Estate Tax Form, Instructions Finalized for 2010; Due September 19

The IRS on September 8 posted the instructions for Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, for decedents dying in 2010. For most 2010 decedents, the due date is September 19. The form itself was posted on September 3, but without instructions.

For decedents who died between January 1, 2010, and December 16, 2010, Form 706 (and payment of estate and/or generation-skipping transfer tax) is due on September 19, 2011. For decedents who died between December 17, 2010, and December 31, 2010, the form and tax payment are due within nine months after the decedent’s death. Executors can request an extension of time to file and pay the tax due by filing Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes.

The request for an extension of time to pay is made on a separate section of Form 4768 from the section of the form for requesting the extension of time to file. In addition, even though the six-month extension to file is automatic, the extension of time to pay the estate tax due is not automatic. Each estate’s executor must state a reason why the extension is needed and show reasonable cause in order to obtain an extension of time to pay the estate tax.

Executors of estates of decedents who died in 2010 have a choice to elect to apply the Code as if the estate tax had not been reinstated by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312). If an executor makes this election, the estate will not be subject to estate tax and should not file Form 706. Instead, the election is made on Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, which is due November 15, 2011. However, the final version of Form 8939 has not been released, nor have its instructions, which will explain what documentation must be attached.

Form 706 must be filed by the executor of the estate of any U.S. citizen or resident who died in 2010 if the gross estate, plus adjusted taxable gifts and specific exemption, exceeds $5 million, unless the executor makes the election under Sec. 1022. Once made, the Sec. 1022 carryover basis election is irrevocable, except as provided in Notice 2011-66.

All Forms 706 are filed with the IRS Service Center in Cincinnati.

In an Aug. 8 letter to the IRS, Patricia Thompson, chair of the AICPA’s Tax Executive Committee, asked that the due dates for Forms 706 and 8939 be postponed until 90 days after the release of whichever of these forms and instructions is issued last. This would “allow a reasonable period of time for the preparation and filing of either 2010 Form 706 or 2010 Form 8939,” Thompson wrote. The AICPA has not received a reply to this request.