Enter the social security number assigned specifically to the decedent. You cannot use the social security number assigned to the decedent's spouse. If the decedent did not have a social security number, the executor should obtain one for the decedent by filing Form SS-5, Application for Social Security Card, with a local Social Security Administration office.

If there is more than one executor, enter the name of the executor to be contacted by the IRS. List the other executors' names, addresses, and SSNs (if applicable) on an attached sheet.

Use Form 8822, Change of Address, to report a change of the executor's address.

Only individual executors should complete this line. If there is more than one individual executor, all should list their social security numbers on an attached sheet.

If you elected alternate valuation on line 1, Part 3, Elections by the Executor, enter the amount you entered in the “Alternate value” column of item 12 of Part 5, Recapitulation. Otherwise, enter the amount from the “Value at date of death” column.

To figure the tentative tax on the amount on line 5, use Table A above.

Three worksheets are provided to help you compute the entries for these lines. You need not file these worksheets with your return but should keep them for your records. Worksheet TG—Taxable Gifts Reconciliation, below, allows you to reconcile the decedent's lifetime taxable gifts to compute totals that will be used for the line 4 worksheet below and the line 7 worksheet on page 5.

You must get all of the decedent's gift tax returns (Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return) before you complete Worksheet TG. The amounts you will enter on Worksheet TG can usually be derived from these returns as filed. However, if any of the returns were audited by the IRS, you should use the amounts that were finally determined as a result of the audits.

In addition, you must include in column b of Worksheet TG any gifts in excess of the annual exclusion made by the decedent (or on behalf of the decedent under a power of attorney) but for which no Forms 709 were filed. You must make a reasonable inquiry as to the existence of any such gifts. The annual exclusion for 1977 through 1981 was $3,000 per donee per year and $10,000 for years after 1981.

For tax years beginning after 1998 the annual $10,000 exclusion for gifts is indexed for inflation. For calendar year 2003, the annual exclusion for gifts is $11,000.

The applicable credit amount (formerly the unified credit), is $345,800 for the estates of decedents dying in 2003. The amount of the credit cannot exceed the amount of estate tax imposed.

If the decedent made gifts (including gifts made by the decedent's spouse and treated as made by the decedent by reason of gift splitting) after September 8, 1976, and before January 1, 1977, for which the decedent claimed a specific exemption, the unified credit (applicable credit amount) on this estate tax return must be reduced. The reduction is figured by entering 20% of the specific exemption claimed for these gifts.

Note: (The specific exemption was allowed by section 2521 for gifts made before January 1, 1977.)

If the decedent did not make any gifts between September 8, 1976, and January 1, 1977, or if the decedent made gifts during that period but did not claim the specific exemption, enter zero.

The estate of a decedent dying in 2003 must reduce by 50% the amount of the state death tax credit found in the table on page 6. This reduction is calculated on line 13.

You may take a credit on line 13 for estate, inheritance, legacy, or succession taxes paid as the result of the decedent's death to any state or the District of Columbia. However, see section 2053(d) and the related regulations for exceptions and limits if you elected to deduct the taxes from the value of the gross estate.

If you make a section 6166 election to pay the Federal estate tax in installments and make a similar election to pay the state death tax in installments, see Rev. Rul. 86-38, 1986-1 C.B. 296, for the method of computing the credit allowed with this Form 706.

If you have elected to extend the time to pay the tax on a reversionary or remainder interest, you may take a credit against that portion of the Federal estate tax for state death taxes attributable to the reversionary or remainder interest. The state death taxes must be paid and claimed before the expiration of the extended time for paying the estate tax.

The credit may not be more than 50% of the amount figured by using Table B on page 6, based on the value of the adjusted taxable estate. The adjusted taxable estate is the amount of the Federal taxable estate (line 3 of the Tax Computation) reduced by $60,000. You may claim an anticipated amount of credit and figure the Federal estate tax on the return before the state death taxes have been paid. However, the credit cannot be finally allowed unless you pay the state death taxes and claim the credit within 4 years after the return is filed (or later as provided by the Code if a petition is filed with the Tax Court of the United States, or if you have an extension of time to pay) and submit evidence that the tax has been paid. If you claim the credit for any state death tax that is later recovered, see Regulations section 20.2016-1 for the notice you are required to give the IRS within 30 days.

