Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return Page 6
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46Form 706 (Rev. 11-01)
Instructions for Schedule A-1. Section
specially valued property received by the skip person at their
special use value and one showing the same interests at their
2032A Valuation
fair market value.
The election to value certain farm and closely held business
If the skip person received interests in specially valued
property at its special use value is made by checking “Yes” to
property that were shown on Schedule R-1, show these interests
line 2 of Part 3, Elections by the Executor, Form 706. Schedule
on the Schedule R, Parts 2 and 3 worksheets, as appropriate.
A-1 is used to report the additional information that must be
Do not use Schedule R-1 as a worksheet.
submitted to support this election. In order to make a valid
Completing the Special Use Value Worksheets. On lines 2–4
election, you must complete Schedule A-1 and attach all of the
and 6, enter -0-.
required statements and appraisals.
Completing the Fair Market Value Worksheets. Lines 2 and 3,
For definitions and additional information concerning special
fixed taxes and other charges. If valuing the interests at their fair
use valuation, see section 2032A and the related regulations.
market value (instead of special use value) causes any of these
Part 1. Type of Election
taxes and charges to increase, enter the increased amount (only)
on these lines and attach an explanation of the increase.
Estate and GST Tax Elections. If you elect special use
Otherwise, enter -0-.
valuation for the estate tax, you must also elect special use
valuation for the GST tax and vice versa.
Line 6—GST exemption. If you completed line 10 of Schedule R,
You must value each specific property interest at the same
Part 1, enter on line 6 the amount shown for the skip person on
value for GST tax purposes that you value it at for estate tax
the line 10 special use allocation schedule you attached to
purposes.
Schedule R. If you did not complete line 10 of Schedule R,
Part 1, enter -0- on line 6.
Protective Election. To make the protective election described
in the separate instructions for line 2 of Part 3, Elections by the
Total GST Tax Savings. For each skip person, subtract the tax
Executor, you must check this box, enter the decedent’s name
amount on line 10, Part 2 of the special use value worksheet
and social security number in the spaces provided at the top of
from the tax amount on line 10, Part 2 of the fair market value
Schedule A-1, and complete line 1 and column A of lines 3 and
worksheet. This difference is the skip person’s total GST tax
4 of Part 2. For purposes of the protective election, list on line 3
savings.
all of the real property that passes to the qualified heirs even
Part 3. Agreement to Special Valuation Under
though some of the property will be shown on line 2 when the
additional notice of election is subsequently filed. You need not
Section 2032A
complete columns B–D of lines 3 and 4. You need not complete
The agreement to special valuation by persons with an interest
any other line entries on Schedule A-1. Completing Schedule
in property is required under section 2032A(a)(1)(B) and (d)(2)
A-1 as described above constitutes a Notice of Protective
and must be signed by all parties who have any interest in the
Election as described in Regulations section 20.2032A-8(b).
property being valued based on its qualified use as of the date
Part 2. Notice of Election
of the decedent’s death.
An interest in property is an interest that, as of the date of the
Line 10. Because the special use valuation election creates a
decedent’s death, can be asserted under applicable local law so
potential tax liability for the recapture tax of section 2032A(c),
you must list each person who receives an interest in the
as to affect the disposition of the specially valued property by
the estate. Any person who at the decedent’s death has any
specially valued property on Schedule A-1. If there are more
such interest in the property, whether present or future, or
than eight persons who receive interests, use an additional sheet
that follows the format of line 10. In the columns “Fair market
vested or contingent, must enter into the agreement. Included
are owners of remainder and executory interests; the holders of
value” and “Special use value,” you should enter the total
general or special powers of appointment; beneficiaries of a gift
respective values of all the specially valued property interests
received by each person.
over in default of exercise of any such power; joint tenants and
holders of similar undivided interests when the decedent held
GST Tax Savings
only a joint or undivided interest in the property or when only an
To compute the additional GST tax due upon disposition (or
undivided interest is specially valued; and trustees of trusts and
cessation of qualified use) of the property, each “skip person”
representatives of other entities holding title to, or holding any
(as defined in the instructions to Schedule R) who receives an
interests in the property. An heir who has the power under local
interest in the specially valued property must know the total GST
law to caveat (challenge) a will and thereby affect disposition of
tax savings on all of the interests in specially valued property
the property is not, however, considered to be a person with an
received. This GST tax savings is the difference between the
interest in property under section 2032A solely by reason of that
total GST tax that was imposed on all of the interests in
right. Likewise, creditors of an estate are not such persons
specially valued property received by the skip person valued at
solely by reason of their status as creditors.
their special use value and the total GST tax that would have
If any person required to enter into the agreement either
been imposed on the same interests received by the skip person
desires that an agent act for him or her or cannot legally bind
had they been valued at their fair market value.
himself or herself due to infancy or other incompetency, or due
Because the GST tax depends on the executor’s allocation of
to death before the election under section 2032A is timely
the GST exemption and the grandchild exclusion, the skip
exercised, a representative authorized by local law to bind the
person who receives the interests is unable to compute this GST
person in an agreement of this nature may sign the agreement
tax savings. Therefore, for each skip person who receives an
on his or her behalf.
interest in specially valued property, you must attach worksheets
The Internal Revenue Service will contact the agent
showing the total GST tax savings attributable to all of that
designated in the agreement on all matters relating to continued
person’s interests in specially valued property.
qualification under section 2032A of the specially valued real
How To Compute the GST Tax Savings. Before computing
property and on all matters relating to the special lien arising
each skip person’s GST tax savings, you must complete
under section 6324B. It is the duty of the agent as
Schedules R and R-1 for the entire estate (using the special use
attorney-in-fact for the parties with interests in the specially
values).
valued property to furnish the IRS with any requested
For each skip person, you must complete two Schedules R
information and to notify the IRS of any disposition or cessation
(Parts 2 and 3 only) as worksheets, one showing the interests in
of qualified use of any part of the property.
Schedule A-1—Page 6
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