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Canadian Small Estate Relief

Uncompensated losses that were

The total tax charged,

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incurred during settlement of the estate

Any discount allowed,

If you are claiming a small estate

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and that arose from theft or from

Any penalties and interest imposed,

exemption (worldwide estate of a

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casualties, such as fires, storms, or

The tax actually paid, and

Canadian resident decedent not more

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shipwrecks.

Each payment date.

than $1.2 million) from tax on U.S.

securities or certain other U.S. situs

You may deduct only that part of a

If possible, attach the certificate to

property, under the 1995 Protocol to

debt or mortgage that was contracted in

this return; otherwise, please file it as

the Canadian income tax treaty, do not

good faith and for full value in money or

soon as possible.

money’s worth. You may deduct

list the exempt assets on Schedule A.

If you later recover any of the state

mortgages only if you included the full

Instead, list those assets and their

tax for which you claim this deduction,

value of the mortgaged property in the

values in a statement attached to the

you must notify the IRS at the following

total gross estate on line 3. Do not

return specifying that you are relying on

address within 30 days of receiving any

deduct tax on income received after

the treaty.

refund of state taxes.

death or property taxes accrued after

To determine initially whether the

death. See Line 7, below, for details on

Internal Revenue Service Center

small estate exemption applies,

deducting death taxes.

Philadelphia, PA 19255

however, you must include the exempt

On line 4, show the total of these

assets in the value of the entire gross

deductible items. In general, the total is

Part II—Tax Computation

estate, wherever located, on lines 2

limited to the amount on line 3.

and 3 of Schedule B.

Line 4 and Line 5. To determine the

Line 6. Use line 6 to enter the following

tentative tax on the amount on line 2 (to

deductions.

Schedule B—Taxable Estate

be entered on line 4) and the tentative

Charitable deduction. Unless a

tax on the amount on line 3 (to be

For the line 5 deduction to be

treaty allows otherwise, you may take a

entered on line 5), use Table A in the

allowed, you must complete

charitable deduction only if the transfer

version of Form 706 that corresponds

lines 1 through 4 and document

was to a domestic entity or for use in

CAUTION

to the decedent’s date of death.

the amounts you include on lines 2

the United States as described in the

Line 7. Enter the unified credit. The

and 4.

Instructions for Form 706.

unified credit is allowed for the smaller

Attach Schedule O of Form 706. If

To document the line 2 amount,

of the line 6 amount or the maximum

you claim the deduction under a treaty,

attach a certified copy of the foreign

unified credit. In general, the maximum

specify the applicable treaty and attach

death tax return; or if none was filed, a

unified credit is $13,000.

a computation of the deduction.

certified copy of the estate inventory

For a citizen of a U.S. possession

and the schedule of debts and charges

Marital deduction. Unless a treaty

(section 2209) the maximum unified

that were filed with the foreign probate

allows otherwise, you may only take a

credit is the greater of:

court or as part of the estate’s

marital deduction if the surviving

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$13,000, or

administration proceedings.

spouse is a U.S. citizen or if the

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The product of $46,800 times a

Supplement these documents with

property passes to a qualified domestic

fraction.

attachments if they do not set forth the

trust (QDOT) described in section

entire gross estate outside the United

2056A and an election is made on

The numerator of the fraction is the

States. If more proof is needed, you will

Schedule M of Form 706.

part of the gross estate located in the

be notified.

United States (line 1 of Schedule B),

Attach Schedule M of Form 706, and

and the denominator is the entire gross

To support the line 4 amount, attach

a statement showing your computation

estate wherever located (line 3 of

an itemized schedule. For each

of the marital deduction.

Schedule B).

expense or claim, specify the nature

See section 2518 for the rules

and amount and give the creditor’s

If the unified credit is affected by a

governing disclaimers of interests

name. Describe other deductions fully

treaty, see section 2102(b)(3)(A). (At

in property.

and identify any particular property to

the time this form went to print, treaties

Line 7. You may take a deduction on

which they relate.

with Australia, Canada, Finland,

line 7 for death taxes (estate,

Germany, Greece, Italy, Japan,

Line 2. The amount on line 2 is the

inheritance, legacy, or succession

Norway, and Switzerland contained

total value of the assets included in the

taxes) you paid to any state or the

provisions to which section

entire gross estate that were located

District of Columbia on property listed in

2102(b)(3)(A) applies.)

outside the United States. If you claim

Schedule A. To calculate the deduction

deductions on line 5 of Schedule B, you

for state death taxes, use the formula

Any amount previously allowed

must also document the amount you

below. Enter the result on line 7.

as a unified credit against the

enter on line 2. See the first paragraph

gift tax will reduce, dollar for

CAUTION

Total value of assets

under Schedule B, above.

dollar, the unified credit allowed the

in the gross estate subject

If you elected the alternate valuation

estate (section 2102(c)(3)(B)).

to state death taxes

Total state

date for property listed on Schedule A,

death taxes

Line 9. Use line 9 to enter the following

Gross estate located in the

paid

use it also for the assets reported on

U.S. (line 1 of Schedule B)

credits.

line 2. Otherwise, value the amounts as

Credit for Federal gift taxes. See

of the date of death.

Generally, you must claim this

sections 2102 and 2012. Attach

deduction within 4 years of filing the

Line 4. You may deduct the following

computation of credit.

return. However, see section 2058(b)

items whether or not they were incurred

for exceptions and periods of

or paid in the United States:

Canadian marital credit. In

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limitations.

Funeral expenses;

addition to the unified credit, a

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Administration expenses;

For the deduction to be allowed, you

nonrefundable marital credit may be

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Claims against the estate;

must file a certificate signed by the

allowed if all applicable elections are

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Unpaid mortgages and other liens;

appropriate official of the taxing state.

made. The credit amount is generally

and

The certificate should show:

limited to the lesser of:

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Instructions For Form 706-Na - United States Estate (And Generation-Skipping Transfer) Tax Return - Internal Revenue Service - 2005 Page 4

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