Form Ia 706 - General Instructions For Iowa Inheritance Tax Return

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General Instructions for Iowa Inheritance Tax Return (IA 706)
Return Required
Valuation
An inheritance tax return must be filed by the fiduciary of any
Alternate Valuation: Alternate value may be used on the same
estate when the gross share subjected to tax without reduction for
terms and conditions that govern the alternate valuation for federal
liabilities of any beneficiary, heir, transferee, or surviving joint
estate tax purposes. Note: The alternate value cannot be used for
tenant exceeds the allowable exemption from such share or if a
Iowa purposes unless used for federal estate tax purposes and a
federal return has been filed. (See below for deaths on or after
federal estate tax return is required to be filed, and the amount of
July 1, 2004.) The term “estate” includes property held in trust or
federal estate tax owing has been reduced.
otherwise not subject to probate.
In general, the alternate valuation date is the date six months after
Gross Estate
the decedent’s death. If the property is sold within the 6-month
period, the date of the sale is the alternate date for valuing the
Gross estate includes all those items or interests in property passing
property sold.
by any method of transfer specified in Iowa Code section 450.3.
If the election is made, all of the property included in the gross
The return must provide for schedules listing the assets included
estate and not just a portion of the property must be valued at the
in the gross estate, a listing of the liabilities deductible in computing
alternate valuation.
the net estate and a computation of the tax due, if any, on each
If the alternate valuation is elected, the value established for federal
share of the net estate. When Iowa schedules are filed with the
estate tax purposes must also be the alternate value for inheritance
return, only those schedules that apply to the particular assets and
tax purposes.
liabilities of the estate are required. Iowa schedules A through I
Failure to indicate on line 25 of the inheritance tax return the
may be replaced with the Iowa Bar probate schedules. Note: Only
election of alternate valuation will be construed as a decision not
the Department’s inheritance tax return and the liabilities Schedules
to elect an alternate valuation date.
J and K will be accepted.
Special Use Valuation: Real estate that has been valued at its
If the estate has filed a federal estate tax return, a copy must be
special use value under 26 U.S.C. section 2032A for computing
submitted with the Iowa return. If the federal estate tax return
the federal estate tax is eligible to be valued for inheritance tax
includes the schedules of assets and liabilities, the taxpayer may
purposes at its special use value.
omit Iowa Schedules A through I from the return.
Real estate cannot be specially valued for inheritance tax purposes
A return merely listing the assets and their values is not sufficient
unless it is also eligible and is valued at its special use value for
in estates that exceed $25,000. (Even in nontaxable estates, the
federal estate tax purposes. However, even though real estate is
section showing computation of shares and tax must be completed
specially valued for federal estate tax purposes, the estate has the
before an inheritance tax clearance can be issued.)
right to elect or not to elect to value real estate at its special use
Effective for estates of decedents dying on or after July 1,
value for computing the inheritance tax. Note: The special use
2004, when all assets of the decedent pass to a surviving spouse,
value cannot be used for Iowa purposes if a special use election
lineal ascendants or descendants, legally-adopted children, and/
for federal estate tax purposes has no effect on the federal tax.
or stepchildren, an Iowa inheritance tax return should not be filed
The election to specially value real estate under provisions of Iowa
unless the estate has a federal estate tax requirement to file. The
Code chapter 450B must be made by the fiduciary for the estate
voluntary election to file a federal estate tax return does not create
or trust on the inheritance tax return. The election, once made, is
a requirement to file the IA 706. A clearance will not be issued.
irrevocable. Failure to make an election on the inheritance tax
Each individual should use his or her judgment on whether to file
return will be construed as an election not to specially value real
a short form probate inventory with the clerk of the district court,
estate under Iowa Code chapter 450B.
or whether filing a simple affidavit of the death of the joint tenant
A copy of the executed election for federal estate tax purposes
is sufficient for title purposes. Determination of the kind of filings
must be timely filed with the Iowa Department of Revenue. The
that are required for title purposes is outside the Department’s
agreement must be executed by all parties who have interest in
jurisdiction.
the property to be valued at its special use as of the date of the
Due Date of the Return
decedent’s death. In the agreement, the qualified heir must consent
The tax must be paid to the Department on or before the last day
to be personally liable for the additional inheritance tax imposed
of the ninth month after the death of the decedent.
in the event of early disposition or cessation of the qualified use.
Power of Attorney
A protective election may be made to specially value qualified
Completing the authorization on page 1 will authorize the person
real property for inheritance tax purposes. The protective election
to represent the estate and receive confidential information.
must be made on the inheritance tax return and must contain the
Inheritance Tax Clearance
same information required by Certified Federal Regulations (CFR)
section 20.2032A-8(b).
A full payment clearance will be issued only after the tax, penalty,
If a protective election is made and it is found that the real estate
and interest have been paid in full. Note: Only an original
qualifies for special use valuation as finally determined for federal
inheritance tax clearance will be issued by the Department. The
estate tax purposes, an additional notice of election must be filed
personal representative is required to designate on the return who
within 60 days after date of determination, along with an amended
is to receive the clearance. If the return fails to designate a recipient,
inheritance tax return. Failure to file the additional notice within
the clearance will be sent to the clerk of district court designated
60 days will disqualify the real estate for special use valuation.
on the return.
60-066a (10/18/11)

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