Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return Page 40
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55The credit figured under the statute;
imposing the tax is determined by the
Austria, Canada, Denmark, Finland,
or
same principles that would apply in
France, Germany, Greece, Ireland, Italy,
The credit figured under the treaty,
determining whether similar property of
Japan, Netherlands, Norway, South
plus the credit figured under the statute
a nonresident not a U.S. citizen is
Africa, Switzerland, and the United
for death taxes paid to each political
situated within the United States for
Kingdom.
subdivision or possession of the treaty
purposes of the federal estate tax. See
A credit claimed under a treaty is in
country that are not directly or indirectly
the Instructions for Form 706-NA.
general figured on Schedule P in the
creditable under the treaty.
same manner as the credit is figured
Computation of Credit Under
under the statute with the following
Under the statute, the credit is
the Statute
principal exceptions.
authorized for all death taxes (national
The situs rules contained in the treaty
Item 1. Enter the amount of the estate,
and local) imposed in the foreign
apply in determining whether property
inheritance, legacy, and succession
country. Whether local taxes are the
was situated in the foreign country.
taxes paid to the foreign country and its
basis for a credit under a treaty depends
The credit may be allowed only for
possessions or political subdivisions,
upon the provisions of the particular
payment of the death tax or taxes
attributable to property that is:
treaty.
specified in the treaty (but see the
Situated in that country,
If a credit for death taxes paid in
instructions earlier for credit under the
Subjected to these taxes, and
more than one foreign country is
statute for death taxes paid to each
Included in the gross estate.
allowable, a separate computation of
political subdivision or possession of the
The amount entered at item 1 should
the credit must be made for each
treaty country that are not directly or
not include any tax paid to the foreign
foreign country. The copies of
indirectly creditable under the treaty).
country for property not situated in that
Schedule P on which the additional
If specifically provided, the credit is
country and should not include any tax
computations are made should be
proportionately shared for the tax
paid to the foreign country for property
attached to the copy of Schedule P
applicable to property situated outside
not included in the gross estate. If only a
provided in the return.
both countries, or that was deemed in
part of the property subjected to foreign
some instances situated within both
taxes is both situated in the foreign
The total credit allowable for any
countries.
country and included in the gross
property, whether subjected to tax by
The amount entered at item 4 of
estate, it will be necessary to determine
one or more than one foreign country, is
Schedule P is the amount shown on
the portion of the taxes attributable to
limited to the amount of the federal
line 12 of Part 2—Tax Computation, less
that part of the property. Also, attach the
estate tax attributable to the property.
the total of the credits claimed for
computation of the amount entered at
The anticipated amount of the credit
federal gift taxes on pre-1977 gifts
item 1.
may be figured on the return, but the
(section 2012) and for tax on prior
Item 2. Enter the value of the gross
credit cannot finally be allowed until the
transfers (line 14 of Part 2—Tax
estate, less the total of the deductions
foreign tax has been paid and a Form
Computation). (If a credit is claimed for
on items 21 and 22 of Part
706-CE evidencing payment is filed.
tax on prior transfers, it will be
5—Recapitulation.
Section 2014(g) provides that for credits
necessary to complete Schedule Q
for foreign death taxes, each U.S.
Item 3. Enter the value of the property
before completing Schedule P.) For
possession is deemed a foreign
situated in the foreign country that is
examples of computation of credits
country.
subjected to the foreign taxes and
under the treaties, see the applicable
included in the gross estate, less those
regulations.
Convert death taxes paid to the
portions of the deductions taken on
foreign country into U.S. dollars by
Computation of credit in cases
Schedules M and O that are attributable
using the rate of exchange in effect at
where property is situated outside
to the property.
the time each payment of foreign tax is
both countries or deemed situated
made.
Item 4. Subtract any credit claimed on
within both countries. See the
line 15 for federal gift taxes on pre-1977
appropriate treaty for details.
If a credit is claimed for any foreign
gifts (section 2012) from line 12 of Part
death tax that is later recovered, see
Schedule Q—Credit for
2—Tax Computation, and enter the
Regulations section 20.2016-1 for the
balance at item 4 of Schedule P.
Tax on Prior Transfers
notice required within 30 days.
Credit Under Treaties
Limitation Period
General
If you are reporting any items on this
The credit for foreign death taxes is
Complete Schedule Q and file it with the
return based on the provisions of a
limited to those taxes that were actually
return if you claim a credit on Part
death tax treaty, you may have to attach
paid and for which a credit was claimed
2—Tax Computation, line 14.
a statement to this return disclosing the
within the later of 4 years after the filing
return position that is treaty based. See
The term transferee means the
of the estate tax return, before the date
Regulations section 301.6114-1 for
decedent for whose estate this return is
of expiration of any extension of time for
details.
filed. If the transferee received property
payment of the federal estate tax, or 60
from a transferor who died within 10
days after a final decision of the Tax
In general. If the provisions of a treaty
years before, or 2 years after, the
Court on a timely filed petition for a
apply to the estate of a U.S. citizen or
transferee, a credit is allowable on this
redetermination of a deficiency.
resident, a credit is authorized for
return for all or part of the federal estate
payment of the foreign death tax or
Credit Under the Statute
tax paid by the transferor's estate for the
taxes specified in the treaty. Treaties
For the credit allowed by the statute, the
transfer. There is no requirement that
with death tax conventions are in effect
question of whether particular property
the property be identified in the estate of
with the following countries: Australia,
is situated in the foreign country
the transferee or that it exist on the date
-40-
Part Instructions
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