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Article #: 11340
Due Date
Generally, taxpayers file Form 706 to report estate and/or Generation Skipping Tax (GST) within 9 months after the date of the decedent’s death. If unable to file Form 706 by the due date, the taxpayer may request a 6-month extension of time to file by filing Form 4768.
How to Create
Form 706 is created like most other returns in the software through the Open/Create menu. If you already have a 1040 return created using the ID needed for the 706, see Drake Tax – 706/1040: Using The Same SSN on Both Returns.
Form 706 vs. Form 1041
The executor of a decedent’s estate files Form 706 to figure any estate tax levied on the entire taxable estate (not just on the share received by a particular beneficiary). Conversely, Form 1041 can be filed annually by the fiduciary of a domestic decedent’s estate, trust, or bankruptcy estate to report the income, deductions, gains, losses, etc. and any income tax liability of the estate or trust.
Filing Requirement
See IRS Instructions for filing thresholds.
e-fileable?
Neither Form 706 or Form 4768 may be e-filed. File Form 706 at the following address:
Department of the Treasury
Internal Revenue Service Center
Kansas City, MO 64999
If using a private delivery service (PDS), mail to:
Internal Revenue Submission
Processing Center
333 W. Pershing Road
Kansas City, MO 64108
Multiple Executors
If there is more than one executor, all listed executors are responsible for the return. It is sufficient for only one of the co-executors to sign the return. Drake Tax provides space for both an executor and second executor, if applicable, on screen 1. If there are multiple executors (more than 2), click the Multiple Executors link from screen 1 to enter the additional executors. Entering a second executor will automatically check box 6d on Form 706, page 1.
Documents Attached
The death certificate must be attached to the return. If the decedent was a citizen or resident of the U.S., and died testate (leaving a valid will), attach a certified copy of the will to the return. If you cannot obtain a certified copy, attach a copy of the will and an explanation of why it is not certified. Other supplemental documents may be required as explained in the 706 instructions.
Schedule J (Funeral and Other Expenses)
Funeral and certain other expenses are deductible. These expenses should be reported on Schedule J, Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims. In Drake Tax, use screen J to report these expenses.
Screen J has fields for up to two funeral expenses and up to two miscellaneous expenses. Press Page Down to open a blank screen J and enter additional expenses.
Itemize funeral expenses in the top two Description and Expense fields. Exclude any amounts that were reimbursed (such as death benefits payable by the Social Security Administration or the Veterans Administration). Press Page Down for another Schedule J screen.
Mark the box to the right of a line if a protective claim has been filed for that expense.
See the IRS instructions for further guidance in completing Schedule J
Surviving spouse and unused exclusions
Section 303 of the Tax Relief, Unemployment Insurance Re-authorization, and Job Creation Act of 2010 authorized estates of decedents dying on or after January 1, 2011, to elect to transfer any unused exclusion to the surviving spouse. The amount received by the surviving spouse is called the deceased spousal unused exclusion, or DSUE, amount. More information is available in the 706 instructions, Part 6.
Not a U.S. resident or U.S. citizen
Decedents who were neither U.S. citizens nor U.S. residents at the time of death, file Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, for the estate of nonresident not a citizen of the United States.
Additional 712 Part I screens
If multiple 712 Part I screens are needed in a return, press Ctrl + Page Down to create a new Part I screen.
“Line 7 Worksheet”
An estate return in Drake Tax does not produce a Line 7 Worksheet. You will need to complete this form outside of the software.
DSUE
If you intend to elect portability of the DSUE amount, timely filing a complete Form 706 is required.
Schedule B, C, or other
To enter a Schedule B, C, and other schedules on a 706 return, go to the PROP screen and choose schedule from the list at the top.
Order of Items:
Use a separate PROP screen (press Page Down) for each item for Schedule C. List items in the following order:
a. Mortgages
b. Promissory notes
c. Contracts by decedent to sell land
d. Cash in possession
e. Cash in banks, savings and loan associations, or other types of financial organization.
Schedule G (Transfers)
If section 2032A valuation was elected (from the #2 check box in Part 3 of screen 1), both Schedule G (Transfers During Decedent’s Life) and Schedule A-1 (Section 2032A Valuation), must be filed. If you answered “Yes” (marked those check boxes) to questions 11b or 12 on screen 2, complete Schedule F or Schedule G. If the decedent made any of the following transfers, complete Schedule G:
• Certain gift taxes (section 2035 (b))
• Other transfers within three years before death (section 2035(a))
• Transfers with retained life estate (section 2036)
• Transfers taking effect at death (section 2037)
• Revocable transfers (section 2038)
Schedule G also must be filed if any section 2035, 2036, 2037, or 2038 transfers were made.
Use the PROP screen for Schedule G, and use the A1 screen, accessible from the Property section of the Form 706 Estate Forms tab, for Schedule A-1. Complete screen A1 for Schedule G using the steps outlined earlier for Schedule A. (See the steps in “2032A Valuation” on page 463.)
For specific instructions on each Schedule G field, see the field-level help in the Description field of the PROP screen, or the IRS instructions.
Schedule K (Debts, Mortgages, and Liens)
Debts, mortgages, and liens against the decedent are reported on Schedule K, Debts of the Decedent, and Mortgages and Liens. Use screen K to report this data. Following are brief descriptions of the screen K fields. See the IRS instructions for more details, and for exceptions.
• Debts — List valid debts the decedent owed at the time of death. Include the creditor
and nature of claim, and allowable death taxes.
• Amount — Enter the amount being claimed as a deduction.
• Mortgages and Liens — List only those obligations secured by mortgages or other liens on property that is included in the gross estate at its full value. Include a description of the mortgage or lien.
• Amount — Enter the amount of the mortgage or lien.
If more screens are needed, press Page Down.
At the top of the K screen are two check boxes:
• If the taxpayer is aware of any actual or potential reimbursement to the estate for any debt of the decedent, mortgage, or lien claimed as a deduction on this schedule, mark the top check box.
• If any of the items on this schedule are deductible under Reg. section 20.2053-4(b) and Reg. section 20.2053-4(c), mark the second box.
• Mark the box to the right of a line if a protective claim has been filed for that expense.
Schedule U (Qual. Cons. Easement Exclusion)
Schedule U is required if the executor elects to exclude any qualifying conservation easements from the gross estate. In Drake Tax, use screen U, accessible from the Property section under Form 706 Estate Forms tab, to enter data for Schedule U. See the IRS instructions for details on completing this schedule.
A worksheet is required if, at the time of the contribution of the conservation easement, the value of the land subject to the easement, or the value of any retained development right, was different from the estate tax value. To have Drake Tax calculate this worksheet, mark the Worksheet is required box near the top of screen U.
Form 8971-A
To get Form 8971-A to produce, go to the PROP screen. Select the relevant property, then choose the Beneficiary Information tab and make the necessary selections.