If you transfer property other than cash to the state in payment of state inheritance taxes, the amount you may claim as a credit is the lesser of the state inheritance tax liability discharged or the fair market value of the property on the date of the transfer.

For more details, see Rev. Rul. 86-117, 1986-2 C.B. 157.

You should send the following evidence to the IRS:

You may take a credit for Federal gift taxes imposed by Chapter 12 of the Code, and the corresponding provisions of prior laws, on certain transfers the decedent made before January 1, 1977, that are included in the gross estate. The credit cannot be more than the amount figured by the following formula:

For more information, see the regulations under section 2012. This computation may be made using Form 4808, Computation of Credit for Gift Tax. Attach a copy of a completed Form 4808 or the computation of the credit. Also attach all available copies of Forms 709 filed by the decedent to help verify the amounts entered on lines 4, 7, and 15. You can get Form 4808 on the IRS Web Site at www.irs.gov.

You may not use these bonds to pay the GST tax.

See the example on page 12 showing the use of Schedule B where the alternate valuation is adopted.

Unless you elect at the time you file the return to adopt alternate valuation as authorized by section 2032, you must value all property included in the gross estate on the date of the decedent's death. Alternate valuation cannot be applied to only a part of the property.

You may elect special use valuation (line 2) in addition to alternate valuation.

You may not elect alternate valuation unless the election will decrease both the value of the gross estate and the total net estate and GST taxes due after application of all allowable credits.

You elect alternate valuation by checking “Yes” on line 1 and filing Form 706. Once made, the election may not be revoked. The election may be made on a late filed Form 706 provided it is not filed later than 1 year after the due date (including extensions).

If you elect alternate valuation, value the property that is included in the gross estate as of the applicable dates as follows:

The property included in the alternate valuation and valued as of 6 months after the date of the decedent's death, or as of some intermediate date (as described above) is the property included in the gross estate on the date of the decedent's death. Therefore, you must first determine what property constituted the gross estate at the decedent's death.

As part of each Schedule A through I, you must show:

Distributions, sales, exchanges, and other dispositions of the property within the 6-month period after the decedent's death must be supported by evidence. If the court issued an order of distribution during that period, you must submit a certified copy of the order as part of the evidence. The IRS may require you to submit additional evidence if necessary.

If the alternate valuation method is used, the values of life estates, remainders, and similar interests are figured using the age of the recipient on the date of the decedent's death and the value of the property on the alternate valuation date.

The total value of the property valued under section 2032A may not be decreased from FMV by more than $840,000 for decedents dying in 2003.

Real property may qualify for the section 2032A election if:

For this purpose, adjusted value is the value of property determined without regard to its special-use value. The value is reduced for unpaid mortgages on the property or any indebtedness against the property, if the full value of the decedent's interest in the property (not reduced by such mortgage or indebtedness) is included in the value of the gross estate. The adjusted value of the qualified real and personal property used in different businesses may be combined to meet the 50% and 25% requirements.

If the gross estate includes an interest in a closely held business, you may be able to elect to pay part of the estate tax in installments.

The maximum amount that can be paid in installments is that part of the estate tax that is attributable to the closely held business. In general, that amount is the amount of tax that bears the same ratio to the total estate tax that the value of the closely held business included in the gross estate bears to the total gross estate.

You may also elect to pay GST taxes in installments. See section 6166(i).

For details of this election, see section 6163 and the related regulations.

Complete line 4 whether or not there is a surviving spouse and whether or not the surviving spouse received any benefits from the estate. If there was no surviving spouse on the date of decedent's death, enter “None” in line 4a and leave lines 4b and 4c blank. The value entered in line 4c need not be exact. See the instructions for “Amount” under line 5, below.

If you answered “Yes,” these assets must be shown on Schedule F.

Section 2044 property is property for which a previous section 2056(b)(7) election (QTIP election) has been made, or for which a similar gift tax election (section 2523) has been made. For more information, see the instructions on the back of Schedule F.

If you checked “Yes” for either 8a or 8b, you must complete and attach Schedule D and attach a Form 712, Life Insurance Statement, for each policy and an explanation of why the policy or its proceeds are not includible in the gross estate.

