US Internal Revenue Service: i706--1993

8/14/2019 US Internal Revenue Service: i706--1993

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Cat. No. 16779E

Change To Note

General Instructions

Purpose of FormThe executor of a decedents estate usesForm 706 to figure the estate tax imposedby Chapter 11 of the Internal RevenueCode. This tax is levied on the entiretaxable estate, not just on the sharereceived by a particular beneficiary. Form706 is also used to compute thegeneration-skipping transfer (GST) taximposed by Chapter 13 on direct skips

(transfers to skip persons of interests inproperty included in the decedents grossestate).

Which Estates Must FileForm 706 must be filed by the executor forthe estate of every U.S. citizen or residentwhose gross estate, plus adjusted taxablegifts and specific exemption, is more thancertain limits.

To determine whether you must file areturn for the estate, add:

1. The adjusted taxable gifts (undersection 2001(b)) made by the decedentafter December 31, 1976;

2. The total specific exemption allowedunder section 2521 (as in effect before itsrepeal by the Tax Reform Act of 1976) forgifts made by the decedent afterSeptember 8, 1976; and

3. The decedents gross estate valuedat the date of death.

You must file a return for the estate ifthe total of 1, 2, and 3 above is more than$600,000 for decedents dying after 1986.For filing requirements for decedents dyingafter 1981 and before 1986, see theNovember 1987 Revision of Form 706.

Gross Estate

The gross estate includes all property inwhich the decedent had an interest(including real property outside the UnitedStates). It also includes:

Certain transfers made during thedecedents life without an adequate andfull consideration in money or moneysworth;

Annuities;

Joint estates with right of survivorship;

Tenancies by the entirety;

Life insurance proceeds (even thoughpayable to beneficiaries other than theestate);

Property over which the decedent

possessed a general power ofappointment;

Dower or curtesy (or statutory estate) ofthe surviving spouse;

Community property to the extent of thedecedents interest as defined byapplicable law.

For more specific information, see theinstructions for Schedules A through I.

Instructions for Form 706(Revised August 1993)United States Estate (and Generation-SkippingTransfer) Tax Return

For decedents dying after October 8, 1990.Section references are to the Internal Revenue Code unless otherwise noted.

Paperwork Reduction Act Notice.We ask for the information on this form to carry outthe Internal Revenue laws of the United States. You are required to give us theinformation. We need it to ensure that you are complying with these laws and to allow usto figure and collect the right amount of tax.

The time needed to complete and file this form and related schedules will varydepending on individual circumstances. The estimated average times are:

Copying, assembling,and sending the form

to the IRSPreparingthe form

Learning about the lawor the formRecordkeepingForm

2 hr., 11 min.706 49 min.3 hr., 26 min.1 hr., 9 min.

20 min.Sch. A 20 min.10 min.16 min.

46 min.A-1 49 min.59 min.25 min.

20 min.B 20 min.11 min.10 min.13 min.C 20 min.8 min.2 min.

7 min.D 20 min.8 min.6 min.

40 min.E 20 min.24 min.7 min.

33 min.F 20 min.21 min.6 min.

26 min.G 14 min.11 min.18 min.

26 min.H 14 min.10 min.6 min.

26 min.I 20 min.11 min.25 min.

26 min.J 20 min.16 min.5 min.

26 min.K 20 min.10 min.9 min.

13 min.L 20 min.10 min.5 min.

13 min.M 20 min.24 min.31 min.

20 min.O 17 min.18 min.9 min.

7 min.P 14 min.18 min.14 min.

7 min.Q 14 min.11 min.10 min.7 min.Q Wksht. 20 min.59 min.10 min.

20 min.R 49 min.1 hr., 1 min.34 min.

7 min.R-1 20 min.24 min.29 min.

26 min.S 25 min.37 min.22 min.

20 min.Contin. 20 min.7 min.3 min.

If you have comments concerning the accuracy of these time estimates or suggestionsfor making this form more simple, we would be happy to hear from you. You can write toboth the Internal Revenue Service, Attention: Reports Clearance Officer, T:FP,Washington, DC 20224; and the Office of Management and Budget, PaperworkReduction Project (1545-0015), Washington, DC 20503. DO NOT send the tax form toeither of these offices. Instead, see Where To File on page 2.

Department of the TreasuryInternal Revenue Service

Use Revision ofForm 706 Dated

For Decedents DyingAfter Beforeand

December 31, 1981 October 23, 1986 November, 1987November, 1981

October, 1988July, 1990October, 1991August, 1993

January 1, 1982

January 1, 1990October 9, 1990January 1, 1993

October 22, 1986December 31, 1989October 8, 1990October 8, 1990

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The Omnibus Budget Reconciliation Act of 1993 increased the maximum estate taxrate to 53% for taxable estates in excess of $2.5 million and 55% for taxable estates inexcess of $3 million. This increase is permanent and applies to the estates of decedentsdying after December 31, 1992. Because the February 1993 revision of Form 706 isbased on a maximum estate tax rate of 50%, it should not be used.


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U.S. Citizens or Residents;Nonresident Noncitizens

File Form 706 for the estates of decedentswho were either U.S. citizens or U.S.residents at the time of death. File Form706-NA, United States Estate (andGeneration-Skipping Transfer) Tax Return,Estate of nonresident not a citizen of theUnited States, for the estates ofnonresident alien decedents (decedentswho were neither U.S. citizens norresidents at the time of death).

Residents of U.S. Possessions

All references to citizens of the UnitedStates are subject to the provisions ofsections 2208 and 2209, relating todecedents who were U.S. citizens andresidents of a U.S. possession on the dateof death. If such a decedent became aU.S. citizen only because of his or herconnection with a possession, then thedecedent is considered a nonresident aliendecedent for estate tax purposes, and youshould file Form 706-NA. If such adecedent became a U.S. citizen whollyindependently of his or her connection witha possession, then the decedent isconsidered a U.S. citizen for estate taxpurposes, and you should file Form 706.

ExecutorThe term executor means the executor,personal representative, or administrator ofthe decedents estate. If none of these isappointed, qualified, and acting in theUnited States, every person in actual orconstructive possession of any property ofthe decedent is considered an executorand must file a return.

When To FileYou must file Form 706 to report estate

and/or generation-skipping transfer taxwithin 9 months after the date of thedecedents death unless you receive anextension of time to file. Use Form 4768,Application for Extension of Time To File aReturn and/or Pay U.S. Estate (andGeneration-Skipping Transfer) Taxes, toapply for an extension of time. If youreceived an extension, attach a copy of itto Form 706.

Where To FileUnless the return is hand carried to theoffice of the District Director, please mail itto the Internal Revenue Service Centerindicated below for the state where the

decedent was domiciled at the time ofdeath. If you are filing a return for theestate of a nonresident U.S. citizen, mail itto the Internal Revenue Service Center,Philadelphia, PA 19255, USA.

Where To File.

Florida, Georgia, SouthCarolina

Atlanta, GA 39901

New Jersey, New York(New York City andcounties of Nassau,Rockland, Suffolk, andWestchester)

Holtsville, NY 00501

New York (all othercounties), Connecticut,Maine, Massachusetts, NewHampshire, Rhode Island,Vermont

Andover, MA 05501

Illinois, Iowa, Minnesota,Missouri, Wisconsin

Kansas City, MO 64999

Delaware, District ofColumbia, Maryland,Pennsylvania, Virginia

Philadelphia, PA 19255

Indiana, Kentucky,Michigan, Ohio, WestVirginia

Cincinnati, OH 45999

Kansas, New Mexico,Oklahoma, Texas

Austin, TX 73301

Alaska, Arizona, California(counties of Alpine, Amador,Butte, Calaveras, Colusa,Contra Costa, Del Norte, ElDorado, Glenn, Humboldt,Lake, Lassen, Marin,Mendocino, Modoc, Napa,Nevada, Placer, Plumas,Sacramento, San Joaquin,

Shasta, Sierra, Siskiyou,Solano, Sonoma, Sutter,Tehama, Trinity, Yolo, andYuba), Colorado, Idaho,Montana, Nebraska,Nevada, North Dakota,Oregon, South Dakota,Utah, Washington,Wyoming

Ogden, UT 84201

California (all othercounties), Hawaii

Fresno, CA 93888

Alabama, Arkansas,Louisiana, Mississippi,North Carolina, Tennessee

Memphis, TN 37501

Paying the Tax

The estate and GST taxes are due within 9months after the date of the decedentsdeath unless an extension of time forpayment has been granted, or unless youhave properly elected under section 6166to pay in installments, or under section6163 to postpone the part of the taxattributable to a reversionary or remainderinterest. These elections are made bychecking lines 3 and 4 (respectively) ofPart 3, Elections by the Executor, andattaching the required statements.

If the tax paid with the return is differentfrom the balance due as figured on thereturn, explain the difference in anattached statement. If you have made prior

payments to IRS or redeemed certainmarketable United States Treasury bondsto pay the estate tax (see the lastparagraph of the instructions to ScheduleB), attach a statement to Form 706including these facts. If an extension oftime to pay has been granted, attach acopy of the approved Form 4768 to Form706.

Make the check payable to the InternalRevenue Service. Please write thedecedents name, social security number,and Form 706 on the check to assist usin posting it to the proper account.

