21.7.5. Estate and Gift Tax Returns

(1) Employees in the Estate and Gift Tax Teams respond to taxpayer correspondence and phone calls as well as process claims, certain applications and other internal adjustment requests.

1. IRM 21.7.5 provides specific guidance to employees assigned to the Estate and Gift (E&G) teams.

2. In addition, IRM 21.7.5 provides general guidance for employees in Accounts Management(AM) who may receive misdirected toll-free calls.

(1) Information regarding authorities delegated to Estate and Gift Tax Returns and Accounts Management can be found in IRM 1.4.3.3, Authorities.

(1) IRM 1.1.1.3, Statutory Authority, provides guidance for Estate and Gift Tax (E&G) employees.

(2) IRM 1.1.13.9.4, Accounts Management provides guidance to employees assigned to the Accounts Management organization.

(3) The Small Business/Self Employed (SB/SE) and Wage and Investment (W&I) Business Operating Divisions are responsible for taxpayer relationships by:

1. Providing taxpayers top quality service by helping them understand and meet their tax responsibilities

2. Applying tax law with integrity and fairness to all.

3. In addition, providing general tax-related information, information on the status of taxpayer returns/refunds/accounts and adjusting accounts, when appropriate.

(1) IRM 1.4.40, Resource Guide for Managers - SB/SE Field and Office Examination Group Manager, provides guidance for program management and review of programs assigned to Estate and Gift Tax Operations.

(1) FY 2018 Program Letter, Measures and Operating Guidelines.

(2) IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS) and Electronic Products and Services Support.

(1) The ReferenceNet Legal and Tax Research Service page provides an Acronym Database to research acronyms found within this IRM. Acronyms are also found in specific subsections of this IRM.

(1) Refer to IRM 1.4.2.15, Related Resources, for information on related resources that impact internal controls.

(1) This section contains information on Form 706 and Form 709 U.S. Estate and Gift Tax series returns. The forms covered in this section are:

• Form 706,United States Estate (and Generation-Skipping Transfer) Tax Return

• Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return

• Form 706-A, United States Additional Estate Tax Return (IRC Section 2032A)

• Form 706-GS(D), Generation-Skipping Transfer Tax Return For Distributions

• Form 706-GS(T), Generation-Skipping Transfer Tax Return For Terminations

• Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts

• Form 706-D, United States Additional Estate Tax Return Under IRC Section 2057

• Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return

(2) All forms contained in this section (unless otherwise noted) and related correspondence are processed at the Cincinnati Campus. All domestic and international estate and gift tax work is processed in the Cincinnati campus only. Forward all related forms, amended returns, claims, penalty abatement requests, notices, or other correspondence to:

Estate and Gift Tax Operation
201 W. Rivercenter Boulevard
Covington, KY 41011
Attention: Stop 824G

(1) Many changes to the estate and gift tax were made by EGTRRA legislation. Many of these changes were not effective until later years. The changes effective in 2009 and earlier that affect material in this IRM have been incorporated.

(2) Sections 501 - 581, of PL 107-16, enacted estate and gift tax legislation. (Refer to sections 501 - 581 of this act for information not contained in this IRM.)

(3) EGTRRA included a modified carryover basis system. Under that law, assets received by a person who died in 2010 would not receive the historical step-up in basis to the fair market value for estate tax purposes because there was no estate tax in 2010. Instead, the decedent's basis in the property, or its date of death fair market value, if less, would be carried over from the person who died to the recipient. Also, a decedent's executor is allowed to allocate a $1,300,000 increase in basis to certain appreciated property passing to any person and an additional $3,000,000 increase in basis to property that goes to the decedent's spouse.

(1) After being repealed for most of 2010, the Estate and Generation-Skipping Transfer (GST) taxes were reinstated on December 17, 2010. Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, PL 111-312 (TRUIRJCA) (also known as Extender's Legislation) provides provisions to the prior law (Economic Growth and Tax Relief Reconciliation Act of 2001, PL 107-16, also known as EGTRRA).

(2) Section 301 of TRUIRJCA Reinstatement of Estate Tax; Repeal of Carryover Basis Section includes:

• Special election - allows an executor of an estate of a decedent who died in 2010 to make an election (a 301(c) election) to apply certain rules (including the modified carryover basis rules and other rules from part V of EGTRRA) to property acquired from a decedent who died in 2010. The election is made by filing Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent.

• Extension of time to file Form 706 - in the case of the estate of a decedent dying after December 31, 2009, and before the date of enactment (DOE) of TRUIRJCA, filing any return (including any election required to be made on the return), making any payment of tax under chapter 11, or making any disclaimer of an interest in property passing by reason of the death of the decedent shall not be earlier than the date which is 9 months after the DOE.

• Extension of time to file Form 709 - in the case of any generation-skipping transfer made after December 31, 2009, and made before the date of enactment (DOE) of TRUIRJCA, the due date for filing any return under IRC 2662 (including any election required to be made on such return) shall not be earlier than the date which is 9 months after the DOE.

(3) Section 302, of TRUIRJCA Modifications to Estate, Gift and Generation -Skipping Transfer Taxes:

• Applicable credit and exclusion amount - the applicable credit amount is the amount of tentative tax that would be determined under Code Section 2001(c) if the amount with respect to which such tentative tax is to be computed were equal to the applicable exclusion amount ($5,000,000).

• Inflation adjustment - in the case of any decedent dying in a calendar year after 2011, the dollar amount shall be increased by an amount equal to such dollar amount multiplied by the cost-of living. If any amount, as adjusted, is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.

• Maximum estate tax rate - Over $500,000 .......$155,800, plus 35 percent of the excess of such amount over $500,000.

• Modification to gift tax - For gifts made after December 31, 2010, a citizen or resident of the U.S. is allowed a credit against the tax imposed for each calendar year. The amount is equal to the applicable credit for the calendar year reduced by the sum of the allowable credit to an individual for all preceding calendar periods.

• Modification of gift tax rate - on or after January 1, 2011 IRC 2505(a) is amended to read that for purposes of applying paragraph (2) for any calendar year, the tax rate in effect for that calendar year will, in lieu of the rates in effect for the preceding calendar periods, be used in determining the amounts allowable as a credit under this section for all preceding calendar periods.

• Modification of GST transfer tax rate - for any generation-skipping transfer made after December 31, 2009 and before January 1, 2011, the applicable rate will be zero.

• Modifications of estate and gift taxes to reflect differences in credit resulting from different tax rates - the tax imposed shall be the amount equal to the excess of tentative tax on the sum of taxable estate, adjusted taxable gifts over the aggregate amount of tax which would have been payable under Chapter 12 of the Code.

  Note: The term "adjusted taxable gifts" means the total amount of the taxable gifts (within the meaning of Code Section 2503) made by the decedent after December 31,1976, other than gifts which are includible in the gross estate of the decedent.

• Gift tax - in the case of a citizen or resident of the U.S., a credit will be allowed against the tax imposed by Code 2501 for each calendar year amount equal to the amount of the tentative tax under the rate schedule in Code Section 2502 (a)(2) for any calendar year in lieu of the rates of tax in effect for the preceding calendar periods. This is reduced by the sum of the amounts allowable as a credit to the individual under Code Section 2505 for all preceding periods.

  Exception: As otherwise provided in TRUIRJCA sec. 302 applies to estates of decedents dying, GST transfers, and gifts made, after December 31, 2009.

(4) Section 303, Applicable Exclusion Amount Increased by Unused Exclusion Amount of Deceased Spouse:

• Applicable exclusion amount -The applicable exclusion amount is the sum of the basic exclusion amount ($5,000,000) and, in the case of a surviving spouse's, the deceased spousal unused exclusion (DSUE) amount. A surviving spouse must include in his or her applicable exclusion amount only the DSUE amount of the deceased spouse most recently predeceasing such surviving spouse (known as the last deceased spouse), and then, only if the executor of the deceased spouse's estate elected portability of the DSUE amount on a timely-filed estate return. See IR-2011-97 for more information. For additional information, see IR-2012-24 which supplements IR-2011-97. See updated information Rev. Proc. 2017-34 .

• Inflation adjustment - for any decedent dying in a calendar year after January 1, 2011 the $5,000,000 amount of the basic exclusion amount shall be increased by an amount equal to such dollar amount, multiplied by the cost-of-living adjustment (COLA) determined under IRC 1(f)(3)(b) for such calendar year by substituting "calendar year 2010" for "calendar year 1992" in IRC 1(f)(3)(B). If any amount as adjusted under the preceding sentence is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.

• Deceased spousal unused exclusion amount -With respect to the surviving spouse of a deceased spouse dying after December 31,2010, the DSUE amount is the lesser of the basic exclusion amount or the excess of the basic exclusion amount of the last such deceased spouse of the surviving spouse over the amount with respect to which the tentative tax is determined under IRC 2001(b)(1) on the estate of the deceased spouse.

• Election required - A DSUE amount may not be taken into account by the surviving spouse unless the executor of the estate of the deceased spouse files an estate tax return on which the amount is computed and makes an election on the return that the amount may be taken into account. Such election is irrevocable. An executor elects portability by filing a complete and properly-prepared estate tax return that is filed within 9 months of the decedent's date of death (or within 15 months if an extension of the time for filing the estate tax return is in effect). A timely election is required for portability even if an estate otherwise has no filing requirement. See IR -2011-97 for more information. An estate that is qualifying estate may secure a 6-month extension of time to file the estate return to elect portability, even if the estate missed the deadline for filing Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, to secure the automatic 6-month extension. For additional information, see IR-2012-24.

• Examination of prior returns after expiration of period of limitations with respect to deceased spousal unused exclusion amount - after the time has expired under IRC 6501 in which a tax may be assessed under Chapter 11 or Chapter 12 of the Code with respect to a DSUE amount, the Secretary may examine a return of the deceased spouse to make a determination for purposes of determining the DSUE amount available to the surviving spouse.

(5) Section 304, Application of EGTRRA Sunset to this Title:

• Application of EGTRRA sunset to title III of the Act - under Section 901(a) of EGTRRA all provisions of, and amendments made by, EGTRRA shall not apply to taxable, plan, or limitation years beginning after December 31, 2010, or in the case of title V of EGTRRA, to estates of decedents dying, gifts made, or GST transfers after December 31, 2010. Under Section 901(b) of EGTRRA, the code and Employee Retirement Income Security Act of 1974 (ERISA) shall be applied and administered to years, estates, gifts, and transfers described in Section 901(a) of EGTRRA as if the provisions and amendments described had never been enacted.

(1) The American Taxpayer Relief Act of 2012 (PL 112-240) with respect to Estate, Gift and GST taxes provides the following:

• Estates - Permanently provides maximum federal estate tax marginal rate of 40 percent with an annually inflation-adjusted $5,000,000 exclusion for estates of decedents dying after December 31, 2012.

• Portability - Makes "portability" permanent between spouses. Prior to the permanent extension, Portability was only available to the estates of decedents dying after December 31, 2010 and before January 1, 2013. Portability allows the estate of the decedent who is survived by a spouse to make an election to permit the surviving spouse to apply the decedent's unused exclusion (the deceased spousal unused exclusion amount (DSUE)) to the surviving spouse's own transfers during life and at death.

• State Death Tax Deduction - Extends the state deduction for state estate taxes.

• Miscellaneous Estate Tax Provisions - Made permanent the repeal of Qualified family-owned business interest (QFOBI); retains the provisions passed in the 2001 act (EGTRRA) relating to qualified conservation easements; made permanent the changes to the number of owners a closely held business could have and still be eligible to pay the estate in installments under Section 6166, and eliminating the 5 percent surtax on estates larger than $10,000,000 .

• Gift Tax - Provides for a maximum federal gift tax marginal rate of 40 percent and a gift tax exemption (and related unified credit (applicable credit amount)) of $ 5,000,000 (inflation adjusted) for gifts made after 2012.

• Generation-Skipping Tax (GST) - Provides for a maximum federal GST tax rate of 40 percent with a $5,000,000 exemption and extends a number of GST tax-related provisions scheduled to expire after 2012. They include automatic allocation of GST exemption to certain transfers and the ability to opt out of such automatic allocation; clarification of valuation rules with respect to the determination of the inclusion ratio for GST tax purposes; provisions allowing for a qualified severance of a trust for purposes of the GST tax; and relief to request an extension of time to allocate GST exemption to transfers occurring before January 1, 2001 or an extension of time to opt out of the automatic GST exemption allocation rules.

(2) Modifications of Estate Tax- Code Section 2001(c), as amended by Section 302(a)(2) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, is amended by changing "Over $500,000" and all that follows. The tax computation table below reflects the amendments made under the American Taxpayer Relief Act of 2012 (ATRA).

(3) Code Section 2010(c)(4)(B)(i) is amended by changing "basic exclusion amount" and inserting "applicable exclusion amount". The amendment corrects a technical reference in the 2010 Act.

(1) As a result of the Supreme Court's decision in, United States v. Windsor, 570 U.S.,133 S. Ct. 2675 (2013), the Service issued Rev. Rul. 2013-17, effective September 16, 2013, with the following guidance on tax treatment of same-sex spouses:

• For federal tax purposes, the terms "spouse", "husband", and "wife" includes individuals of the same sex who were lawfully married under the laws of a state whose laws authorize the marriage of two individuals of the same sex and who remain married.

• For federal tax purposes, the Service will recognize a marriage of individuals of the same sex that was validly created under the laws of the state of celebration even if the married couple resides in a state that does not recognize the validity of same-sex marriages.

• For federal tax purposes, the terms , "spouse" "husband and wife", "husband" and "wife" do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship that as recognized under state law is not denominated as a marriage under the laws of that state, and the term "marriage" does not include such formal relationships.

(2) The rules related to marital issues remain the same.

