Instructions For Form 706-A - United States Additional Estate Tax Return

use the specially valued property for its

ends after the decedent’s death, there

Required activities for material

qualified use if:

were periods totaling more than 3 years

participation. See the Instructions for

•

The disposition or cessation of

during which:

Form 706.

qualified use was before the death of

1. Neither the decedent nor any

Basis

the qualified heir and

member of the decedent’s family

•

The disposition or cessation was

materially participated in the operation

See section 1014(a) for the basis of

within 10 years after the decedent’s

of the farm or other business (while the

property acquired from a decedent.

death. (But see Two-Year Grace

decedent held the property) and

Election to increase basis. A

Period — Commencement Date below.)

2. Neither the qualified heir nor any

qualified heir may elect to increase the

member of the qualified heir’s family

Only one additional estate tax will be

basis of specially valued property when

materially participated in the operation

imposed with respect to any one part of

a taxable event (as defined on page 1)

of the farm or other business (while the

specially valued property. For example,

occurs. If this election is made, the

heir held the property).

if additional estate tax is imposed for

basis of the property shall increase to

early cessation of a qualified use, a

the excess of the fair market value (as

second additional estate tax will not be

If the decedent was retired or

defined on page 3) amount on the

imposed for a subsequent early

disabled before death, there are special

decedent’s date of death (or alternate

disposition of the same part of the

rules for applying the 8-year period to

valuation date, if applicable) over the

specially valued property.

paragraph (1) above. See section

value amount determined under section

2032A(b)(4) and the Instructions for

Disposition to family member. A

2032A. Once the election is made, it is

Form 706.

disposition of an interest in property to

irrevocable.

a family member of the qualified heir is

Member of family. The term “member

To make the election, the qualified

a taxable event that must be reported

of the family” includes only:

heir must:

on Form 706-A. If the transferee enters

•

An ancestor (parent, grandparent,

Check the box on line 7 of Part I,

into an agreement to be personally

•

etc.) of the individual (where individual

Enter on line 20 of Part II the amount

liable for any additional tax under

refers to either the decedent or a

of interest being paid on the additional

section 2032A(c), the disposition is

qualified heir);

estate tax due, and

nontaxable and you should enter it on

•

The spouse of the individual;

File with Form 706-A, a statement

Schedule C.

•

A lineal descendant (child, stepchild,

that:

If the family member does not enter

grandchild, etc.) of the individual, the

(a) Contains the name, address, and

into the agreement, the disposition is

individual’s spouse, or a parent of the

taxpayer identification number of the

taxable and you should enter it on

individual; or

qualified heir and of the estate;

•

Schedule A.

The spouse, widow, or widower of

(b) Identifies the election as the

any lineal descendant described above.

Disposition of timber. If the executor

election under section 1016(c) of the

made a qualified woodlands election

Code; and

A legally adopted child of an

(section 2032A(e)(13)(A)), the

individual is treated as a child of that

disposition or severing of timber from

respect to which the election is

individual by blood.

the woodland is a disposition of a

made.

portion of the interest in the property.

Period of material participation. To

The disposition of a right to sever is

determine whether the material

A qualified heir who makes this

treated as a disposition of the standing

participation requirement is satisfied,

election must pay interest on the

timber.

include periods during which the

additional estate tax calculated from the

decedent’s estate held the property.

The additional estate tax on this

date that is 9 months after the date of

disposition is the amount equal to the

the decedent’s death to the date of the

If a qualified heir dies before the

lesser of:

payment of the additional estate tax.

required period has passed, any

•

The amount realized on the

material participation requirement ends

disposition (or, if other than a sale or

Two-Year Grace

for that heir’s portion of the property,

exchange at arm’s length, the fair

provided the heir received a separate

Period—

market value of the interest disposed

or other undivided interest from the

of) or

Commencement Date

decedent.

•

The amount of additional estate tax

For the 2 years immediately following

that would have been imposed if the

If qualified heirs receive successive

the date of the decedent’s death, the

entire interest of the qualified heir in the

interests in specially valued property

failure by the qualified heir to begin

qualified woodland had been disposed

(for example, a life estate and

using the property in a qualified use will

of, minus any additional estate tax

remainder interests), the material

not be considered a cessation of

imposed on all earlier transactions

participation requirement does not end

qualified use and therefore will not

involving the woodland.

for any part of the property until the

trigger the additional estate tax. The

later of the expiration of the recapture

Cessation of qualified use. The

date on which the qualified heir begins

period or the death of the last qualified

specially valued real property must be

to use the property in a qualified use is

heir.

used as a farm for farming purposes, or

the commencement date.

used in a trade or business other than

In determining whether the required

The 10-year recapture period is

the trade or business of farming. For

participation has occurred, disregard

more details, see the Instructions for

extended by the period after the

brief periods (30 days or less) during

Form 706.

decedent’s death and before the

which there was no material

commencement date.

The qualified use ceases if the

participation. But you may disregard

specially valued real property is not

these periods only if they were both

For example, if the decedent died

used for the qualified use described

preceded and followed by substantial

February 28, 2006, and the

above. Use of the property as a farm or

periods (more than 120 days) in which

commencement date is August 1, 2007,

other business is also considered to

there was uninterrupted material

the recapture period would begin

cease if, during any 8-year period that

participation.

August 1, 2007, and end July 31, 2017.

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Instructions For Form 706-A - United States Additional Estate Tax Return - 2008 Page 2

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