Signature and VerificationIf there is more than one executor, alllisted executors must verify and sign thereturn. All executors are responsible forthe return as filed and are liable forpenalties provided for erroneous or falsereturns.

If two or more persons are liable for filingthe return, they should all join together infiling one complete return. However, if theyare unable to join in making one completereturn, each is required to file a return

disclosing all the information the personhas in the case, including the name ofevery person holding an interest in theproperty and a full description of theproperty. If the appointed, qualified, andacting executor is unable to make acomplete return, then every person holdingan interest in the property must, on noticefrom the IRS, make a return regarding thatinterest.

The executor who files the return must,in every case, sign the declaration on page1 under penalties of perjury. If the return isprepared by someone other than theperson who is filing the return, the preparermust also sign at the bottom of page 1.

Part 1

Line 2

Enter the social security number assignedspecifically to the decedent. You cannotuse the social security number assigned tothe decedents spouse. If the decedent d idnot have a social security number, theexecutor should obtain one for thedecedent by filing Form SS-5 with a localSocial Security Administration office.

Line 6aName of Executor

If there is more than one executor, enterthe name of the executor to be contacted

by the IRS. List the other executorsnames, addresses, and SSNs (if applicable)on an attached sheet.

Line 6bExecutors Address

Use Form 8822, Change of Address, toreport a change of the executors address.

Line 6cExecutors SocialSecurity Number

Only individual executors should completethis line. If there is more than oneindividual executor, all should list theirsocial security numbers on an attachedsheet.

Supplemental Documents

You must attach the death certificate tothe return.

If the decedent was a citizen or residentand died testate, attach a certified copy ofthe will to the return. Other supplementaldocuments may be required as explainedbelow. Examples include Forms 712, 709,709-A, and 706CE, trust and power ofappointment instruments, death certificate,and state certification of payment of deathtaxes. If you do not file these documents


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with the return, the processing of thereturn will be delayed.

If the decedent was a U.S. citizen butnot a resident of the United States, youmust attach the following documents tothe return: (1) a copy of the inventory ofproperty and the schedule of liabilities,claims against the estate, and expenses ofadministration filed with the foreign courtof probate jurisdiction, certified by a properofficial of the court; (2) a copy of the returnfiled under the foreign inheritance, estate,legacy, succession tax, or other death tax

act, certified by a proper official of theforeign tax department, if the estate issubject to such a foreign tax; and (3) if thedecedent died testate, a certified copy ofthe will.

Rounding Off to WholeDollarsYou may show the money items on thereturn and accompanying schedules aswhole-dollar amounts. To do so, drop anyamount less than 50 cents and increaseany amount from 50 cents through 99cents to the next higher dollar.

PenaltiesSection 6651 provides for penalties forboth late filing and for late payment unlessthere is reasonable cause for the delay.The law also provides for penalties forwillful attempts to evade payment of tax.The late filing penalty will not be imposed ifthe taxpayer can show that the failure tofile a timely return is due to reasonablecause. Executors filing late (after the duedate, including extensions) should attachan explanation to the return to showreasonable cause.

Section 6662 provides a penalty for theunderpayment of estate tax of $5,000 ormore when the underpayment isattributable to valuation understatements.A valuation understatement occurs whenthe value of property reported on Form 706is 50 percent or less of the actual value ofthe property.

These penalties also apply to late filing,late payment, and underpayment of GSTtaxes.

Publication 448Additional information may be found inPub. 448, Federal Estate and Gift Taxes.

Specific InstructionsYou must file the first three pages of Form706 and all required schedules. SchedulesA through I must be filed, as appropriate,to support the entries in items 1 through 9of the Recapitulation.

If you enter zero on any item of theRecapitulation, you need not file theschedule (except for Schedule F) referredto on that item.

If you claim any deductions on items 11through 19 of the Recapitulation, you mustcomplete and attach the appropriate

Schedule(s) to support the claimeddeductions.

If you claim the credits for foreign deathtaxes or tax on prior transfers, you mustcomplete and attach Schedule P or Q.

Form 706 has 41 numbered pages. Thepages are perforated so that you canremove them for copying and filing. Whenyou complete the return, staple all therequired pages together in the properorder.

Number the items you list on each

schedule, beginning with 1 each time.Total the items listed on the schedule andits attachments, Continuation Schedules,etc. Enter the total of all attachments,Continuation Schedules, etc., at thebottom of the printed schedule, but do notcarry the totals forward from one scheduleto the next. Enter the total or totals foreach schedule on the Recapitulation, page3, Form 706.

Do not complete the Alternate valuationdate or Alternate value columns of anyschedule unless you elected alternatevaluation on line 1 of Part 3, Elections bythe Executor.

If there is not enough space on a

schedule to list all the items, attach aContinuation Schedule (or additionalsheets of the same size) to the back of theschedule. The Continuation Schedule islocated at the end of the Form 706package. You should photocopy the blankschedule before completing it if you willneed more than one copy.

Instructions for Part 3.Elections by the Executor

Line 1Alternate Valuation

Unless you elect at the time you file thereturn to adopt alternate valuation asauthorized by section 2032, you must

value all property included in the grossestate on the date of the decedentsdeath. Alternate valuation cannot beapplied to only a part of the property. Youmay elect special use valuation (line 2) inaddition to alternate valuation.

You may not elect alternate valuationunless the election will decrease both thevalue of the gross estate and the total netestate and GST taxes due after applicationof all allowable credits.

Alternate valuation is elected bychecking Yes on line 1 and filing Form706. Once made, the election may not berevoked. The election may be made on alate filed Form 706 provided it is not filed

later than 1 year after the due date(including extensions).

If you elect alternate valuation, value theproperty that is included in the grossestate as of the applicable dates asfollows:

1. Any property distributed, sold,exchanged, or otherwise disposed of orseparated or passed from the gross estateby any method within 6 months after thedecedents death is valued on the date ofdistribution, sale, exchange, or otherdisposition, whichever occurs first. Value

this property on the date it ceases to forma part of the gross estate, that is, on thedate the title passes as the result of itssale, exchange, or other disposition.

2. Any property not distributed, sold,exchanged, or otherwise disposed ofwithin the 6-month period is valued on thedate 6 months after the date of thedecedents death.

3. Any property, interest, or estate that isaffected by mere lapse of time is valuedas of the date of decedents death or onthe date of its distribution, sale, exchange,or other disposition, whichever occurs first.However, you may change the date ofdeath value to account for any change invalue that is not due to a mere lapse oftime on the date of its distribution, sale,exchange, or other disposition.

The property included in the alternatevaluation and valued as of 6 months afterthe date of the decedents death, or as ofsome intermediate date (as describedabove) is the property included in thegross estate on the date of the decedentsdeath. Therefore, you must first determinewhat property constituted the gross estateat the decedents death.

Interest accrued to the date of thedecedents death on bonds, notes, andother interest-bearing obligations isproperty of the gross estate on the date ofdeath and is included in the alternatevaluation. Rent accrued to the date of thedecedents death on leased real orpersonal property is property of the grossestate on the date of death and is includedin the alternate valuation.

Outstanding dividends that weredeclared to stockholders of record on orbefore the date of the decedents deathare considered property of the gross estateon the date of death, and are included inthe alternate valuation. Ordinary dividendsdeclared to stockholders of record after

the date of the decedents death are notproperty of the gross estate on the date ofdeath and are not included in the alternatevaluation. However, if dividends aredeclared to stockholders of record afterthe date of the decedents death so thatthe shares of stock at the later valuationdate do not reasonably represent the sameproperty at the date of the decedentsdeath, include those dividends (exceptdividends paid from earnings of thecorporation after the date of thedecedents death) in the alternatevaluation.

As part of each Schedule A through I,you must show: (1) what property is

included in the gross estate on the date ofthe decedents death; (2) what propertywas distributed, sold, exchanged, orotherwise disposed of within the 6-monthperiod after the decedents death, and thedates of these distributions, etc. These twoitems should be entered in theDescription column of each schedule.Briefly explain the status or dispositiongoverning the alternate valuation date,such as: Not disposed of within 6 monthsfollowing death, Distributed, Sold,Bond paid on maturity, etc. In this samecolumn, describe each item of principal


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and includible income; (3) the date ofdeath value, entered in the appropriatevalue column with items of principal andincludible income shown separately;and (4) the alternate value, entered in theappropriate value column with items ofprincipal and includible income shownseparately. In the case of any interest orestate, the value of which is affected bylapse of time, such as patents, leaseholds,estates for the life of another, or remainderinterests, the value shown under theheading Alternate value must be the

adjusted value (i.e., the value as of thedate of death with an adjustment reflectingany difference in its value as of the laterdate not due to lapse of time).

Distributions, sales, exchanges, andother dispositions of the property withinthe 6-month period after the decedentsdeath must be supported by evidence. Ifthe court issued an order of d istributionduring that period, you must submit acertified copy of the order as part of theevidence. The District Director may requireyou to submit additional evidence ifnecessary.

