Form 706: U.S. Estate (and Generation-Skipping Transfer) Tax Return
United States Estate (and Generation-Skipping Transfer) Form 706. The IRS uses a Tax Return form to compute estate taxes for executors of decedents, as per Chapter 11 of the Internal Revenue Code (IRC). The tax applies to the whole taxable estate, not just the beneficiary’s part. In addition, executors utilize Form 706 to compute the IRC Chapter 13 generation-skipping transfer tax (GSTT).
For estates valued over $12.92 million in 2023 (or $13.61 million in 2024), executors utilize Form 706 to assess tax obligations.
Form 706 also helps executors appraise an estate before distributing assets to beneficiaries per the decedent’s will or trust. The IRS values inheritances on a step-up basis. That adjusts the cost base to the fair market value of the inherited property after death.
The stepped-up valuation approach helps heirs reduce capital gains taxes. Limiting estate administrative activities makes the appraisal process cleaner.
Who can file?
Every U.S. citizen or resident’s executor must file Form 706:
- Decedents with gross estate-adjusted taxable gifts and exemptions above the exclusion amount: $12.92 million in 2023 ($13.61 million in 2024) or
- Whose executor transfers the “deceased spousal unused exclusion” (DSUE) to the surviving spouse, regardless of gross estate size?
Add 1, 2, and 3 to see if the estate exceeds the exclusion.
- The decedent’s adjusted taxable gifts after Dec. 31, 1976
- The entire particular exemption permitted under Section 2521 until its repeal by the Tax Reform Act of 1976 for decedent gifts after Sept. 8, 1976
- Gross estate value at death
The gross estate includes:
- Everything the deceased owned, including foreign real estate
- Certain decedent-related transfers are made without sufficient consideration Annuities
- Inclusive portion of combined estates with survivorship rights.
- The entire tenancy includes the relevant portion.
- Some life insurance proceeds
- Property within the decedent’s general appointment authority
- The surviving spouse’s dower or statutory estate
- The deceased had an interest in community property.
The IRS values estates using a stepped-up valuation.
Form 706 is available on the IRS website.
Related Forms
U.S. Form 706-NA calculates estate tax and GSTT liabilities for nonresident alien decedents.
Using Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions, compute GSTT taxes on trust distributions. Skippers who receive taxable trust distributions must calculate and submit the tax using document 706-GS(D).
A generation-skipping transfer tax (GST) applies to inheritances or gifts to individuals two or more generations below the grantor. An inheritance or gift goes to the “skip person.” Skip people can be anybody at least 37½ years younger than the grantor, not only a grandchild.
The GSTT applies to skip-person gifts and inheritances. This secures generational taxation. The GSTT has the same lifetime exemption as federal estate and gift taxes—$12.92 million in 2023 ($13.61 million in 2024).
Form 706-GS(D-1), Notification of Distribution From a Generation-Skipping Trust, requires trustees to report taxable distributions to skip individuals. The skip person must also get distribution tax information from trustees.
Where to Send Form 706
You must complete Form 706 to report estate or GSTT within nine months of death. Application for Extension of Time to Submit a Return and Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, Form 4768, grants an automatic six-month extension if you can’t submit Form 706.
Submit Form 706 to:
- Department of the Treasury, IRS, Kansas City, MO 64999
For private delivery services like DHL Express, FedEx, and UPS, mail Form 706 to:
- Internal Revenue Submission Processing Center, 333 W. Pershing Road, Kansas City, MO 64108
Use the following address to update Form 706, even if you use a private delivery service:
- IRSC, Attn: E&G, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915
Within nine months of death, estate tax and GSTT are required. Make checks payable to “United States Treasury” and write the decedent’s name, SSN, and “Form 706” on them. Consider paying online via the Electronic Federal Tax Payments System (EFTPS).
Does every estate file this form?
Not all estates need Document 706. The gross estate, adjusted taxable gifts, and tax exemption must exceed the filing maximum for the year of death to submit a form on behalf of a deceased individual.
How are IRS Forms 706 and 709 different?
An executor files IRS 706 to determine due taxes, whereas a person files IRS 709 to record gifts exceeding the yearly limit.
What causes estate tax returns?
Estates with yearly gross revenue over $600 must submit Form 1041, U.S. Revenue Tax Return for Estates and Trusts. The estate may pay quarterly estimated taxes.
Bottom Line
IRS 706, the United States Estate and Generation-Skipping Transfer Tax Return, reports a dead person’s estate for federal estate tax purposes. It details the decedent’s assets, deductions, and beneficiaries. Using it, the IRS calculates estate taxes that may be exempt from annual dollar increases.
Conclusion
- An executor uses document 706 to compute estate tax and generation-skipping transfer tax (GSTT) under Chapters 11 and 13 of the Internal Revenue Code (IRC).
- A dead U.S. citizen or resident whose gross estate, adjusted taxable gifts, and specified exemptions exceed $12.92 million in 2023 (adjusted to $13.61 million in 2024) must file document 706.
- Form 706-GS(D) calculates generation-skipping transfer tax on trust dividends.
