Looking for a Form 706 Templates? Download it for free!

Instructions for Form 706-D

Department of the Treasury

Internal Revenue Service

(October 2000)

United States Additional Estate Tax Return Under Code

Section 2057

Section references are to the Internal Revenue Code unless otherwise noted.

individual's spouse, or a parent of such

Statute of Limitations

General Instructions

individual; and

The additional estate tax may be

The spouse, widow, or widower of any

assessed until 3 years after the IRS

Purpose of Form

lineal descendent described above.

receives notice that the qualified heir

A legally adopted child of an individual

If an estate claimed a qualified

disposed of the QFOBI, qualified use

is treated as a child of that individual by

family-owned business interest (QFOBI)

ceased, or a disqualifying act occurred.

blood.

deduction on Schedule T of Form 706,

However, if the property was disposed

United States Estate (and

of in an involuntary conversion or in an

Taxable Events

Generation-Skipping Transfer) Tax

exchange, the tax may be assessed up to

Return, each qualified heir assumed

3 years after the IRS receives notice that

Section 2057 imposes an additional

personal liability for a portion of the

the property was replaced or will not be

estate tax when there is a “taxable

reduction in estate tax resulting from the

replaced. See section 2032A(f) for details.

event.” A taxable event occurs if, within

QFOBI deduction.

10 years of the decedent's death and

Section 2057 imposes an additional

Lien

before the qualified heir's death, one of

estate tax on a qualified heir when certain

the following events occurs:

If the estate elected to take the QFOBI

“taxable events” occur with respect to a

1. The qualified heir disposes of any

deduction, section 6324B establishes a

QFOBI received by the qualified heir. The

portion of his or her interest in the

special lien against the QFOBI equal to

qualified heir uses Form 706-D to report

qualified family-owned business, other

the adjusted tax difference attributable to

and pay the additional estate tax. A

than by a disposition to a member of the

such an interest.

qualified heir also uses Form 706-D to

qualified heir's family or through a

report certain nontaxable events.

qualified conservation contribution under

Definitions

section 170(h);

Who Must File

2. The qualified heir ceases to meet

Ownership rules. Ownership of the

material participation requirements (i.e., if

business interest may either be direct, or

Each qualified heir must file a Form 706-D

neither the qualified heir nor any member

indirect through a corporation,

to report:

partnership, or a trust. An interest owned,

of his or her family has materially

A taxable event. See Taxable Events

directly or indirectly, by or for such an

participated in the trade or business for

below.

at least 5 years of any 8-year period (see

entity, is considered owned

An involuntary conversion or exchange

page 2 for a discussion of material

proportionately by or for the entity's

of a QFOBI.

participation));

shareholders, partners, or beneficiaries.

A transfer to a family member.

A person is the beneficiary of a trust only

3. The principal place of business of

A qualified conservation contribution.

if he or she has a present interest in the

the qualified family-owned business

The loss of U.S. citizenship if the

trust.

ceases to be located in the United States;

QFOBI passes or is acquired or held in a

For more information on ownership

4. The qualified heir loses United

qualified trust.

rules, see the Instructions for Form 706.

States citizenship and neither a qualified

Qualified heir. A person is a qualified

trust was created nor was a security

When To File and Pay

arrangement made. (See page 4 for more

heir of property if he or she is a member

information.)

of the decedent's family and acquired or

File Form 706-D and pay any additional

received the QFOBI from the decedent.

Note: For special rules for involuntary

tax due within 6 months after the taxable

conversions and exchanges, see the

If a qualified heir disposes of any

disposition, disqualifying act, or cessation

instructions for Schedule B on page 3.

QFOBI to any member of his or her

of qualified use of the QFOBI, unless an

family, that person will then be treated as

extension of time has been granted.

As under section 2032A, the 10-year

the qualified heir with respect to that

recapture period may be extended for a

Use Form 4768, Application for

interest.

period of up to 2 years if the qualified heir

Extension of Time To File a Return and/or

For the purpose of the QFOBI

does not begin to use the property for a

Pay U.S. Estate (and Generation-

period of up to 2 years after the

deduction, a qualified heir also includes

Skipping Transfer) Taxes, to apply for an

decedent's death. (See Two-Year Grace

any active employee of the trade or

extension of time to file. Circle “Form

Period on page 2.)

business to which the QFOBI relates, if

706-D” at the top of the Form 4768.

the employee has been employed by the

Only one additional estate tax will be

Make the check or money order

trade or business for a period of at least

imposed with respect to any one interest

payable to the United States Treasury

10 years before the date of the decedent's

in the qualified family-owned business.

and write “Form 706-D” and the qualified

death.

For example, if additional estate tax is

heir's social security number on the check

imposed for early cessation of use of the

Member of family. The term member of

or money order.

QFOBI, a second additional estate tax will

the family includes only:

not be imposed for a subsequent early

Where To File

An ancestor (parent, grandparent, etc.)

disposition of the same part of the QFOBI.

of such individual;

File Form 706-D with the Internal

A sale or disposition, in the ordinary

The spouse of such individual;

Revenue Service office where the Form

course of business, of assets such as

The lineal descendent (child, stepchild,

706 for the decedent's estate was filed.

inventory or a piece of equipment used in

grandchild, etc.) of the individual, the

the business (e.g., the sale of crops or a

Cat. No. 28479R

Instructions For Form 706-D - United States Additional Estate Tax Return Under Code Section 2057 - 2000

Related Articles

Related forms

Related Categories