Line 2Special Use Valuation of

Section 2032AUnder section 2032A, you may elect tovalue certain farm and closely heldbusiness real property at its farm orbusiness use value rather than its fairmarket value. You may elect both specialuse valuation and alternate valuation. Toelect this valuation you must check Yesto line 2 and complete and attachSchedule A-1 and its required additionalstatements. You must file Schedule A-1and its required attachments with Form706 for this election to be valid. You maymake the election on a late filed return solong as it is the first return filed.

The total value of the property valued

under section 2032A may not bedecreased from fair market value by morethan $750,000.

Real property may qualify for the section2032A election if:

1. The decedent was a U.S. citizen orresident at the time of death;

2. The real property is located in theUnited States;

3. At the decedents death the realproperty was used by the decedent or afamily member for farming or in a trade orbusiness or is rented for such use by thesurviving spouse to a family member on anet cash basis;

4. The real property was acquired fromor passed from the decedent to a qualifiedheir of the decedent;

5. The real property was owned andused in a qualified manner by thedecedent or a member of the decedentsfamily during 5 of the 8 years before thedecedents death;

6. There was material participation bythe decedent or a member of thedecedents family during 5 of the 8 yearsbefore the decedents death; and

7. The qualified property is thepercentage of the decedents gross estatespecified in section 2032A.

For definitions and additionalinformation, see section 2032A and therelated regulations.

Include the words section 2032Avaluation in the Description column ofany Form 706 schedule if section 2032Aproperty is included in the decedentsgross estate.

An election under section 2032A need

not include all the property in an estatethat is eligible for special use valuation, butsufficient property to satisfy the thresholdrequirements of section 2032A(b)(1)(B)must be specially valued under theelection.

If joint or undivided interests (e.g.,interests as joint tenants or tenants incommon) in the same property arereceived from a decedent by qualifiedheirs, an election with respect to one heirs joint or undivided interest need not includeany other heirs interest in the sameproperty if the electing heirs interest plusother property to be specially valuedsatisfies the requirements of section2032A(b)(1)(B).

If successive interests (e.g., life estatesand remainder interests) are created by adecedent in otherwise qualified property,an election under section 2032A isavailable only with respect to that property(or part) in which qualified heirs of thedecedent receive all of the successiveinterests, and such an election mustinclude the interests of all of those heirs.

For example, if a surviving spousereceives a life estate in otherwise qualifiedproperty and the spouses brother receivesa remainder interest in fee, no part of theproperty may be valued pursuant to anelection under section 2032A.

Where successive interests in speciallyvalued property are created, remainderinterests are treated as being received byqualified heirs only if the remainderinterests are not contingent on surviving anonfamily member or are not subject todivestment in favor of a nonfamily member.

Protective Election.You may make aprotective election to specially valuequalified real property. Under this election,whether or not you may ultimately usespecial use valuation depends upon valuesas finally determined (or agreed tofollowing examination of the return)meeting the requirements of section2032A.

To make a protective election, checkYes to line 2 and complete Schedule A-1according to its instructions for ProtectiveElection.

If you make a protective election, youshould complete this Form 706 by valuingall property at its fair market value. Do notuse special use valuation. Usually, this willresult in higher estate and GST taxliabilities than will be ultimately determinedif special use valuation is allowed. Theprotective election does not extend thetime to pay the taxes shown on thereturn. If you wish to extend the time to

pay the taxes, you should file Form 4768 inadequate time beforethe return due date.

If it is found that the estate qualifies forspecial use valuation based on the valuesas finally determined (or agreed tofollowing examination of the return), youmust file an amended Form 706 (with acomplete section 2032A election) within 60days after the date of this determination.Complete the amended return usingspecial use values under the rules ofsection 2032A, and complete ScheduleA-1 and attach allof the required

statements.

Line 3Installment Payments

If you check this line to make a protectiveelection, you should attach a notice ofprotective election as described inRegulations section 20.6166-1(d). If youcheck this line to make a final election, youshould attach the notice of electiondescribed in Regulations section20.6166-1(b).

In computing the adjusted gross estateunder section 6166(b)(6) to determinewhether an election may be made undersection 6166, the net amount of any realestate in a closely held business must be

used.You may also elect to pay GST taxes in

installments. See section 6166(i).

Line 4Reversionary orRemainder Interests

For the details of this election, see section6163 and the related regulations.

Instructions for Part 4.General Information (pages2 and 3)

Power of Attorney

Completing the authorization on page 2 ofForm 706 will authorize one attorney,accountant, or enrolled agent to representthe estate and receive confidential taxinformation, but will not authorize therepresentative to enter into closingagreements for the estate. If you wish torepresent the estate, you must completeand sign the authorization.

If you wish to authorize persons otherthan attorneys, accountants, and enrolledagents, or if you wish to authorize morethan one person, to receive confidentialinformation or represent the estate, youmust complete and attach Form 2848,Power of Attorney and Declaration of

Representative.You must also complete and attach

Form 2848 if you wish to authorizesomeone to enter into closing agreementsfor the estate.

If you wish only to authorize someone toinspect and/or receive confidential taxinformation (but not to represent youbefore the IRS), you must complete andfile Form 8821, Tax InformationAuthorization.


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Line 4

Complete line 4 whether or not there is asurviving spouse and whether or not thesurviving spouse received any benefitsfrom the estate. If there was no survivingspouse on the date of decedents death,enter None in line 4a and leave lines 4band 4c blank. The value entered in line 4cneed not be exact. See the instructions forAmount, under line 5, below.

Line 5

Name.Enter the name of each individual,trust, or estate who received (or willreceive) benefits of $5,000 or more fromthe estate directly as an heir, next-of-kin,devisee, or legatee; or indirectly (forexample, as beneficiary of an annuity orinsurance policy, shareholder of acorporation, or partner of a partnershipthat is an heir, etc.).

Identifying Number.Enter the socialsecurity number of each individualbeneficiary listed. If the number isunknown, or the individual has no number,please indicate unknown or none. Fortrusts and other estates, enter theemployer identification number.

Relationship.For each individualbeneficiary enter the relationship (if known)to the decedent by reason of blood,marriage, or adoption. For trust or estatebeneficiaries, indicate TRUST or ESTATE.

Amount.Enter the amount actuallydistributed (or to be distributed) to eachbeneficiary including transfers during thedecedents life from Schedule G requiredto be included in the gross estate. Thevalue to be entered need not be exact. Areasonable estimate is sufficient. Forexample, where precise values cannotreadily be determined, as with certainfuture interests, a reasonableapproximation should be entered. The totalof these distributions should approximatethe amount of gross estate reduced byfuneral and administrative expenses, debtsand mortgages, bequests to survivingspouse, charitable bequests, and anyFederal and state estate and GST taxespaid (or payable) relating to the benefitsreceived by the beneficiaries listed on lines4 and 5.

All distributions of less than $5,000 tospecific beneficiaries may be included withdistributions to unascertainablebeneficiaries on the line provided.

Line 6Section 2044 Property

If you answered Yes, these assets must

be shown on Schedule F.Section 2044 property is property forwhich a previous section 2056(b)(7)election (QTIP election) has been made, orfor which a similar gift tax election (section2523) has been made. For more detailssee Pub. 448.

Line 8Insurance Not Included inthe Gross Estate

If you checked Yes for either 8a or 8b,you must complete and attach Schedule Dand attach a Form 712, Life Insurance

Statement, for each policy and anexplanation of why the policy or itsproceeds are not includible in the grossestate.

Line 10Partnership Interests and

Stock in Close Corporations

If you answered Yes to line 10, you mustinclude full details for partnerships andunincorporated businesses on Schedule F(Schedule E if the partnership interest isjointly owned). You must include full detailsfor the stock of inactive or closecorporations on Schedule B.

Value these interests using the rules ofRegulations section 20.2031-2 (stocks) or20.2031-3 (other business interests).

A close corporation is a corporationwhose shares are owned by a limitednumber of shareholders. Often, one familyholds the entire stock issue. As a result,little, if any, trading of the stock takesplace. There is, therefore, no establishedmarket for the stock, and those sales thatdo occur are at irregular intervals andseldom reflect all the elements of arepresentative transaction as defined bythe term fair market value.

Line 12TrustsIf you answered Yes to either 12a or12b, you must attach a copy of the trustinstrument for each trust.

You must complete Schedule G if youanswered Yes to 12a and Schedule F ifyou answered Yes to 12b.

Line 14Transitional MaritalDeduction Computation

You must check Yes if property passesto the surviving spouse under a maximummarital deduction formula provision thatmeets the requirements of section 403(e)(3)of the Economic Recovery Tax Act of 1981

(P. L. 97-34; 95 Stat. 305).If you check Yes to line 14, you must

compute the marital deduction under therules that were in effect before theEconomic Recovery Tax Act of 1981.

For a format for this computation, youshould obtain the November 1981 revisionof Form 706 and its instructions. Thecomputation is items 19 through 26 of theRecapitulation. You should also apply therules of Rev. Rul. 80-148, 1980-1 C.B. 207,if there is property that passes to thesurviving spouse outside of the maximummarital deduction formula provision.

Line 16Excess Retirement

AccumulationIf the decedent did not have any interest ina qualified employer plan or individualretirement plan (defined in section7701(a)(37)), check No to this question.

Note: The tax on excess retirementaccumulations will not apply to mostdecedents because the present value ofthe hypothetical annuity is usually so largethat very few decedents will have a largertotal interest in qualified plans andindividual retirement plans. The rules beloware a general description of the section

4980A(d) excess retirement accumulation.If it appears, after reading these rules, thatthere is the possibility of such an excess,see the instructions for Schedule S onpage 20 for more information.

A qualified plan means any:

1. Qualified pension, profit-sharing, orstock bonus plan described in section401(a) that includes a trust exempt fromtax under section 501(a);

2. Annuity plan described in section403(a);

3. Annuity contract, custodial account,or retirement income account described insection 403(b)(1), 403(b)(7), or 403(b)(9);

4. Qualified bond purchase plandescribed in section 405(a) prior to thatsections repeal by section 491(a) of theTax Reform Act of 1984.

To determine if the decedent had anexcess retirement accumulation, you mustfirst total all of the decedents interests (asof the date of death) in qualified plans andindividual retirement plans. Then determinethe present (date of death or alternatevaluation date) value of a hypothetical lifeannuity for the decedent. This hypotheticallife annuity must pay the decedent the

greater of $150,000 (unindexed) or$112,500 (indexed) per year, times themultiplier described in the instructions forline 3, Part III, of Schedule S. Thoseinstructions are on page 21.

If the decedents total interest in theplans is greater than the value of thishypothetical annuity, then there is anexcess retirement accumulation, and youshould check Yes to question 16 andattach Schedule S to your return.

Instructions for Part 5.Recapitulation (Page 3 ofForm 706)

Gross Estate

Items 1 through 9.You must make anentry in each of items 1 through 9. If thegross estate does not contain any assetsof the type specified by a given item, enterzero for that item. Entering zero for any ofitems 1 through 9 is a statement by theexecutor, made under penalties of perjury,that the gross estate does not contain anyincludible assets covered by that item. Donot enter any amounts in the Alternatevalue column unless you elected alternatevaluation on line 1 of Elections by theExecutor on page 2.

Which Schedules To Attach for Items 1

Through 9.You must attach Schedule Fto the return and answer its questionseven if you report no assets on it.

You must attach Schedules A, B, and Cif the gross estate includes any RealEstate; Stocks and Bonds; or Mortgages,Notes, and Cash, respectively. You mustattach Schedule D if the gross estateincludes any Life Insurance or if youanswered Yes to question 8a. You mustattach Schedule E if the gross estatecontains any Jointly Owned Property or ifyou answered Yes to question 9. Youmust attach Schedule G if the decedent


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made any of the lifetime transfers to belisted on that schedule or if you answeredYes to question 11 or 12a. You mustattach Schedule H if you answered Yesto question 13. You must attach ScheduleI if you answered Yes to question 15.

Deductions

Items 11 Through 19.You must attachthe appropriate schedules for thedeductions you c laim.

Item 15.If item 14 is less than or equalto the value (at the time of the decedentsdeath) of the property subject to claims,enter the amount from item 14 on item 15.

If the amount on item 14 is more thanthe value of the property subject to claims,enter the greater of (a) the value of theproperty subject to claims, or (b) theamount actually paid at the time the returnis filed.

In no event should you enter more onitem 15 than the amount on item 14. Seesection 2053 and the related regulationsfor more information.

Instructions for Part 2.TaxComputation (Page 1 ofForm 706)In general, the estate tax is figured byapplying the unified rates shown in Table Ato the total of transfers both during life andat death, and then subtracting the gifttaxes. You must complete the TaxComputation.

Line 1

If you elected alternate valuation on line 1,Part 3, Elections by the Executor, enterthe amount you entered in the Alternatevalue column of item 10 of Part 5,Recapitulation. Otherwise, enter theamount from the Value at date of death

column.

Lines 4 and 9

Three worksheets are provided to help youcompute the entries for these lines. Youneed not file these worksheets with yourreturn but should keep them for yourrecords. Worksheet TG allows you to

reconcile the decedents lifetime taxablegifts to compute totals that will be used forthe line 4 and line 9 worksheets. You mustget all of the decedents gift tax returns(Form 709, United States Gift (andGeneration-Skipping Transfer) Tax Return)before you complete Worksheet TG. Theamounts you will enter on Worksheet TGcan usually be derived from these returnsas filed. However, if any of the returnswere audited by the IRS, you should usethe amounts that were finally determinedas a result of the audits.

Special Treatment of Split Gifts.Thesespecial rules apply only if:

1. The decedents spouse predeceasedthe decedent;

2. The decedents spouse made giftsthat were split with the decedent underthe rules of section 2513;

3. The decedent was the consentingspouse for those split gifts, as that term isused on Form 709; and

4. The split gifts were included in thedecedents spouses gross estate undersection 2035.

If all four conditions above are met, donot includethese gifts on line 4 of the Tax

Computation and do not includethe gifttaxes payable on these gifts on line 9 ofthe Tax Computation. These adjustmentsare incorporated into the worksheets.

Line 7

Lines 7ac are used to calculate thephaseout of the unified credit andgraduated rates. The phaseout applies onlyto estates in which the amount thetentative tax is computed on exceeds $10million.

Line 12

If the decedent made gifts (including giftsmade by the decedents spouse and

treated as made by the decedent byreason of gift splitting) after September 8,1976, and before January 1, 1977, forwhich the decedent claimed a specificexemption, the unified credit on this estatetax return must be reduced. The reductionis figured by entering 20% of the specificexemption claimed for these gifts. (Note:

The specific exemption was allowed bysection 2521 for gifts made before January1, 1977.)

If the decedent did not make any giftsbetween September 8, 1976, and January1, 1977, or if the decedent made giftsduring that period but did not claim thespecific exemption, enter zero.

Line 15

You may take a credit on line 15 for estate,inheritance, legacy, or succession taxespaid as the result of the decedents deathto any state or the District of Columbia.However, see section 2053(d) and therelated regulations for exceptions andlimits if you elected to deduct the taxesfrom the value of the gross estate.

If you make a section 6166 election topay the Federal estate tax in installmentsand make a similar election to pay thestate death tax in installments, see Rev.Rul. 86-38, 1986-1 C.B. 296, for themethod of computing the credit allowedwith this Form 706.

The credit may not be more than theamount figured by using Table B on page9, based on the value of the adjustedtaxable estate. The adjusted taxable estateis the amount of the Federal taxable estate(line 3 of the Tax Computation) reduced by$60,000. You may claim an anticipatedamount of credit and figure the Federalestate tax on the return before the statedeath taxes have been paid. However, thecredit cannot be finally allowed unless youpay the state death taxes and claim thecredit within 4 years after the return is filed(or later as provided by the Code if apetition is filed with the Tax Court of theUnited States, or if you have an extensionof time to pay) and submit evidence thatthe tax has been paid. If you claim thecredit for any state death tax that is laterrecovered, see Regulations section

20.2016-1 for the notice you are requiredto give the IRS within 30 days.

If you transfer property other than cashto the state in payment of state inheritancetaxes, the amount you may claim as creditis the lesser of the state inheritance taxliability discharged or the fair market valueof the property on the date of the transfer.


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Worksheet TG Taxable Gifts ReconciliationTo be used for lines 4 and 9 of the Tax Computation

Calendar year orcalendar quarter

Total taxable giftsreported on Form 709 for

period (see Note)

Note: For the definition of a taxable gift see section 2503. Ignore the old specificexemption. Follow Form 709. That is, include only the decedents one-half of splitgifts, whether the gifts were made by the decedent or the decedents spouse.

b.a.

Taxable amountincluded in col. b forgifts that qualify for

special treatment of

split gifts describedabove

Taxable amountincluded in col. bfor gifts included

in the gross estate

Gift tax paid bydecedent on gifts

in col. d

Gift tax paid bydecedents spouse on

gifts in col. cGiftsmadeafterJune6,

19

32,andbefore1977

Total taxable giftsmade before 1977

1.

f.e.d.c.

Giftsmade

after1976

Totals for gifts made after 19762.

Line 4 Worksheet Adjusted Taxable Gifts Made After 1976

1. Taxable gifts made after 1976. Enter the amount from line 2, column b, Worksheet TGTaxable gifts made after 1976 reportable on Schedule G. Enter the amount from line 2,column c, Worksheet TG

2.

Taxable gifts made after 1976 that qualify for special treatment. Enter the amountfrom line 2, column d, Worksheet TG

3.

Add lines 2 and 34.Adjusted taxable gifts. Subtract line 4 from line 1. Enter here and on line 4 of the Tax Computation of Form

706

5.


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Line 9 Worksheet Gift Tax on Gifts Made After 1976

Total taxable gifts for priorperiods (from Form 709,Tax Computation, line 2)

Calendar yearor calendar

quarter

Unused unified credit forthis period (see below)

Taxable gifts for thisperiod (from Form 709,

Tax Computation, line 1)

Tax payable for thisperiod (subtract col.

e from col. d)

Tax payable using TableA (on page 9)

b.a.

Total pre-1977taxable gifts. Enter

the amount from line1, Worksheet TG

f.e.d.c.

1. Total gift taxes payable on gifts made after 1976 (combine the amounts in column f)

Gift taxes paid by the decedent on gifts that qualify for special treatment. Enter the amount fromline 2, column e, Worksheet TG on page 7

2.

Subtract line 2 from line 13.

