Kerry L. Spindler, Esq, Goulston & Storrs, PC
On September 8, 2011, the IRS released final Form 706 United States Estate (and Generation Skipping Transfer) Tax Return for decedents dying in 2010, and the Instructions thereto.
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was to have repealed the federal estate tax for decedents dying in 2010 and replace the step-up in basis traditionally available to property transferred at death with a modified carry-over basis regime. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRA) restored the federal estate tax for 2010 decedents, subject to a $5M federal estate tax exemption amount and a 35% maximum federal estate tax rate, and also restored the step-up in basis rules. This notwithstanding, TRA § 301(c) permits the executor or administrator of a 2010 estate to elect into EGTRRA’s zero estate tax/modified carry-over basis rules. This election (a § 1022 Election) will be made on a timely filed Form 8939 (see IRS Notice 2011-66). This Form 706 is to be used only with respect to decedents who died during calendar year 2010 where the executor or administrator is not making a § 1022 Election.
Form 706 & Instructions
This Form 706 is due on or before September 19, 2011 with respect to the estates of decedents who died between January 1, 2010 and December 16, 2010. This is consistent with TRA § 301(d)(1) and § 301(d)(2), which extended the due date for filing the estate tax return, paying estate tax, making qualified disclaimers and allocating GST to no sooner than 9 months from the date of the TRA’s enactment. Also noteworthy are the following:
- As discussed above and pursuant to TRA § 301(c), the executor or administrator of a 2010 estate may elect out of estate tax and elect into EGTRRA’s modified carry-over basis treatment of property acquired or passing from the decedent by timely filing Form 8939.
- Pursuant to TRA § 302(a)(1), the federal estate tax exclusion amount is $5,000,000.
- Pursuant to TRA § 302(a)(2), the maximum federal estate tax rate is 35%.
- Pursuant to TRA § 302(c), the applicable rate for generation skipping transfers is zero.
- Pursuant to TRA § 302(d)(1), prior gifts made by the decedent must be calculated at the rate in effect at the date of the decedent’s death.
- Executors and administrators must provide documentation of their status, such as a certified copy of the decedent’s will or a court order designating the executor or administrator.
In addition, the following are indexed for inflation and applicable to decedents dying in 2010:
- The ceiling on special use valuation is $1,000,000.
- The amount used in computing the 2% portion of estate tax payable in installments is $1,340,000.