(3) See Notice 2017-6, this notice provides guidance on the application of the decision in United States v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013), and the holdings of Revenue Ruling 2013–17, 2013–38 I.R.B. 201, to the rules regarding the applicable exclusion amount under §§ 2010(c) and 2505 of the Internal Revenue Code (Code), and the generation-skipping transfer (GST) exemption under § 2631, as they relate to certain gifts, bequests, and generation-skipping transfers by (or to) same-sex spouses. In particular, this notice provides special administrative procedures allowing certain taxpayers and the executors of certain taxpayers’ estates to recalculate a taxpayer’s remaining applicable exclusion amount and remaining GST exemption to the extent an allocation of that exclusion or exemption was made to certain transfers made while the taxpayer was married to a person of the same sex.

(4) See Notice 2017-15, this notice provides guidance on the application of the decision in United States v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013), and the holdings of Revenue Ruling 2013–17, 2013–38 I.R.B. 201, to the rules regarding the applicable exclusion amount under §§ 2010(c) and 2505 of the Internal Revenue Code (Code), and the generation-skipping transfer (GST) exemption under § 2631, as they relate to certain gifts, bequests, and generation-skipping transfers by (or to) same-sex spouses. In particular, this notice provides special administrative procedures allowing certain taxpayers and the executors of certain taxpayers’ estates to recalculate a taxpayer’s remaining applicable exclusion amount and remaining GST exemption to the extent an allocation of that exclusion or exemption was made to certain transfers made while the taxpayer was married to a person of the same sex.

(1) Taxpayers may call with estate and gift questions regarding an account or concerning tax law.

(2) Account questions generally refer to an extension or return that has already been filed. Examples of account issues include:

• CP Notice issues (math error, balance due, etc.)

• Extension of time to file return

• Extension to Pay, i.e., IRC 6161

• Payoff request

• Closing letters

• Penalty or interest issues

• Installment agreements, i.e., IRC 6161 and IRC 6166

• Receipt of payment

• Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent

(3) Tax law issues generally are unrelated to a filed return. Examples of tax law issues/questions include:

• Executor's responsibilities

• Internal Revenue Code (IRC) Sections

• Items to be reported/deductions allowed on an estate tax return

(4) Do not confuse Form 706, "U.S. Estate Tax Return", (MFT 52) calls with Form 1041, "U.S. Income Tax Return for Estates & Trusts", (MFT 05) calls. There are two distinguishably different "Estates".

• When an individual dies, the property and debts they have accumulated up to the date of death are referred to as their "Estate". The gross estate is reported on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, if certain dollar criteria are met. See IRM 21.7.5.4.1, Form 706 Procedures.

• The other common type of "Estate" is a decedent’s estate. It is also created with the death of the taxpayer and remains open until the final distribution of the assets of the estate to the heirs and other beneficiaries. Income that is received after the date of death must be reported on Form 1041, U. S. Fiduciary Income Tax Return (for Estates and Trusts), if there is gross income of $600 or more in the taxable year, or if any beneficiary is a non-resident alien. (See IRM 21.7.4.4.1.1.1,Domestic Decedents and Bankruptcy Estates.)

(5) The Estate and Gift Tax Program toll-free telephone number, 1-866-699-4083, is available for account calls (pertaining to Form 706 and Form 709 only) from 8:00 a.m. until 4:00 p.m., Eastern Time, Monday through Friday. Route Estate and Gift account calls as follows:

• Provide the taxpayer with the Estate and Gift toll-free telephone number, 1-866-699-4083, then transfer the caller to extension 90281, or if you are a site with Infrastructure Upgrade Project (IUP) transfer to 3020, or

• Offer to prepare Form e-4442/4442, Inquiry Referral, for routing to Estate and Gift at the Cincinnati campus via fax at 1-855-386-5128.

(6) International Estate and Gift tax account calls from taxpayers located within the U.S. and certain countries that can call toll-free numbers, will call 1-866-699-4083. International Estate and Gift taxpayers located outside the U.S. may call 1-859-669-2349 (not a toll-free number) for account calls (pertaining to Form 706-NA and Form 709 only). This telephone number goes to voice mail and the messages are checked daily. The International email address is sbse.eg.intl@irs.gov, and can be given to international callers located outside the U.S.

(7) Calls relating to estate and gift tax law issues (non-account related) cannot be transferred by all call sites. However, if your system allows you to transfer the call, transfer to 92194 (English) and 92195 (Spanish), or if your site is using the IUP numbers transfer to 3013 (English) and 3014 (Spanish). Otherwise, advise the taxpayer that you are unable to transfer them and that they must call back on 1-800-829-1040. Regular hours of operation for tax law type of calls: M-F 7:00 a.m. until 7:00 p.m., taxpayer's local time. Alaska and Hawaii will follow Pacific Time.