Gift tax paid by decedents spouse on split gifts included on Schedule G. Enter the amount from line2, column f, Worksheet TG on page 7

4.

Add lines 3 and 4. Enter here and on line 9 of the Tax Computation of Form 7065.

Column d: To figure the tax payable for this column, you must use Table A in these instructions, as it applies to the year of the decedents death rather than to theyear the gifts were actually made. To compute the entry for col. d, you should figure the tax payable on the amount in col. b and subtract it from the tax payableon the amounts in cols. b and c added together. Enter the difference in col. d.

If the amount in columns b and c combined exceeds $10 million for any given calendar year, then you must calculate the tax in column d for that year using theForm 709 revision in effect for the year of the decedents death.

To calculate the tax, enter the amount for the appropriate year from column c of the worksheet on line 1 of the Tax Computation of the Form 709. Enter theamount from column b on line 2 of the Tax Computation. Complete the Tax Computation through the tax due before any reduction for the unified credit and enterthat amount in column d, above.

Column e: To figure the unused unified credit, use the unified credit in effect for the year the gift was made. This amount should be on line 12 of the TaxComputation of the Form 709 filed for the gift.

For more details, see Rev. Rul. 86-117,1986-2 C.B. 157.

You should send the following evidenceto the IRS:

1. Certificate of the proper officer of thetaxing state, or the District of Columbia,showing: (a) the total amount of tax

imposed (before adding interest andpenalties and before allowing discount); (b)the amount of discount allowed; (c) theamount of penalties and interest imposedor charged; (d) the total amount actuallypaid in cash; and (e) the date of payment.

2. Any additional proof the IRSspecifically requests.

You should file the evidence requestedabove with the return if possible.Otherwise, send it as soon after you filethe return as possible.

Line 17

You may take a credit for Federal gift taxesimposed by Chapter 12 of the Code, and

the corresponding provisions of prior laws,on certain transfers the decedent madebefore January 1, 1977, that are includedin the gross estate. The credit cannot bemore than the amount figured by thefollowing formula:

Gross estate tax minus (thesum of the state death taxesand unified credit)

Value ofincluded gift

Value of gross estate minus(the sum of the deductions forcharitable, public, and similargifts and bequests and maritaldeduction)

For more information, see the regulationsunder section 2012. This computation maybe made using Form 4808, Computationof Credit for Gift Tax. Attach a copy of acompleted Form 4808 or the computationof the credit. Also attach all availablecopies of Forms 709 filed by the decedentto help verify the amounts entered on lines

4, 9, and 17.

Line 23

If you answered Yes to question 16 ofGeneral Information, you must completeSchedule S. Enter the tax due from line 17of Schedule S on line 23. This increasedestate tax may not be offset by any of theestate tax credits on lines 1119.

Line 26

You may not use these bonds to pay theGST tax. You may use these bonds to paythe increased estate tax shown on line 23.

Instructions for ScheduleA.Real EstateSee the reverse side of Schedule A onForm 706.

Instructions for ScheduleB.Stocks and Bonds

General

If the total gross estate contains anystocks or bonds, you must completeSchedule B and file it with the return.

On Schedule B list the stocks and bondsincluded in the decedents gross estate.Number each item in the left-hand column.Bonds that are exempt from Federalincome taxes are not exempt fromestate taxes unless specificallyexempted by an estate tax provision ofthe Code. Therefore, you should list thesebonds on Schedule B.

Public housing bonds includible in thegross estate must be included at their fullvalue.

If you paid any estate, inheritance,legacy, or succession tax to a foreigncountry on any stocks or bonds included

(continued on page 10)


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Table AUnified Rate Schedule

Column DColumn CColumn BColumn A

Rate of tax onexcess overamount incolumn A

Tax onamount incolumn A

Taxableamountnot over

Taxableamount

over

(Percent)

$10,0000 0 182020,000$10,000 $1,800

40,00020,000 3,800 222460,00040,000 8,200

Table B Worksheet

80,00060,000 13,000 26

80,000 2818,200100,000

Federal Adjusted Taxable Estate

30100,000 23,800150,0003238,800250,000150,0003470,800500,000250,000

$

37155,800750,000500,000

60,000

1 Federal taxable estate (from Tax Computation,Form 706, line 3)

1,000,000 39750,000 248,3001,250,000 411,000,000 345,800

3 Federal adjusted taxable estate. Subtract line 2from line 1. Use this amount to computemaximum credit for state death taxes in Table B.

1,500,000 431,250,000 448,3002,000,000 451,500,000 555,8002,500,000 492,000,000 780,800

2,500,000 1,025,800 53

Table B

Computation of Maximum Credit for State Death Taxes(Based on Federal adjusted taxable estate computed using the worksheet above.)

Rate of credit onexcess over amount

in column (1)

Credit on amountin column (1)

Adjusted taxableestate less than

Adjusted taxableestate equal to or

more than

Rate of credit onexcess over amount

in column (1)

Credit on amountin column (1)

Adjusted taxableestate less than

Adjusted taxableestate equal to or

more than

(4)(3)(4)(3)(2)(1) (2)(1)

(Percent)(Percent)

0 2,540,0002,040,000$40,000 8.0106,800None0$40,000 3,040,0002,540,00090,000 8.8146,8000.80

90,000 3,540,0003,040,000140,000 9.6190,8001.6$400140,000 4,040,0003,540,000240,000 10.4238,8002.41,200240,000 5,040,0004,040,000440,000 11.2290,8003.23,600

440,000 6,040,0005,040,000640,000 12.0402,8004.010,000640,000 7,040,0006,040,000840,000 12.8522,8004.818,000

8,040,0007,040,0001,040,000840,000 13.6650,8005.627,6001,040,000 9,040,0008,040,0001,540,000 14.4786,8006.438,800

10,040,0009,040,0002,040,0001,540,000 15.2930,8007.270,80010,040,000 16.01,082,800

2 Ad justment

Examples showing use of Schedule B

Example where the alternate valuation is not adopted; date of death, January 1, 1993

Alternatevaluation

date

Alternatevalue

Value at dateof death

Description including face amount of bonds or number of shares and par value whereneeded for identification. Give CUSIP number if available.

Itemnumber

Unit value

$60,000-Arkansas Railroad Co. first mortgage 4%, 20-year bonds,due 1995. Interest payable quarterly on Feb. 1, May 1, Aug. 1 andNov. 1; N.Y. Exchange, CUSIP No. XXXXXXXXX

1

60,000100

Interest coupons attached to bonds, item 1, due and payable on Nov.

1, 1992, but not cashed at date of death 600400Interest accrued on item 1, from Nov. 1, 1992, to Jan. 1, 1993

500 shares Public Service Corp., common; N.Y. Exchange, CUSIP No.XXXXXXXXX

255,000110

Dividend on item 2 of $2 per share declared Dec. 10, 1992, payableon Jan. 10, 1993, to holders of record on Dec. 30, 1992 1,000

3,000,000551,290,8003,000,000


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Example where the alternate valuation is adopted; date of death, January 1, 1993

Alternatevaluation

date

Alternatevalue

Value at dateof death

Description including face amount of bonds or number of shares and par value whereneeded for identification. Give CUSIP number if available.

Itemnumber

Unit value

$60,000-Arkansas Railroad Co. first mortgage 4%, 20-year bonds,due 1995. Interest payable quarterly on Feb. 1, May 1, Aug. 1 andNov. 1; N.Y. Exchange, CUSIP No. XXXXXXXXX

1

60,000100

29,7004/1/9399$30,000 of item 1 distributed to legatees on Apr. 1, 1993

29,4005/2/9398$30,000 of item 1 sold by executor on May 2, 1993

Interest coupons attached to bonds, item 1, due and payable on

Nov. 1, 1992, but not cashed at date of death. Cashed by executoron Feb. 1, 1993 6006002/1/93

Interest accrued on item 1, from Nov. 1, 1992, to Jan. 1, 1993. Cashedby executor on Feb. 1, 1993 4004002/1/93

500 shares of Public Service Corp., common; N.Y. Exchange, CUSIPNo. XXXXXXXXX

255,000110

45,0007/1/9390Not disposed of within 6 months following death

Dividend on item 2 of $2 per share declared Dec. 10, 1992, and paidon Jan. 10, 1993, to holders of record on Dec. 30, 1992 1/10/93 1,0001,000

(Continued from page 8)

in this schedule, group those stocks andbonds together and label them Subjectedto Foreign Death Taxes.

List interest and dividends on each stockor bond separately. Indicate as a separateitem dividends that have not beencollected at death, but which are payableto the decedent or the estate because thedecedent was a stockholder of record onthe date of death. However, if the stock isbeing traded on an exchange and is sellingex-dividend on the date of the decedentsdeath, do not include the amount of thedividend as a separate item. Instead, add itto the ex-dividend quotation in determiningthe fair market value of the stock on thedate of the decedents death. Dividendsdeclared on shares of stock before thedeath of the decedent but payable tostockholders of record on a date after the

decedents death are not includible in thegross estate for Federal estate taxpurposes.