If you answered “Yes” to line 10, you must include full details for partnerships and unincorporated businesses on Schedule F (Schedule E if the partnership interest is jointly owned). You must include full details for the stock of inactive or close corporations on Schedule B.

Value these interests using the rules of Regulations section 20.2031-2 (stocks) or 20.2031-3 (other business interests).

A “close corporation” is a corporation whose shares are owned by a limited number of shareholders. Often, one family holds the entire stock issue. As a result, little, if any, trading of the stock takes place. There is, therefore, no established market for the stock, and those sales that do occur are at irregular intervals and seldom reflect all the elements of a representative transaction as defined by the term “fair market value” (FMV).

If you answered “Yes” to either 12a or 12b, you must attach a copy of the trust instrument for each trust.

You must complete Schedule G if you answered “Yes” to 12a and Schedule F if you answered “Yes” to 12b.

Check “Yes” if property passes to the surviving spouse under a maximum marital deduction formula provision that meets the requirements of section 403(e)(3) of the Economic Recovery Tax Act of 1981 (P.L. 97-34; 95 Stat. 305).

If you check “Yes” to line 14, compute the marital deduction under the rules that were in effect before the Economic Recovery Tax Act of 1981.

For a format for this computation, you should obtain the November 1981 revision of Form 706 and its instructions. The computation is items 19 through 26 of the Recapitulation. You should also apply the rules of Rev. Rul. 80-148, 1980-1 C.B. 207, if there is property that passes to the surviving spouse outside of the maximum marital deduction formula provision.

Before completing Schedule B, read the examples showing use of Schedule B where the alternate valuation is not adopted (see page 11) and adopted (see above).

If the total gross estate contains any stocks or bonds, you must complete Schedule B and file it with the return.

On Schedule B list the stocks and bonds included in the decedent's gross estate. Number each item in the left-hand column. Bonds that are exempt from Federal income tax are not exempt from estate tax unless specifically exempted by an estate tax provision of the Code. Therefore, you should list these bonds on Schedule B.

Public housing bonds includible in the gross estate must be included at their full value.

If you paid any estate, inheritance, legacy, or succession tax to a foreign country on any stocks or bonds included in this schedule, group those stocks and bonds together and label them “Subjected to Foreign Death Taxes.”

List interest and dividends on each stock or bond separately. Indicate as a separate item dividends that have not been collected at death, but which are payable to the decedent or the estate because the decedent was a stockholder of record on the date of death. However, if the stock is being traded on an exchange and is selling ex-dividend on the date of the decedent's death, do not include the amount of the dividend as a separate item. Instead, add it to the ex-dividend quotation in determining the fair market value of the stock on the date of the decedent's death. Dividends declared on shares of stock before the death of the decedent but payable to stockholders of record on a date after the decedent's death are not includible in the gross estate for Federal estate tax purposes.

If the stock or bond is unlisted, show the company's principal business office.

The CUSIP (Committee on Uniform Security Identification Procedure) number is a nine-digit number that is assigned to all stocks and bonds traded on major exchanges and many unlisted securities. Usually, the CUSIP number is printed on the face of the stock certificate. If the CUSIP number is not printed on the certificate, it may be obtained through the company's transfer agent.

List the fair market value (FMV) of the stocks or bonds. The FMV of a stock or bond (whether listed or unlisted) is the mean between the highest and lowest selling prices quoted on the valuation date. If only the closing selling prices are available, then the FMV is the mean between the quoted closing selling price on the valuation date and on the trading day before the valuation date.

To figure the FMV if there were no sales on the valuation date:

If no actual sales were made reasonably close to the valuation date, make the same computation using the mean between the bona fide bid and asked prices instead of sales prices. If actual sales prices or bona fide bid and asked prices are available within a reasonable period of time before the valuation date but not after the valuation date, or vice versa, use the mean between the highest and lowest sales prices or bid and asked prices as the FMV.

For example, assume that sales of stock nearest the valuation date (June 15) occurred 2 trading days before (June 13) and 3 trading days after (June 18). On those days the mean sale prices per share were $10 and $15, respectively. Therefore, the price of $12 is considered the FMV of a share of stock on the valuation date. If, however, on June 13 and 18, the mean sale prices per share were $15 and $10, respectively, the FMV of a share of stock on the valuation date is $13.

If only closing prices for bonds are available, see Regulations section 20.2031-2(b).