(8) For all other Estate type questions (i.e., Form 1041) the taxpayer should call 1-800-829-4933, Business & Speciality Tax Help Line. However, if your system allows you to transfer the call, transfer to 92030 (English) and 92031 (Spanish) for account type questions, sites using IUP TTG numbers transfer to 1030 (English) and 1031 (Spanish). For tax law type calls transfer to 92194 (English) and 92195 (Spanish), for sites using IUP TTG numbers transfer to 3013 (English) and 3014 (Spanish).

(1) To ensure quality service, Estate and Gift Tax employees can provide the name and extension number of the Estate and Gift campus employee assigned to the taxpayer’s case when transferring the customer to the correct extension.

(1) Forward requests for deferment of payment of federal taxes to the appropriate Collection Advisory group for the geographic area in which the taxpayer is located. See Pub 4235, Collection Advisory Group Addresses, for the current address listing. However, if the tax due is a gift tax reportable on Form 709, send Form 1127 to:
Department of the Treasury Internal Revenue Center
Cincinnati, OH 45999

(2) Process Form 1127, Application for Extension of Time for Extension of Time for Payment of Tax Due to Undue Hardship, as follows:

(1) Form 706 must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate plus adjusted taxable gifts and specific exemption, exceed certain limitations. For decedents dying between 1987 and 1997, Form 706 was required if the total of these amounts exceeded $600,000. The Taxpayer Relief Act of 1997 (TPRA), and most recently PL 107-16, Economic Growth and Tax Relief Reconciliation Act of 2001, see Exhibit 21.7.5-1.

(2) Return and tax are due nine months after date of death, unless an extension of time for filing and/or payment (Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes), has been granted. Additional information on extensions of time to pay can be found in IRM 4.25.2, Campus Procedures For Estate Tax.

(3) Route claims and/or amended returns involving non-resident U.S. citizens to Cincinnati Campus through local routing procedures.

(4) Form 706 is filed under the decedent's Social Security Number (SSN). When researching IDRS, input a "V" behind the decedent's SSN (i.e., 000-00-0000V). The MFT is 52 and the tax period consists of six zeros (000000). Although the return is filed under the decedent's SSN, research via BMF command codes such as BMFOL and BRTVU. Also, input a "W" behind the decedent's SSN to research accounts on the invalid segment.

(1) Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, is filed by estate of a nonresident who is not a U.S. citizen.

(2) A nonresident not a citizen decedent is a decedent who is neither domiciled in, nor a citizen of, the United States at the time of death.

(3) The estate tax is imposed on the transfer of the decedent's taxable estate, rather than on the receipt of any part of it.

(4) For purposes of this form, a U.S. citizen who was a resident of a U.S. Territory at the time of his death is considered a "nonresident - not a citizen of the United States", but only if such person acquired U.S. citizenship solely as a result of:

1. His/her being a citizen of such territory, or

2. His/her birth or residence within such territory

(5) The executor of the estate must file Form 706-NA if, at the date of death, the value of the decedent's gross estate located in the United States under Internal Revenue Code situs rules exceeds the filing limit. The filing limit is $60,000, which is reduced by the sum of:

1. The gift tax specific exemption (IRC section) allowed with respect to gifts made between September 9, 1976, and December 31, 1976.

2. The total taxable gifts made after December 31, 1976, that are not included in the gross estate.

   Note: For the estates of decedents dying after November 10, 1988, the estate tax is computed using the unified rate schedule in IRC 2001(c).

(6) Form 706-NA is due 9 months after the date of decedent's death, unless an extension of time for filing and/or payment was granted using Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes.

(7) Only E&G at Campus Compliance Operations, Cincinnati (CCOC) can approve Form 706-NA extension of time for filing.

1. The extension may be granted even though an application is made later than 9 months from the date of death.

2. However, unless the personal representative is abroad, the extended due date for filing the estate tax return may not be later than 15 months from the date of the decedent's death.

(8) The MFT for Form 706-NA is 52 and the tax period is always 000000.

(9) Both original and amended Form 706-NA, along with correspondence involving the form, are filed and worked by the Estate and Gift Tax team located at the Cincinnati Campus.

(10) The tax is due when the return is filed unless deferred payment under IRC 6161(a) or IRC 6163(b) has been granted. For more information, see IRM 3.12.263.13, Section 01 Data, Form 706-NA General Information.

(11) Form 706-NA filers do not have the same privilege that Form 706 filers have to make installment payments for the balance due under IRC 6166.

1. The balance due must be paid within 9 months after the decedent's death unless an extension of time to pay was granted.

2. In that case, they must attach a copy of the approved Form 4768 to Form 706-NA.

(12) Payment must be made by check or money order payable to the United States Treasury for the face value in U.S. dollars.

(13) Cincinnati E&G is the only function that can issue a transfer certificate or an International Closing Letter.

1. If no TIN is specified, research CC NAMES and NAMEI to locate an SSN or ITIN using a "W" or a "V" at the end of the TIN.