Description

For stocks indicate:

Number of shares

Whether common or preferred

Issue

Par value where needed for identification

Price per share

Exact name of corporation

Principal exchange upon which sold, iflisted on an exchange

CUSIP number, if availableFor bonds indicate:

Quantity and denomination

Name of obligor

Date of maturity

Interest rate

Interest due date

Principal exchange, if listed on anexchange

CUSIP number, if available

If the stock or bond is unlisted, show thecompanys principal business office.

The CUSIP (Committee on Uniform

Security Identification Procedure) numberis a nine-digit number that is assigned toall stocks and bonds traded on majorexchanges and many unlisted securities.Usually, the CUSIP number is printed onthe face of the stock certificate. If theCUSIP number is not printed on thecertificate, it may be obtained through thecompanys transfer agent.

Valuation

List the fair market value of the stocks orbonds. The fair market value of a stock orbond (whether listed or unlisted) is themean between the highest and lowestselling prices quoted on the valuation date.If only the closing selling prices areavailable, then the fair market value is themean between the quoted closing sellingprice on the valuation date and on thetrading day before the valuation date. Tofigure the fair market value if there were nosales on the valuation date:

1. Find the mean between the highestand lowest selling prices on the nearesttrading date before and the nearest tradingdate after the valuation date. Both tradingdates must be reasonably close to thevaluation date.

2. Prorate the difference between themean prices to the valuation date.

3. Add or subtract (whichever applies)

the prorated part of the difference to orfrom the mean price figured for the nearesttrading date before the valuation date.

If no actual sales were made reasonablyclose to the valuation date, make the samecomputation using the mean between thebona fide bid and asked prices instead ofsales prices. If actual sales prices or bonafide bid and asked prices are availablewithin a reasonable period of time beforethe valuation date but not after thevaluation date, or vice versa, use the meanbetween the highest and lowest sales

prices or bid and asked prices as the fairmarket value.

For example, assume that sales of stock

nearest the valuation date (June 15)occurred 2 trading days before (June 13)and 3 trading days after (June 18). Onthose days the mean sale prices per sharewere $10 and $15, respectively. Therefore,the price of $12 is considered the fairmarket value of a share of stock on thevaluation date. If, however, on June 13 and18, the mean sale prices per share were$15 and $10, respectively, the fair marketvalue of a share of stock on the valuationdate is $13.

If only closing prices for bonds areavailable, see Regulations section20.2031-2(b).

Apply the rules in the section 2031

regulations to determine the value ofinactive stock and stock in closecorporations. Send with the schedulecomplete financial and other data used todetermine value, including balance sheets(particularly the one nearest to thevaluation date) and statements of the netearnings or operating results and dividendspaid for each of the 5 years immediatelybefore the valuation date.

Securities reported as of no value,nominal value, or obsolete should be listedlast. Include the address of the companyand the state and date of theincorporation. Attach copies ofcorrespondence or statements used todetermine the no value.

If the security was listed on more thanone stock exchange, use either the recordsof the exchange where the security isprincipally traded or the composite listingof combined exchanges, if available, in apublication of general circulation. In valuinglisted stocks and bonds, you shouldcarefully check accurate records to obtainvalues for the applicable valuation date.

If you get quotations from brokers, orevidence of the sale of securities from theofficers of the issuing companies, attach tothe schedule copies of the letters


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furnishing these quotations or evidence ofsale.

See Rev. Rul. 69-489, 1969-2 C.B. 172,for the special valuation rules for certainmarketable U.S. Treasury Bonds (issuedbefore March 4, 1971). These bonds,commonly called flower bonds, may beredeemed at par plus accrued interest inpayment of the tax at any Federal Reservebank, the office of the Treasurer of theUnited States, or the Bureau of the PublicDebt, as explained in Rev. Proc. 69-18,1969-2 C.B. 300.

Instructions forSchedule D.Insurance onthe Decedents LifeSee the reverse side of Schedule D onForm 706.

Instructions for ScheduleE.Jointly Owned PropertySee the reverse side of Schedule E onForm 706.

Instructions for Schedule

F.Other MiscellaneousPropertySee the reverse side of Schedule F onForm 706.

Instructions forSchedule G.TransfersDuring Decedents LifeYou must complete Schedule G and file itwith the return if the decedent made anyof the transfers described below in 1through 5 or if you answered Yes on line11 or 12a of Part 4, General Information.

Five types of transfers should bereported on this schedule:

1. Certain gift taxes.Section 2035(c).Enter at item A of the Schedule the totalvalue of the gift taxes that were paid bythe decedent or the estate on gifts madeby the decedent or the decedents spousewithin 3 years before death.

The date of the gift, not the date ofpayment of the gift tax, determineswhether a gift tax paid is included in thegross estate under this rule. Therefore, youshould carefully examine the Forms 709filed by the decedent and the decedentsspouse to determine what part of the totalgift taxes reported on them was

attributable to gifts made within 3 yearsbefore death. For example, if the decedentdied on July 10, 1993, you should examinegift tax returns for 1993, 1992, 1991, and1990. However, the gift taxes on the 1990returns that are attributable to gifts madebefore July 10, 1990, are not included inthe gross estate.

Attach an explanation of how youcomputed the includible gift taxes if you donot include in the gross estate the entiregift taxes shown on any Form 709 filedwithin 3 years of death. Also attach copies

of any pertinent gift tax returns filed by thedecedents spouse within 3 years of death.

2. Other transfers within 3 years beforedeath.Section 2035(a). These transfersinclude onlythe following:

Any transfer by the decedent withrespect to a life insurance policy within 3years before death.

Any transfer within 3 years before deathof a retained section 2036 life estate,section 2037 reversionary interest, orsection 2038 power to revoke, etc., if the

property subject to the life estate, interest,or power would have been included in thegross estate had the decedent continuedto possess the life estate, interest, orpower until death.

These transfers are reported onSchedule G regardless of whether a gifttax return was required to be filed for themwhen they were made. However, theamount includible and the informationrequired to be shown for the transfers aredetermined:

For insurance on the life of the decedentusing the instructions to Schedule D.(Attach Form(s) 712.)

For insurance on the life of another using

the instructions to Schedule F. (AttachForm(s) 712.)

For sections 2036, 2037, and 2038transfers, using paragraphs 3, 4, and 5ofthese instructions.

3. Transfers with retained life estate(section 2036).These are transfers inwhich the decedent retained the incomefrom the transferred property or the right todesignate the person or persons who willpossess or enjoy the transferred property,or the income from the transferred propertyif the transfer was made:

(a) Between March 4, 1931, and June 6,1932, inclusive, and the decedent aloneretained the right to so designate for life,

or for any period that did not in fact endbefore the decedents death; or

(b) After June 6, 1932, and the decedentretained the right to so designate, eitheralone or with any person, for life, for anyperiod that must be ascertained byreference to the decedents death, or forany period that did not in fact end beforethe decedents death.

Retained Voting Rights. Transfers with aretained life estate also include transfers ofstock in a controlled corporation afterJune 22, 1976, if the decedent retained oracquired voting rights in the stock. If thedecedent retained direct or indirect votingrights in a controlled corporation, the

decedent is considered to have retainedenjoyment of the transferred property. Acorporation is a controlled corporation ifthe decedent owned (actually orconstructively) or had the right (either aloneor with any other person) to vote at least20% of the total combined voting power ofall classes of stock. See section 2036(b). Ifthese voting rights ceased or wererelinquished within 3 years before thedecedents death, the corporate interestsare included in the gross estate as if thedecedent had actually retained the votingrights until death.

4. Transfers taking effect at death(section 2037).These are transfers madeon or after September 8, 1916, that tookeffect at the decedents death. A transferthat takes effect at the decedents death isone under which possession or enjoymentcan be obtained only by surviving thedecedent. A transfer is not treated as onethat takes effect at the decedents deathunless the decedent retained areversionary interest in the property thatimmediately before the decedents deathhad a value of more than 5% of the value

of the transferred property. If the transferwas made before October 8, 1949, thereversionary interest must have arisen bythe express terms of the instrument oftransfer.

5. Revocable transfers (section 2038).These are transfers in which the enjoymentof the transferred property was subject atdecedents death to any change throughthe exercise of a power to alter, amend,revoke, or terminate, as follows:

If the transfer was made before 4:01p.m., eastern standard time, June 2, 1924,and the power was reserved at the time ofthe transfer and was exercisable by thedecedent alone or with a person who had

no substantial adverse interest in thetransferred property.

If the transfer was made on or after 4:01p.m., eastern standard time, June 2, 1924,and before June 23, 1936, and the powerwas reserved at the time of the transferand was exercisable by the decedentalone or with any person (regardless ofwhether that person had a substantialadverse interest in the transferredproperty), or

If the transfer was made after June 22,1936, regardless of whether the power wasreserved at the time of the transfer or latercreated or conferred, regardless of thesource from which the power was

acquired, regardless of whether the powerwas exercisable by the decedent alone orwith any person, and regardless of whetherthat person had a substantial adverseinterest in the transferred property.

If the decedent relinquished within 3years before death any of the includiblepowers described above, you shoulddetermine the gross estate as if thedecedent had actually retained the powersuntil death.

For more detailed information on whichtransfers are includible in the gross estate,see the Estate Tax Regulations.

