For decedent’s dying in 2022, the following amounts are applicable:
Effective July 8, 2022, Rev. Proc. 2022-32 provides a simplified method for certain estates to obtain an extension of time to file a return on or before the fifth anniversary of the decedent’s death to elect portability of the deceased spousal unused exclusion (DSUE) amount.
The gross estate includes all property in which the decedent had an interest (including property outside the United States).
It also includes:
Certain transfers made during the decedent’s life without an adequate and full consideration in money or money’s worth,
The includible portion of joint estates with right of survivorship,
The includible portion of tenancies by the entirety,
Certain life insurance proceeds (even though payable to beneficiaries other than the estate),
Property over which the decedent possessed a general power of appointment,
Dower or curtesy (or statutory estate) of the surviving spouse, and
Community property to the extent of the decedent’s interest as defined by applicable law.
The executor of a decedent’s estate uses Form 706 to figure the estate tax imposed by chapter 11 of the Internal Revenue Code. This tax is levied on the entire taxable estate and not just on the share received by a particular beneficiary. Form 706 is also used to figure the generation-skipping transfer (GST) tax imposed by chapter 13 on direct skips (transfers to skip persons of interests in property included in the decedent’s gross estate).
You must file Form 706 to report estate and/or GST tax within 9 months after the date of the decedent’s death.
If you find that you must change something on a return that has already been filed, you should:
File another Form 706;
Enter “Supplemental Information” across the top of page 1 of the form; and
Attach a copy of pages 1, 2, 3, and 4 of the original Form 706 that has already been filed
If you have already been notified that the return has been selected for examination, you should contact a tax attorney with federal estate tax experience.
Section 6651 provides for penalties for both late filing and for late payment unless there is reasonable cause for the delay. The law also provides for penalties for willful attempts to evade payment of tax. The late filing penalty will not be imposed if the taxpayer can show that the failure to file a timely return is due to reasonable cause.
Section 6662 provides a 20% penalty for the underpayment of estate tax that exceeds $5,000 when the underpayment is attributable to valuation understatements. A valuation understatement occurs when the value of property reported on Form 706 is 65% or less of the actual value of the property.
This penalty increases to 40% if there is a gross valuation understatement. A gross valuation understatement occurs if any property on the return is valued at 40% or less of the value determined to be correct.
Penalties also apply to late filing, late payment, and underpayment of GST taxes.
A formal estate tax closing letter can be requested 9 months after Form 706 is filed.
Instead of an ETCL, the executor of the estate may request an account transcript, which reflects transactions including the acceptance of Form 706 or the completion of an examination. Account transcripts are available online to registered tax professionals using the Transcript Delivery System (TDS) or to authorized representatives making requests using Form 4506-T.
Certain estates are required to report to the IRS and the recipient, the estate tax value of each asset included in the gross estate within 30 days of the due date (including extensions) of Form 706 or the date of filing Form 706 if the return is filed late. The basis of certain assets when sold or otherwise disposed of must be consistent with the basis (estate tax value) of the asset when it was received by the beneficiary. To satisfy the consistent basis reporting requirements, the estate must file Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent.