Drake Tax – 706: Schedules L, M, and O (Deductions)

Last Updated: October 30, 2026

Overview

Deduction schedules J through M and Schedule O are entered on screens in the Deductions section of the Form 706 Estate Forms tab of the Data Entry Menu, and—for Schedule M and Schedule O—on screen PROP and screen BENE as described below.

For Schedule J and Schedule K, see Drake Tax – 706 – Estate Tax Returns FAQs (KB 11340). For how deduction screens affect Part 2, line 2, see Drake Tax – 706: Tax Computation (Part 2) (KB 19053).

Schedule L (Net Losses and Expenses Incurred)

Schedule L is required to claim deductions for net losses during administration of the estate, and for expenses incurred during administration of estate property not subject to claims. Use screen L to report this information.

Following are brief descriptions of the screen L fields. See the IRS Instructions for Form 706 for limitations and further explanations.

• Net losses during administration — Describe net losses during administration. Do not include losses claimed on a federal income tax return.
• Expenses incurred for property not subject to claims — Describe any expenses incurred in administering property that was not subject to claims. Indicate whether estimated, agreed upon, or paid.
• Amount — Enter the amount of the loss or expense.

Mark the box to the right of a line if a protective claim has been filed for that expense.

Schedule M (Bequests to Surviving Spouse)

Schedule M is required to claim a deduction for bequests to the surviving spouse. Generally, Schedule M can include all property interests passing from the decedent to the surviving spouse that are included in the gross estate. (See the IRS instructions for terminable interests, nondeductible terminable interests, and QTIP elections.)

Using PROP for Schedule M

Use screen PROP to enter most Schedule M information:

1. Open screen PROP and complete the applicable fields in the top section (Description, Value, etc.).
2. On the Send to Sch M line, mark the Send this information to Schedule M check box.
3. Enter the amount (if different from the value provided) to flow to Schedule M. A statement is generated with the return that lists the property and stated value.

By default, the value in the Value field on PROP flows to Schedule M. To send a different amount, mark the check box and enter an amount in the Amount to be carried to Sch M override field.

If applicable, mark the box on PROP to indicate QTIP property and the Section 20.2010-2T(a)(7)(ii) check boxes regarding the amount in the override field. (QTIP property and Section 20.2010-2T(a)(7)(ii) check boxes on screen M also affect amounts entered on screen M.)

Using screen M for Schedule M

Use screen M to report the following Schedule M information:

• Line 1 – Qualified disclaimers — To be a qualified disclaimer, a refusal to accept an interest in property must meet the conditions of section 2518 (Reg. sections 25.2518-1 through 25.2518-3). If property passes to a surviving spouse, mark box 1 on screen M and attach a copy of the written disclaimer required by section 2518(b).
• Line 2 – Information about the surviving spouse — Enter the surviving spouse’s citizenship status and date of birth.
• Line 3 – Sect. 2056(b)(7): QTIP — Use the check box to elect out of QTIP treatment of annuities. To have an entry appear on both section “A1” and section “B1” of Schedule M, mark the QTIP and Section 20.2010… check boxes (beneath the Amount field) on screen M. Press Page Down for a second screen M. Do not mark the line 3 check box on the second screen. The first entry appears in “B1” with additional entries listed on the statement.
  • Only on the first item can you reference the QTIP property.
• Description of the property in the bequest — If you entered this on PROP and marked Send to Sch M, you do not need to re-enter it on screen M.
• Line 5a – Estate taxes, other taxes, and GST taxes — Enter federal estate taxes, state death taxes, and state and federal GST taxes payable out of property interests described in the Description fields.

For more on Schedule M, use field-level help on screen M (press F1 in a field, or right-click and select Help > Help for this Field) and consult the IRS instructions.

Schedule O (Other Gifts and Bequests)

Schedule O, Charitable, Public, and Similar Gifts and Bequests, must be submitted if the estate included gifts to charities, public gifts, or certain bequests.

1. If a beneficiary is a charitable organization, open screen BENE (from the Supplemental Forms tab) and enter contact information at the top. At the bottom, complete the Form 706, Schedule O lines, if applicable. (An amount in the Amount distributed… field overrides an amount in the Value field on PROP.)
2. Open a new PROP screen (from the Form 706 Estate Forms tab). Enter a Description of the bequest to the charity and the Value.
3. Click the Beneficiary Information tab on PROP.
4. Select the charity from the TIN drop list and enter the acquired property percentage of the property that was (or will be) acquired by the charity.
5. Open screen O. If the bequest is contested, might be contested, or passed to the charity as a result of a qualified disclaimer, mark boxes 1a, 1b, or 2, as appropriate.
6. Enter in the fields on lines 4a, 4b, and 4c any federal estate taxes, state death taxes, and state and federal GST taxes payable out of property interests described in the Description fields on the PROP screens.

For more on Schedule O and required attachments, consult the IRS instructions.

Filing instructions

Form 706 and Form 8971 are filed to different locations. Mailing addresses are listed in the filing instructions generated in View/Print mode. For more information, consult the IRS instructions for Forms 706 and 8971.