Special Valuation Rules for Certain

Lifetime TransfersNote: Code sections 27012704 wereenacted by the Omnibus BudgetReconciliation Act of 1990. These sectionsprovide rules for valuing certain transfers tofamily members and are generally effectivefor transfers occurring after October 8,1990.

Section 2701 deals with the transfer ofan interest in a corporation or partnershipwhile retaining certain distribution rights, ora liquidation, put, call, or conversion right.


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Section 2702 deals with the transfer ofan interest in a trust while retaining anyinterest other than a qualified interest. Ingeneral, a qualified interest is a right toreceive certain distributions from the trustat least annually, or a noncontingentremainder interest if all of the otherinterests in the trust are distribution rightsspecified in section 2702.

Section 2703 provides rules for thevaluation of property transferred to a familymember but subject to an option,agreement, or other right to acquire or use

the property at less than fair market value.It also applies to transfers subject torestrictions on the right to sell or use theproperty.

Finally, section 2704 provides that incertain cases the lapse of a voting orliquidation right in a family-ownedcorporation or partnership will result in adeemed transfer.

These rules have potential consequensesfor the valuation of property in an estate. Ifthe decedent (or any member of his or herfamily) was involved in any suchtransactions, see Code sections 27012704for additional details.

How To CompleteSchedule G

All transfers (other than outright transfersnot in trust and bona fide sales) made bythe decedent at any time during life mustbe reported on the Schedule regardless ofwhether you believe the transfers aresubject to tax. If the decedent made anytransfers not described in the instructionson page 11, the transfers should not beshown on Schedule G. Instead, attach astatement describing these transfers: listthe date of the transfer, the amount orvalue, and the type of transfer.

Complete the schedule for each transferthat is included in the gross estate undersections 2035(a), 2036, 2037, and 2038 asdescribed on page 11.

In the Item number column, numbereach transfer consecutively beginning with1. In the Description column, list thename of the transferee, the date of thetransfer, and give a complete descriptionof the property. Transfers included in thegross estate should be valued on the dateof the decedents death or, if the alternatevaluation is adopted, according to section2032.

If only part of the property transferredmeets the terms of section 2035(a), 2036,2037, or 2038, then only a correspondingpart of the value of the property should beincluded in the value of the gross estate. Ifthe transferee makes additions orimprovements to the property, theincreased value of the property at thevaluation date should not be included onSchedule G. However, if only a part of thevalue of the property is included, enter thevalue of the whole under the columnheaded Description and explain whatpart was included.

Attachments.If a transfer, by trust orotherwise, was made by a writteninstrument, attach a copy of the instrument

to the Schedule. If of public record, thecopy should be certified; if not of record,the copy should be verified.

Instructions forSchedule H.Powers ofAppointmentYou must complete Schedule H and file itwith the return if you answered Yes toline 13 of Part 4, General Information.

On Schedule H include in the gross

estate:1. The value of property for which the

decedent possessed a general power ofappointment on the date of his or herdeath; and

2. The value of property for which thedecedent possessed a general power ofappointment which he or she exercised orreleased before death by disposing of it insuch a way that if it were a transfer ofproperty owned by the decedent, theproperty would be includible in thedecedents gross estate. (See section 2041and Pub. 448 for more details.)

Powers of Appointment

A power of appointment includes allpowers which are in substance and effectpowers of appointment regardless of howthey are identified and regardless of localproperty laws. For example, if a settlortransfers property in trust for the life of hiswife, with a power in the wife toappropriate or consume the principal of thetrust, the wife has a power of appointment.

General Power of Appointment.Ageneral power of appointment is a powerthat is exercisable in favor of the decedent,the decedents estate, the decedentscreditors, or the creditors of thedecedents estate, except:

1. A power to consume, invade, or

appropriate property for the benefit of thedecedent that is limited by anascertainable standard relating to health,education, support, or maintenance of thedecedent.

2. A power created on or before October21, 1942, that is exercisable by thedecedent only in conjunction with anotherperson.

3. A power created after October 21,1942, exercisable by the decedent only inconjunction with (a) the creator of thepower, or (b) a person who has asubstantial interest in the property subjectto the power, which is adverse to theexercise of the power in favor of the

decedent.A part of a power created after October

21, 1942, is considered a general power ofappointment if the power:

1. May only be exercised by thedecedent in conjunction with anotherperson; and

2. Is also exercisable in favor of theother person (in addition to beingexercisable in favor of the decedent, thedecedents creditors, the decedentsestate, or the creditors of the decedentsestate).

The part to include in the gross estate asa general power of appointment is figuredby dividing the value of the property by thenumber of persons (including thedecedent) in favor of whom the power isexercisable.

Date Power Was Created.Generally, apower of appointment created by will isconsidered created on the date of thetestators death. However, a power ofappointment created by a will executed onor before October 21, 1942, is considereda power created on or before that date if

the person executing the will died beforeJuly 1, 1949, without having republishedthe will, by codicil or otherwise, afterOctober 21, 1942.

A power of appointment created by aninter vivos instrument is consideredcreated on the date the instrument takeseffect. If the holder of a power exercises itby creating a second power, the secondpower is considered as created at the timeof the exercise of the first.

Attachments

If the decedent ever possessed a power ofappointment, attach a certified or verifiedcopy of the instrument granting the power

and a certified or verified copy of anyinstrument by which the power wasexercised or released. You must file thesecopies even if you contend that the powerwas not a general power of appointment,and that the property is not otherwiseincludible in the gross estate.

Instructions forSchedule I.AnnuitiesYou must complete Schedule l and file itwith the return if you answered Yes toquestion 15 of Part 4, General Information.Enter on Schedule I every annuity thatmeets all of conditions 14 under General,

below, and every annuity described inparagraphs ah of Annuities UnderApproved Plans, even if the annuities arewholly or partially excluded from the grossestate.

See the instructions for line 3 ofSchedule M for a discussion regarding theQTIP treatment of certain joint and survivorannuities.

General

Except as otherwise provided underAnnuities Under Approved Plans on page13, include in the gross estate on thisschedule all or part of the value of anannuity receivable by any beneficiary

following the death of the decedent undera contract or agreement that satisfies allfour conditions below:

1. The contract or agreement is not apolicy of insurance on the life of thedecedent;

2. The contract or agreement wasentered into after March 3, 1931;

3. The annuity is receivable by thebeneficiary because he or she survived thedecedent; and

4. Under the contract or agreement, anannuity was payable to the decedent (or


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the decedent possessed the right toreceive the annuity) either alone or inconjunction with another, for thedecedents life or for any period notascertainable without reference to thedecedents death or for any period that didnot in fact end before the decedentsdeath.

Part Includible.If the decedentcontributed only part of the purchase priceof the contract or agreement, include inthe gross estate only that part of the valueof the annuity receivable by the surviving

beneficiary that the decedents contributionto the purchase price of the annuity oragreement bears to the total purchaseprice. For example, if the value of thesurvivors annuity was $20,000 and thedecedent had contributed three-fourths ofthe purchase price of the contract, theamount includible is $15,000 (34 $20,000). Except as provided underAnnuities Under Approved Plans,contributions made by the decedentsemployer to the purchase price of thecontract or agreement are consideredmade by the decedent if they were madeby the employer because of thedecedents employment. For moreinformation, see section 2039.

Annuity Defined.The term annuityincludes one or more payments extendingover any period of time. The paymentsmay be equal or unequal, conditional orunconditional, periodic or sporadic. Thefollowing are examples of contracts (butnot necessarily the only forms of contracts)for annuities that must be included in thegross estate:

1. A contract under which the decedentimmediately before death was receiving orwas entitled to receive, for the duration oflife, an annuity with payments to continueafter death to a designated beneficiary, ifsurviving the decedent;

2. A contract under which the decedentimmediately before death was receiving orwas entitled to receive, together withanother person, an annuity payable to thedecedent and the other person for theirjoint lives, with payments to continue tothe survivor following the death of either;

3. A contract or agreement entered intoby the decedent and employer underwhich the decedent immediately beforedeath and following retirement wasreceiving, or was entitled to receive, anannuity payable to the decedent for lifeand after the decedents death to adesignated beneficiary, if surviving thedecedent, whether the payments after thedecedents death are fixed by the contractor subject to an option or electionexercised or exercisable by the decedent.However, see Annuities Under ApprovedPlans, below;

4. A contract or agreement entered intoby the decedent and employer underwhich at the decedents death, beforeretirement or before the expiration of astated period of time, an annuity waspayable to a designated beneficiary, ifsurviving the decedent. However, seeAnnuities Under Approved Plans, below;

5. A contract or agreement under whichthe decedent immediately before deathwas receiving, or was entitled to receive,an annuity for a stated period of time, withthe annuity to continue to a designatedbeneficiary, surviving the decedent, uponthe decedents death before the expirationof that period of time;

6. An annuity contract or otherarrangement providing for a series ofsubstantially equal periodic payments to bemade to a beneficiary for life or over aperiod of at least 36 months after the date

of the decedents death under anindividual retirement account, annuity, orbond as described in section 2039(e)(before its repeal by P.L. 98-369).

Annuities Under Approved Plans.Thestatute allowing an exclusion for annuitiesunder approved plans has been repealed.However, under the special rules providedfor the annuities described in ah below, itmay be possible to exclude part or all ofthe value of these annuities from the grossestate.