2. If the account has an unreversed TC 420 and the status is higher than 08, route correspondence and Audit Information Management System (AIMS) print to CCOC / E&G on Form 3210.

3. If the account has an unreversed TC 420 and status is lower than 06, explain to the taxpayer that the Service has nine months from the date the return is processed to provide a closing letter. If more than 9 months have passed, refer to CCOC / E&G on Form 3210.

4. If TC 421 is posted on the account and if the account is paid in full (no balance due), request the original return from Files using the controlling DLN and mail the taxpayer a photocopy of the closing letter that is attached to the closed Form 706-NA.

Reminder: Refile the complete 706-NA package.

5. If no return is located, or no TIN is located on Master File, forward Form 706-NA. for processing.

(14) Do not send payment tracers, penalty abatement claims, or mixed entity cases to BMF Classification; these cases are worked by E&G only.

(1) The Executor of an estate (if decedent at time of death was a citizen or resident of the U.S.) files Form 706-A to report sale or cessation of the qualified use of farm or closely held business property at its farm or business use (qualified use) value rather than its fair market value. (See IRC Section 2032A.) The actual election is made by the Executor on Form 706, Schedule A-1. (See Form 706-A Instructions.) Once made, the election cannot be revoked.

(2) An additional tax is imposed if both criteria below are met:

• Disposition or cessation of qualified use was before death of qualified heir.

• Disposition or cessation was within 10 years after decedent's death.

(3) Additional tax is reported by an heir on Form 706-A, which must also be filed and paid if there was any involuntary conversion or exchange of the specially valued property (even if conversion or exchange was nontaxable). Form 706-A is due within six (6) months after taxable disposition or cessation of qualified use. An extension of time to file of up to six months can be requested by filing Form 4768.

(1) Tax is imposed on distributions and certain terminations of interests in trusts, which are subject to the GST tax.

(2) Form 706–GS(D), Generation-Skipping Transfer Tax Return For Distributions, and Form 706–GS(T), Generation-Skipping Transfer Tax Return For Terminations, are processed as MF returns.

(3) All Form 706-GS(T) and Form 706-GS(T) claims for tax decreases or increases are Category A and are routed to Estate and Gift Tax Operation. Estate and Gift follows IRM 21.7.5.4.1.8 or IRM 21.7.5.4.1.9 for adjustment procedures.

(1) Trustees or designated filers of a Qualified Domestic Trust (QDT) use Form 706-QDT to figure and report the estate tax due on certain distributions from the QDT. Amount of tax on the value of the property remaining in the QDT on the date of the surviving spouse's death must also be figured.

(2) A QDT applies only in those situations where a decedent's surviving spouse is not a U.S. citizen. A QDT is any trust that qualifies for an estate tax marital deduction under IRC 2056A, and that also meets the following requirements:

• Trust instrument requires at least one trustee be a citizen of the U.S. or a domestic corporation.

• Trust instrument requires that no distribution of corpus (the principal of a fund or estate as distinct from income or interest) from the trust may be made, unless that trustee has the right to withhold from distribution, QDT tax imposed on distribution.

• QDT election has been made for the trust by the executor of estate of decedent.

• The requirements of all applicable regulations have been met.

(3) If the surviving spouse is a beneficiary of more than one QDT from a single decedent and that decedent's executor has so elected, designated filer selected by the executor is liable for filing the return and paying the tax.

(4) A taxable distribution (taxable event) with respect to a QDT is any of the following:

• Any distribution from a QDT before death of the surviving spouse, except distributions of income to surviving spouse and any distributions made to surviving spouse on account of hardship

• Death of surviving spouse

• Failure of trust to qualify as a QDT

(5) Form 706-QDT is an annual return due on or after January 1, but not later than April 15 of the year following any calendar year in which taxable distributions are made. If surviving spouse has died, Form 706-QDT must be filed within nine months following date of death.

(6) Form 4768 is used to request an extension of time to file.

(1) Form 706-D, United States Additional Estate Tax Return Under Code Section 2057, was made historical in 2013. The Qualified Family-Owned Business Interest provisions were repealed and references to it in the Code were removed by Section 221(a)(97).

(2) Form 706-D was used to report and pay additional estate tax (recapture tax) required by IRC 2057 when certain "taxable events" occur with respect to a qualified family-owned business interest (QFOBI) received by a qualified heir. It is a result of RRA 98. (For definition and examples of taxable events, see the Form 706-D instructions.)

(3) Each qualified heir assumed personal liability for a portion of the additional tax imposed by IRC 2057 with respect to his/her interest in a QFOBI for which a deduction was taken on Form 706 filed for decedents dying after December 31, 1997, and before January 1, 2004. If a taxable event occurs, or there is an involuntary conversion or exchange of a QFOBI, Form 706-D must be filed.

(4) If a qualified heir reinvests all of the involuntary conversion proceeds in qualified replacement property, or if the qualified heir exchanges qualified property solely for qualified exchange property, then there is no additional estate tax. However, the qualified heir must complete Form 706-D (even though there is no tax) to notify IRS that the involuntary conversion or exchange took place.

(5) Form 706-D is due within six months after the taxable disposition, disqualifying act, or cessation of qualified use of the QFOBI, unless an extension of time has been granted. Form 4768 is used to request an extension of time to file. Circle "Form 706-D" at the top. Form 706-D is filed at the same campus where the Form 706 for the decedent's estate was filed. Interest is due on the tax on Form 706-D from the due date of Form 706.

(6) The tax period is determined from the earliest date shown on Schedule A, Form 706-D, Column C.

(7) Forms 706-D are processed NMF as MFT 53, tax class 6, document code 84, blocking series 650–699. Amended Forms 706-D are Category A and must be referred to Estate and Gift for any adjustment action. (Follow standard NMF procedures and IRM 21.7.12, Non-Master File (NMF) Adjustments, to adjust tax, penalty, and interest.) The volume of Forms 706-D is extremely minimal.

(1) Form 709 is used to report transfers of real or personal property subject to the federal gift and GST taxes. All gift and GST taxes are computed and filed on a calendar year basis. The tax is imposed on the donor, the person giving the gift. The donee is the recipient of the gift.

(2) Form 709 is due on or after January 1, but no later than April 15 of the year following the calendar year when the gifts were made. If donor dies during the year gifts were made, executor must file Form 709 not later than the earlier of:

• Due date (including extensions) of donor's estate tax return (Form 706)

• April 15 of year following calendar year the gifts were made

(3) Form 709 is required for the following:

• Gifts of present interests in property to a donee other than a spouse exceeding the annual exclusion. (See Form 709 Instructions for information on present interest.) Based on TPRA (1997), the annual exclusion is indexed in $1,000 increments based on cost of living adjustments for 1998 and subsequent. See the Exhibit 21.7.5-1 for the annual exclusion amount:

• Gifts of present interests in property to a spouse who is not a citizen of the U.S. that exceed the amount in the table below:

For gifts made during calendar year	Annual Exclusion Amount
2003	112,000
2004	114,000
2005	117,000
2006	120,000
2007	125,000
2008	128,000
2009	133,000
2010	134,000
2011	136,000
2012	139,000
2013	143,000
2014	145,000
2015	147,000
2016	148,000

• Gifts of future interests in property to a donee (See Form 709 Instructions for information on future interests.)

(4) Form 709 is not required for outright gifts to a spouse who is a U.S. citizen regardless of the amount of gifts. Also, Form 709 is not required if the only gifts made during the year were deductible as gifts to charities, as long as the entire interest was transferred. If only a partial interest was transferred or the transfer was to someone other than a charity, Form 709 must be filed.

(5) Transfers not subject to the gift tax are:

• Transfers to political organizations

• Payments which qualify for educational and medical exclusion

• Disclaimers, a complete refusal to accept a property interest (Form 709 Instructions have additional information on disclaimers.)

(6) Only individuals are required to file gift tax returns. If a trust, estate, partnership, or corporation makes a gift, the individuals, beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes. Gifts made to an individual are not taken as deductions on the donor’s individual income tax return and they are not included as income on the recipient’s income tax return. Only income derived from gifts is subject to income tax.

(1) Form 709-A, United States Short Form Gift Tax Return, was obsoleted effective October 2003. If you receive a current Form 709-A, return it to the taxpayer with the appropriate letter, advising the taxpayer that the form is obsolete and to file Form 709.

(2) Prior to October 2003, Form 709-A was filed by certain married couples instead of Form 709 to report non-taxable gifts they consented to split. A joint Form 709-A was not allowable.

(3) Form 709-A was filed if all of the following requirements were met:

1. Taxpayer was a U.S. citizen or resident and married during the entire year to same individual, who must also be a U.S. citizen or resident.

2. The only gifts, other than qualified transfers to a third party, consist entirely of present interests in tangible personal property, cash, stocks and bonds listed on a stock exchange, or U.S. savings bonds.

3. Gifts to any one third-party donee (other than gifts for tuition or medical care) during calendar year, did not total more than $22,000.

4. A gift of terminable interest was not made to spouse during calendar year.

5. Spouse did not make gifts during calendar year to any of donees listed on taxpayer's Form 709-A, did not make gifts of terminable interest to taxpayer, did not make gifts (other than tuition or medical care) of over $11,000 to any other donee, and did not make gifts of any future interest to any other donee.

6. Both spouses agreed to split all of gifts that either one made during calendar year.

(4) Form 709-A was a calendar year return due on or after January 1, but not later than April 15 of the year following the year the nontaxable split gifts were made. An extension of time to file a calendar year income tax return also extended the time to file Form 709-A.

(5) The Estate and Gift tax examiner employee must input TC 290 $.00 in appropriate BS to release the "–A" freeze on amended or corrected returns.

(1) Sec. 101 of PL 107-134, Victims of Terrorism Tax Relief Act of 2001, amended IRC 692(relating to income taxes of members of Armed Forces on death) to include specified terrorist victims by adding (d) (4). This section defines a "specified terrorist victim" to mean any decedent who:

1. Dies as a result of wounds or injury incurred as a result of the terrorist attacks against the U.S. on April 19, 1995, or September 11, 2001, or

2. Dies as a result of illness incurred as a result of an attack involving anthrax occurring on or after September 11, 2001, and before January 1, 2002.

(2) Sec. 103 addresses the Estate Tax provisions of PL 107-134 of the bill. IRC 2201 was amended to provide special rates for qualified decedents, unless the executor elects not to have this section apply.

(3) "Qualified decedent" means any specified terrorist victim (as defined in IRC 692(d)(4)) or any citizen or resident of the U.S. dying while in active services of the Armed Forces of the U.S., if they:

1. Were killed in action while serving in a combat zone, as determined under Section 112(c), or

2. Died as a result of wounds, disease, or injury suffered while serving in a combat zone (as determined under Section 112 (c)), and while in the line of duty, by reason of a hazard to which such decedent was subjected as an incident of such service.

(4) The provisions under IRC 2201 also apply to Form 706-NA, which is processed at the Cincinnati Campus. This situation could arise if, for example, a foreign national died in the attacks and had U.S. holdings subject to the estate tax.

(5) The Military Family Tax Relief Act of 2003 amended IRC 2201 (b) to include any astronaut whose death occurs in the line of duty and applies to the estate of decedents dying after December 31, 2002. This includes the Columbia Space Shuttle Heroes.

(1) The following special rate schedule, Rate Schedule Under the Victims of Terrorism Tax Relief Act of 2001, must be used for qualified decedents:

(2) Tentative tax is reduced by the tax that would have been payable on adjusted taxable gifts, if any. It is also computed using the rate schedule above.

(3) Credits against the tax, including the unified credit under IRC 2010 (computed using the IRC 2001(c) rate schedule), and the State death tax credit under IRC 2011, then apply to reduce or eliminate the amount of estate tax payable.

(4) The statute of limitations for claiming a refund for the estates of victims of the Oklahoma City bombing was waived for one year from the date of enactment of this bill. Refunds of credits were allowed if claims were filed before the close of the one-year period beginning January 23, 2002, and ending on January 22, 2003. Procedures for processing amended returns with expired ASED/RSED are provided in IRM 21.7.5.5.5.

(1) Original or amended Forms 706 filed under the Victims of Terrorism Tax Relief Act of 2001 are processed at the Cincinnati Campus. Original Form 706 should be mailed to the Cincinnati Submission Processing Center. Amended Form 706 filed under the Victims of Terrorism Tax Relief Act of 2001 must be mailed to:

Estate and Gift Tax Operation
201 W. Rivercenter Blvd.
Covington, KY 41011
Attention: Stop 824G

(2) If amended Killed in Terrorist Activities (KITA) Form 706 and Form 706–NA are received at any other campus, transfer the case using Form 3210, Document Transmittal, to the Estate and Gift Tax Operation at the address above.

(3) Write one of the following across the top of the first page of each return:

• KITA - Oklahoma City

• KITA - 911

• KITA - Anthrax

• IRC 2201

(4) Original KITA returns are coded with Computer Condition Code (CCC) "B". This allows the tax to be computed using the special rate schedule.

(1) Expedite all processing of KITA claims and returns.

(2) KITA returns must include a copy of the death certificate as proof of death.

(3) All KITA cases must be controlled on IDRS within three business days after receipt in Estate and Gift, using IDRS category code "KITA".

(4) All contact with the executor/surviving spouse must be made through the appropriate, designated employee.

(5) Taxpayer inquiries on KITA cases must receive a reply within three (3) business days.

(6) All time expended in support of the KITA program is reported under Program Code 82385. This code is valid for all functions.

(1) The statute of limitations for claiming a refund for the estates of victims of the Oklahoma City bombing was waived for one year beginning on January 23, 2002, (the date of enactment of this bill) and ending on January 22, 2003. Refunds or credits are allowed if claims are filed before the close of the one-year period.

(2) Additional information can be found in Publication 3920, Tax Relief for Victims of Terrorist Attacks, and IRM 21.6.6.3.22, Federal Income Tax Forgiveness for Certain United States (U.S.) Military and Civilian Employees and Other Individuals.