,
gifts made before death are not
at
later.) To determine the value of the
included in the gross estate. However,
In determining the number of
adjusted gross estate, subtract the
the estate must meet the 35%
partners or shareholders, a partnership
deductions (Schedules J, K, and L) from
requirement by both including in and
or stock interest is treated as owned by
the value of the gross estate.
excluding from the gross estate any gifts
-14-
Part Instructions
ADVERTISEMENT
0 votes
Related Articles
Related forms
Instructions Draft For Form 706-na - United States Estate (and Generation-skipping Transfer) Tax Return Estate Of Nonresident Not A Citizen Of The United States
Financial
Instructions For Form 706-na - United States Estate (and Generation-skipping Transfer) Tax Return - 1999
Financial
Instructions For Form 706-na - United States Estate (and Generation-skipping Transfer) Tax Return - 2007
Financial
Instructions For Form 706-na - United States Estate (and Generation-skipping Transfer) Tax Return - Internal Revenue Service - 2006
Financial
Instructions For Form 706-na - United States Estate (and Generation-skipping Transfer) Tax Return - Internal Revenue Service - 2008
Financial
Instructions For Form 706-na - United States Estate (and Generation-skipping Transfer) Tax Return - Internal Revenue Service - 2005
Financial
Related Categories
Parent category: Financial