No exclusion is allowed for annuitiesunder approved plans unless eithercondition 1 or 2 below is met:

1. On December 31, 1984, the decedentwas both a participant in the plan and inpay status (i.e., had received at least onebenefit payment on or before December31, 1984), and the decedent irrevocablyelected the form of the benefit before July18, 1984; or

2. The decedent separated from servicebefore January 1, 1985, and did notchange the form of benefit before death.

If either of the above conditions is met,an exclusion is allowed. The exclusion maynot exceed $100,000 unless either of thetwo additional conditions below is met:

1. On December 31, 1982, the decedentwas both a participant in the plan and in

pay status (i.e., had received at least onebenefit payment on or before December31, 1982), and the decedent irrevocablyelected the form of the benefit beforeJanuary 1, 1983; or

2. The decedent separated from servicebefore January 1, 1983, and did notchange the form of benefit before death.

If either of the above conditions is met,the exclusion is not subject to the$100,000 limitation.

Approved Plans:

a. An employees trust (or under acontract purchased by an employeestrust) forming part of a pension, stock

bonus, or profit-sharing plan that met allthe requirements of section 401(a), eitherat the time of the decedents separationfrom employment (whether by death orotherwise) or at the time of the terminationof the plan (if earlier);

b. A retirement annuity contractpurchased by the employer (but not by anemployees trust) under a plan that, at thetime of the decedents separation fromemployment (by death or otherwise), or atthe time of the termination of the plan (ifearlier), was a plan described in section403(a);

c. A retirement annuity contractpurchased for an employee by anemployer that is an organization referred toin section 170(b)(1)(A)(ii) or (vi), or that is areligious organization (other than a trust),and that is exempt from tax under section501(a);

d. Chapter 73 of Title 10 of the UnitedStates Code;

e. A bond purchase plan described insection 405 (before its repeal byP.L. 98-369, effective for obligations issuedafter December 31, 1983.)

If an annuity under an approved plandescribed in ae above is receivable by abeneficiary other than the executor and thedecedent made no contributions under theplan toward the cost, no part of the valueof the annuity, subject to the $100,000limitation (if applicable), is includible in thegross estate. If the decedent made acontribution under a plan described in aeabove toward the cost, include in the grossestate on this schedule that proportion ofthe value of the annuity which the amountof the decedents contribution under theplan bears to the total amount of allcontributions under the plan. Theremaining value of the annuity is

excludable from the gross estate subject tothe $100,000 limitation (if applicable). Forthe rules to determine whether thedecedent made contributions to the plan,see Pub. 448.

Note: The accounts, annuities, and bondsdescribed infh, below, are approvedplans only if they provide for a series ofsubstantially equal periodic payments to bemade to a beneficiary for life, or over aperiod of at least 36 months after the dateof the decedents death.

f. An individual retirement accountdescribed in section 408(a);

g. An individual retirement annuitydescribed in section 408(b);

h. A retirement bond described insection 409(a)(before its repeal byP.L. 98-369).

Subject to the $100,000 limitation, ifapplicable, if an annuity under a plandescribed in fh above is receivable by abeneficiary other than the executor, theentire value of the annuity is excludablefrom the gross estate even if the decedentmade a contribution under the plan.However, if any payment to or for anaccount or annuity described in paragraphf, g, or h above was not allowable as anincome tax deduction under section 219(and was not a rollover contribution asdescribed in section 2039(e) before itsrepeal by P.L. 98-369), include in the grossestate on this schedule that proportion ofthe value of the annuity which the amountnot allowable as a deduction under section219 and not a rollover contribution bearsto the total amount paid to or for suchaccount or annuity. For more information,see Regulations section 20.2039-5.

If any part of an annuity under a plandescribed in ah above is receivable bythe executor, it is generally includible in thegross estate on this schedule to the extentthat it is receivable by the executor in that


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capacity. In general, the annuity isreceivable by the executor if it is to bepaid to the executor or if there is anagreement (expressed or implied) that itwill be applied by the beneficiary for thebenefit of the estate (such as in dischargeof the estates liability for death taxes ordebts of the decedent, etc.) or that itsdistribution will be governed to any extentby the terms of the decedents will or thelaws of descent and d istribution.

If data available to you does not indicatewhether the plan satisfies the requirements

of section 401(a), 403(a), 408(a), 408(b), or409(a), you may obtain that informationfrom the District Director of InternalRevenue for the district where theemployers principal place of business islocated.

Line ALump Sum DistributionElection

The election pertaining to the lump sumdistribution from qualified plans (approvedplans) excludes from the gross estate all orpart of the lump sum distribution thatwould otherwise be includible. When therecipient makes the election to take a lumpsum distribution and include it in his or her

income tax, the amount excluded from thegross estate is the portion attributable tothe employer contributions. The portion, ifany, attributable to theemployee-decedents contributions isalways includible. The actual election ismade by the recipient of the distribution bytaking the lump sum distribution and bytreating it as taxable on his or her incometax return as described in Regulationssection 20.2039-4(d). The election isirrevocable. However, you may notcompute the gross estate in accordancewith this election unless you check Yesto line A and attach the name, address,and identifying number of the recipients ofthe lump sum distributions. SeeRegulations section 20.2039-4.

How To Complete the Schedule

In describing an annuity, give the nameand address of the grantor of the annuity.Specify if the annuity is under an approvedplan. If it is under an approved plan, youmust state the ratio of the decedentscontribution to the total purchase price ofthe annuity. If the decedent was employedat the time of death and an annuity asdescribed in paragraph 4 of AnnuityDefined, on page 13, became payable toany beneficiary because the beneficiarysurvived the decedent, you must state theratio of the decedents contribution to the

total purchase price of the annuity. If anannuity under an individual retirementaccount or annuity became payable to anybeneficiary because that beneficiarysurvived the decedent and is payable tothe beneficiary for life or for at least 36months following the decedents death,you must state the ratio of the amountpaid for the individual retirement accountor annuity that was not allowable as anincome tax deduction under section 219(other than a rollover contribution) to thetotal amount paid for the account orannuity. If the annuity is payable out of a

trust or other fund, the description shouldbe sufficiently complete to fully identify it.If the annuity is payable for a term ofyears, include the duration of the term andthe date on which it began, and if payablefor the life of a person other than thedecedent, include the date of birth of thatperson. If the annuity is wholly or partiallyexcluded from the gross estate, enter theamount excluded under Description andexplain how you computed the exclusion.

Instructions for Schedule

J.Funeral Expenses andExpenses Incurred inAdministering PropertySubject to ClaimsSee the reverse side of Schedule J onForm 706.

Instructions for ScheduleK.Debts of the Decedentand Mortgages and LiensYou must complete and attach Schedule Kif you claimed deductions on either item 12or item 13 of Part 5, Recapitulation.

Debts of the Decedent

List under Debts of the Decedent onlyvalid debts the decedent owed at the timeof death. List any indebtedness secured bya mortgage or other lien on property of thegross estate under the heading Mortgagesand Liens. If the amount of the debt isdisputed or the subject of litigation, deductonly the amount the estate concedes to bea valid claim. Enter the amount in contestin the column provided.

Generally, if the claim against the estateis based on a promise or agreement, thededuction is limited to the extent that theliability was contracted bona fide and foran adequate and full consideration inmoney or moneys worth. However, anyenforceable claim based on a promise oragreement of the decedent to make acontribution or gift (such as a pledge or asubscription) to or for the use of acharitable, public, religious, etc.,organization is deductible to the extentthat the deduction would be allowed as abequest under the statute that applies.

Certain claims of a former spouseagainst the estate based on therelinquishment of marital rights aredeductible on Schedule K. For theseclaims to be deductible, all of the followingconditions must be met:

The decedent and the decedentsspouse must have entered into a writtenagreement relative to their marital andproperty rights.

The decedent and the spouse must havebeen divorced before the decedents deathand the divorce must have occurred withinthe 3-year period beginning on the date 1year before the agreement was enteredinto. It is not required that the agreementbe approved by the divorce decree.

The property or interest transferredunder the agreement must be transferred

to the decedents spouse in settlement ofthe spouses marital rights.

You may not deduct a claim madeagainst the estate by a remaindermanrelating to section 2044 property. Section2044 property is described in theinstructions to line 6 of Part 4, GeneralInformation.

Include in this schedule notes unsecuredby mortgage or other lien and give fulldetails, including name of payee, face andunpaid balance, date and term of note,interest rate, and date to which interestwas paid before death. Include the exactnature of the claim as well as the name ofthe creditor. If the claim is for servicesperformed over a period of time, state theperiod covered by the claim. Example:Edison Electric Illuminating Co., for electricservice during December 1992, $150.

If the amount of the claim is the unpaidbalance due on a contract for thepurchase of any property included in thegross estate, indicate the schedule anditem number where you reported theproperty. If the claim represents a joint andseparate liability, give full facts and explainthe financial responsibility of theco-obligor.

Property and Income Taxes.Thededuction for property taxes is limited tothe taxes accrued before the date of thedecedents death. Federal taxes on incomereceived during the decedents lifetime aredeductible, but taxes on income receivedafter death are not deductible.

Keep all vouchers or original records forinspection by the Internal Revenue Service.

Allowable Death Taxes