Instructions For Form 706 - 2016 Page 12
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54combined to meet the 50% and 25%
business use are not eligible for
days) during which there was
requirements.
special-use valuation.
uninterrupted material participation.
Property acquired from the dece-
Retirement or disability. If, on the
Qualified Real Property
dent. Property is considered to have
date of death, the time period for
been acquired from or to have passed
material participation could not be met
Qualified use. Qualified use means
from the decedent if one of the following
because the decedent was retired or
use of the property as a farm for farming
applies:
disabled, a substitute period may apply.
purposes or in a trade or business other
The property is considered to have
The decedent must have retired on
than farming. Trade or business applies
been acquired from or to have passed
social security or been disabled for a
only to the active conduct of a business.
from the decedent under section
continuous period ending with death. A
It does not apply to passive investment
1014(b) (relating to basis of property
person is disabled for this purpose if he
activities or the mere passive rental of
acquired from a decedent);
or she was mentally or physically unable
property to a person other than a
The property is acquired by any
to materially participate in the operation
member of the decedent's family. Also,
person from the estate; or
of the farm or other business.
no trade or business is present in the
The property is acquired by any
The substitute time period for
case of activities not engaged in for
person from a trust, to the extent the
material participation for these
profit.
property is includible in the gross estate.
decedents is a period totaling at least 5
Ownership. To qualify as special-use
years out of the 8-year period that
Qualified heir. A person is a qualified
property, the decedent or a member of
ended on the earlier of:
heir of property if he or she is a member
the decedent's family must have owned
The date the decedent began
of the decedent's family and acquired or
and used the property in a qualified use
receiving social security benefits or
received the property from the
for 5 of the last 8 years before the
The date the decedent became
decedent. If a qualified heir disposes of
decedent's death. Ownership may be
disabled.
any interest in qualified real property to
direct or indirect through a corporation,
any member of his or her family, that
Surviving spouse. A surviving spouse
a partnership, or a trust.
person will then be treated as the
who received qualified real property
If the ownership is indirect, the
qualified heir for that interest.
from the predeceased spouse is
business must qualify as a closely-held
A member of the family includes only:
considered to have materially
business under section 6166. The
An ancestor (parent, grandparent,
participated if he or she was engaged in
indirect ownership, when combined with
etc.) of the individual;
the active management of the farm or
periods of direct ownership, must meet
The spouse of the individual;
other business. If the surviving spouse
the requirements of section 6166 on the
The lineal descendant (child,
died within 8 years of the first spouse's
date of the decedent's death and for a
stepchild, grandchild, etc.) of the
death, you may add the period of
period of time that equals at least 5 of
individual, the individual's spouse, or a
material participation of the
the 8 years preceding death.
parent of the individual; or
predeceased spouse to the period of
Directly owned property leased by
The spouse, widow, or widower of
active management by the surviving
the decedent to a separate closely-held
any lineal descendant described above.
spouse to determine if the surviving
business, is considered qualified real
A legally adopted child of an individual
spouse's estate qualifies for special-use
property if the business entity to which it
is treated as a child of that individual by
valuation. To qualify for this, the
was rented was a closely-held business
blood.
property must have been eligible for
(as defined by section 6166) for the
special-use valuation in the
decedent on the date of the decedent's
predeceased spouse's estate, though it
Material Participation
death and for sufficient time to meet the
does not have to have been elected by
To elect special-use valuation, either the
“5 in 8 years” test explained above.
that estate.
decedent or a member of his or her
Structures and other real property
For additional details regarding
family must have materially participated
improvements. Qualified real property
material participation, see Regulations
in the operation of the farm or other
includes residential buildings and other
section 20.2032A-3(e).
business for at least 5 of the 8 years
structures and real property
ending on the date of the decedent's
improvements regularly occupied or
Valuation Methods
death. The existence of material
used by the owner or lessee of real
participation is a factual determination.
The primary method of valuing
property (or by the employees of the
Passively collecting rents, salaries,
special-use property that is used for
owner or lessee) to operate a farm or
draws, dividends, or other income from
farming purposes is the annual gross
other closely-held business. A farm
the farm or other business is not
cash rental method. If comparable gross
residence which the decedent occupied
sufficient for material participation, nor is
cash rentals are not available, you can
is considered to have been occupied for
merely advancing capital and reviewing
substitute comparable average annual
the purpose of operating the farm even
a crop plan and financial reports each
net share rentals. If neither of these is
when a family member and not the
season or business year.
available, or if you so elect, you can use
decedent was the person materially
the method for valuing real property in a
participating in the operation of the farm.
In determining whether the required
closely-held business.
Qualified real property also includes
participation has occurred, disregard
Average annual gross cash rental.
roads, buildings, and other structures
brief periods (that is, 30 days or less)
Generally, the special-use value of
and improvements functionally related
during which there was no material
property that is used for farming
to the qualified use.
participation, as long as such periods
purposes is determined as follows:
were both preceded and followed by
Elements of value such as mineral
substantial periods (more than 120
rights that are not related to the farm or
-12-
Part Instructions
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial