Form M706q - Election To Claim The Qualified Small Business And Farm Property Deduction - 2017 Page 8
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82017 M706Q Instructions
(continued)
Describe the trade or business, including
the federal Form 706, enter the appropriate
• The qualified heir disposes of any interest in
the type of industry, and enter the six-digit
valuation percentage that qualifies for the
the qualified property (other than by a dis-
NAICS code that best describes the business
deduction. Subtotal all amounts as line 1.
position to a family member).
activities. To determine the appropriate NA-
Non-eligible Property. For qualified small
• For the qualified small business property
ICS code, go to
business property, complete section 2 by
deduction, a family member does not ma-
www/naics/index.html. Enter a keyword to
entering a description of any cash, cash
terially participate in the operation of the
search the most recent NAICS list.
equivalents, publicly traded securities, or
trade or business.
If a family member does not maintain the
assets not used in the operation of the trade
• For the qualified farm property deduction,
2a classification for the qualified property
or business. Cash equivalents are short-
a family member does not maintain the 2a
for the farm property deduction or a family
term securities that are liquid enough to be
classification for the qualified property.
member does not materially participate in
considered equivalent to cash. Examples
The recapture tax equals 16 percent of the
the operation of the trade or business for the
include negotiable instruments, money
amount of the deduction. The return must be
small business property deduction during
market holdings, short-term government
filed and the recapture tax must be paid to the
the three-year period following decedent’s
bonds or Treasury bills, marketable secu-
Minnesota Department of Revenue within six
death, a recapture tax will be imposed.
rities, commercial paper, and other like
months after the date of disqualifying disposi-
items. For assets entered above in section
If the qualified heirs dispose of any interest
tion or cessation of use.
1 consisting of shares of stock or other
in the qualified property other than to a fam-
ownership interests in a business entity, the
Exceptions to three-year holding period for the
ily member during the three years following
amount of cash, cash equivalents, publi-
qualified farm property:
the decedent’s death, a recapture tax will be
cally traded securities, or assets not used
imposed.
• Recapture tax is not triggered if the prop-
in the operation of the trade or business
erty is acquired by a governmental unit via
The recapture tax is equal to 16% of the
held by the corporation or business entity
eminent domain for a public purpose.
amount deducted by this election from the
must be entered in section 2 in proportion
Minnesota adjusted taxable estate. The re-
• Recapture tax is not triggered if a portion
to the decedent’s share of ownership of the
capture tax and return are due no later than
of qualified farm property consisting of less
corporation or business entity on the date
six months from the date of the disqualify-
than 1/5 of the claimed acreage is reclassi-
of death.
ing cessation of the trade or business or the
fied for property tax purposes from 2a to 2b
For qualified farm property, complete
disqualifying disposition of the qualified
under M.S. 273.13, subd. 23, so long as the
section 2 by entering a description of any
property.
property is not substantially altered.
property other than class 2a agricultural
(M.S. 291.03, subd. 11)
• Recapture tax is not triggered if a portion
land (real property) or non-homestead
If the estate answers “no” to any of the
of the qualified farm property (residence,
property included in the values entered
questions in Part 3, stop here: the estate is
garage, and up to one acre of surrounding
above in section 1.
not eligible to claim the small business or
property) are reclassified for property tax
Subtotal all amounts as line 2.
farm property deduction. If the estate an-
purposes from 2a to 4bb under M.S. 273.13,
swers “yes” to all questions in Part 3, the
Allowable Deductions. Complete section
subd. 23.
estate may be eligible to claim the small
3 by entering a description of the Federal
Informational Returns
business or farm property deduction. Con-
allowable deductions that are related to the
When an estate elects for this deduction, a
tinue to Part 4.
assets entered above in section 1, includ-
qualified heir must file two information re-
ing:
Part 4 – Agreement
turns to confirm that no recapture tax is due.
• marital deduction,
To make a valid election, the agreement
The first return is due 24 to 26 months after
• mortgages and liens held against the
must be completed and signed by each
the decedent’s death. The second return is due
qualifying property,
and every qualified heir who acquired the
36 months to 39 months after the decedent’s
qualified property upon the death of the
• property tax payable on the qualifying
death.
decedent.
property,
This requirement is effective for informational
• expenses and costs taken as a deduction
returns due after Dec. 31, 2013.
In addition, the executor of the estate must
used to preserve the qualifying property,
sign the agreement on behalf of the estate.
Questions?
and
A continuation page for the agreement is
• appraisal fees.
You can find forms and information, answers
provided after the instructions, if needed.
to frequently asked questions and options for
Enter the schedule and item number from
Parts 5 and 6 – Deduction Calculation
paying electronically, on our website at:
the federal Form 706 where the allowable
Value of Assets. Complete section 1 by
deduction is reported. Subtotal all amounts
entering a description of each asset that is
Email:
BusinessIncome.tax@state.mn.us
as line 3.
elected to be deducted as qualifying prop-
Phone: 651-556-3075
Recapture Tax
erty from the decedent’s Minnesota adjusted
Weekdays, 8 a.m. to 4:30 p.m.
taxable estate. Enter the schedule and item
If any of the following occurs within three
Or write to:
number from the federal Form 706 where
years of the decedent’s death and before
Minnesota Revenue
the asset is reported. Then enter the fair
the death of the qualified heir, then a recap-
Mail Station 1315
market value of the asset at the valuation
ture tax is imposed:
St. Paul, MN 55146-1315
date. This is the value included in the Fed-
eral gross estate. If the estate is electing to
deduct only a portion of an asset reported on
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