Instructions For Form 706-A - United States Additional Estate Tax Return (Page 2 of 5) in pdf

Period—Commencement Date on

1. Neither the decedent nor any

Required activities for material par-

page 3.)

member of the decedent's family

ticipation. See the Instructions for

materially participated in the operation

Form 706.

Only one additional estate tax will be

of the farm or other business (while the

imposed with respect to any one part of

Basis

decedent held the property) and

specially valued property. For example,

2. Neither the qualified heir nor any

See section 1014(a) for the basis of

if additional estate tax is imposed for

member of the qualified heir's family

property acquired from a decedent.

early cessation of a qualified use, a

materially participated in the operation

second additional estate tax will not be

Election to increase basis. A

of the farm or other business (while the

imposed for a subsequent early

qualified heir may elect to increase the

heir held the property).

disposition of the same part of the

basis of specially valued property when

specially valued property.

If the decedent was retired or

a taxable event (as defined on page 1)

disabled before death, there are special

occurs. If this election is made, the

Disposition to family member. A

rules for applying the 8-year period to

basis of the property shall increase to

disposition of an interest in property to a

paragraph (1) above. See section

the excess of the FMV amount on the

family member of the qualified heir is a

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

decedent's date of death (or alternate

taxable event that must be reported on

Form 706.

valuation date, if applicable) over the

Form 706-A. If the transferee enters into

value amount determined under section

an agreement to be personally liable for

Member of family. The term “member

2032A. Once the election is made, it is

any additional tax under section

of the family” includes only:

irrevocable.

2032A(c), the disposition is nontaxable

An ancestor (parent, grandparent,

and you should enter it on Schedule C.

etc.) of the individual (where individual

To make the election, the qualified

If the family member does not enter

refers to either the decedent or a

heir must:

into the agreement, the disposition is

qualified heir);

Check the box on line 7 of Part I,

taxable and you should enter it on

The spouse of the individual;

Enter on line 20 of Part II the amount

Schedule A.

A lineal descendant (child, stepchild,

of interest being paid on the additional

grandchild, etc.) of the individual, the

estate tax due, and

Disposition of timber. If the executor

File with Form 706-A, a statement

individual's spouse, or a parent of the

made a qualified woodlands election

that:

individual; or

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

The spouse, widow, or widower of

a. Contains the name, address, and

disposition or severing of timber from

any lineal descendant described above.

taxpayer identification number of the

the woodland is a disposition of a

qualified heir and of the estate;

A legally adopted child of an

portion of the interest in the property.

b. Identifies the election as the

individual is treated as a child of that

The disposition of a right to sever is

election under section 1016(c); and

individual by blood.

treated as a disposition of the standing

c. Specifies the property with

timber.

Period of material participation.

respect to which the election is

The additional estate tax on this

To determine whether the material

made.

disposition is the amount equal to the

participation requirement is satisfied,

A qualified heir who makes this

lesser of:

include periods during which the

election must pay interest on the

The amount realized on the

decedent's estate held the property.

additional estate tax calculated from the

disposition (or, if other than a sale or

If a qualified heir dies before the

date that is 9 months after the date of

exchange at arm's length, the FMV of

required period has passed, any

the decedent's death to the date of the

the interest disposed of) or

material participation requirement ends

payment of the additional estate tax.

The amount of additional estate tax

for that heir's portion of the property,

that would have been imposed if the

provided the heir received a separate or

Two-Year Grace

entire interest of the qualified heir in the

other undivided interest from the

Period—Commencement

qualified woodland had been disposed

decedent.

of, minus any additional estate tax

Date

If qualified heirs receive successive

imposed on all earlier transactions

interests in specially valued property

For the two years immediately following

involving the woodland.

(for example, a life estate and

the date of the decedent's death, the

Cessation of qualified use. The

remainder interests), the material

failure by the qualified heir to begin

specially valued real property must be

participation requirement does not end

using the property in a qualified use will

used as a farm for farming purposes, or

for any part of the property until the later

not be considered a cessation of

used in a trade or business other than

of the expiration of the recapture period

qualified use and therefore will not

the trade or business of farming. For

or the death of the last qualified heir.

trigger the additional estate tax. The

more details, see the Instructions for

date on which the qualified heir begins

In determining whether the required

Form 706.

to use the property in a qualified use is

participation has occurred, disregard

the commencement date.

The qualified use ceases if the

brief periods (30 days or less) during

specially valued real property is not

which there was no material

The 10-year recapture period is

used for the qualified use described

participation. But you may disregard

extended by the period after the

earlier. Use of the property as a farm or

these periods only if they were both

decedent's death and before the

other business is also considered to

preceded and followed by substantial

commencement date.

cease if, during any 8-year period that

periods (more than 120 days) in which

ends after the decedent's death, there

there was uninterrupted material

For example, if the decedent died

were periods totaling more than 3 years

participation.

February 28, 2011, and the

during which:

commencement date is August 1, 2012,

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

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