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Printable Form 706 Mesquite Texas: What You Should Know

The IRS Form 706 is considered proof that there existed on December 31 of the year in which the decedent died an estate of the decedent in trust for beneficiaries named in the tax return. If none of the decedent's specified beneficiaries has filed a return for the year of death, then a form 706 is required, because the beneficiary named on the tax return is the qualified heir as of that year (Section 2054). Under Section 2054, the “specified beneficiary's tax liability” means the tax on the estate payable under tax law. This tax is normally calculated at a rate of 0 percent, if a return has not been filed within 7 years of the date of death or if the taxpayer dies without being able to furnish an appropriate return. The tax liability is also equal to the amount of the last taxable distribution before being paid which is a benefit received on the decedent's death. Example 3-10. The decedent's family includes the decedent's mother. The decedent left 500,000 in trust for each of her four grandchildren. For tax purposes, 500,000 is treated as being in trust for both the mother and the four grandchildren. Because the 500,000 is in trust for only one of the four grandchildren, the mother's tax liability (in the year of death) is computed to the amount of the 500,000 received at the time of the decedent's death on December 31, 1997 (in trust for the father, the mother, her children, and the four grandchildren) and is equal to the total amount of tax which would have been payable on the 500,000 if there had been no distribution made to the four grandchildren. Under the Section 2024 guidelines (which have been adopted by Congress), Section 2054 provides that the estate of the decedent's estate is bound by, or may be charged with and is liable for, the full portion of the tax incurred on the estate (up to 600,000) when the estate's tax basis is determined on its basis as of the date of death for the purposes of section 2053.

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