Apply the rules in the section 2031 regulations to determine the value of inactive stock and stock in close corporations. Send with the schedule complete financial and other data used to determine value, including balance sheets (particularly the one nearest to the valuation date) and statements of the net earnings or operating results and dividends paid for each of the 5 years immediately before the valuation date.

Securities reported as of no value, nominal value, or obsolete should be listed last. Include the address of the company and the state and date of the incorporation. Attach copies of correspondence or statements used to determine the “no value.”

If the security was listed on more than one stock exchange, use either the records of the exchange where the security is principally traded or the composite listing of combined exchanges, if available, in a publication of general circulation. In valuing listed stocks and bonds, you should carefully check accurate records to obtain values for the applicable valuation date.

If you get quotations from brokers, or evidence of the sale of securities from the officers of the issuing companies, attach to the schedule copies of the letters furnishing these quotations or evidence of sale.

See Rev. Rul. 69-489, 1969-2 C.B. 172, for the special valuation rules for certain marketable U.S. Treasury Bonds (issued before March 4, 1971). These bonds, commonly called “flower bonds,” may be redeemed at par plus accrued interest in payment of the tax at any Federal Reserve bank, the office of the Treasurer of the United States, or the Bureau of the Public Debt, as explained in Rev. Proc. 69-18, 1969-2 C.B. 300.

Code sections 2701-2704 provide rules for valuing certain transfers to family members.

Section 2701 deals with the transfer of an interest in a corporation or partnership while retaining certain distribution rights, or a liquidation, put, call, or conversion right.

Section 2702 deals with the transfer of an interest in a trust while retaining any interest other than a qualified interest. In general, a qualified interest is a right to receive certain distributions from the trust at least annually, or a noncontingent remainder interest if all of the other interests in the trust are distribution rights specified in section 2702.

Section 2703 provides rules for the valuation of property transferred to a family member but subject to an option, agreement, or other right to acquire or use the property at less than FMV. It also applies to transfers subject to restrictions on the right to sell or use the property.

Finally, section 2704 provides that in certain cases the lapse of a voting or liquidation right in a family-owned corporation or partnership will result in a deemed transfer.

These rules have potential consequences for the valuation of property in an estate. If the decedent (or any member of his or her family) was involved in any such transactions, see Code sections 2701 through 2704 and the related regulations for additional details.

All transfers (other than outright transfers not in trust and bona fide sales) made by the decedent at any time during life must be reported on the Schedule regardless of whether you believe the transfers are subject to tax. If the decedent made any transfers not described in the instructions above, the transfers should not be shown on Schedule G. Instead, attach a statement describing these transfers: list the date of the transfer, the amount or value of the transferred property, and the type of transfer.

Complete the schedule for each transfer that is included in the gross estate under sections 2035(a), 2036, 2037, and 2038 as described in the Instructions for Schedule G above.

In the “Item number” column, number each transfer consecutively beginning with 1. In the “Description” column, list the name of the transferee, the date of the transfer, and give a complete description of the property. Transfers included in the gross estate should be valued on the date of the decedent's death or, if alternate valuation is adopted, according to section 2032.

If only part of the property transferred meets the terms of section 2035(a), 2036, 2037, or 2038, then only a corresponding part of the value of the property should be included in the value of the gross estate. If the transferee makes additions or improvements to the property, the increased value of the property at the valuation date should not be included on Schedule G. However, if only a part of the value of the property is included, enter the value of the whole under the column headed “Description” and explain what part was included.

A power of appointment determines who will own or enjoy the property subject to the power and when they will own or enjoy it. The power must be created by someone other than the decedent. It does not include a power created or held on property transferred by the decedent.

A power of appointment includes all powers which are in substance and effect powers of appointment regardless of how they are identified and regardless of local property laws. For example, if a settlor transfers property in trust for the life of his wife, with a power in the wife to appropriate or consume the principal of the trust, the wife has a power of appointment.

Some powers do not in themselves constitute a power of appointment. For example, a power to amend only administrative provisions of a trust that cannot substantially affect the beneficial enjoyment of the trust property or income is not a power of appointment. A power to manage, invest, or control assets, or to allocate receipts and disbursements, when exercised only in a fiduciary capacity, is not a power of appointment.

If the decedent ever possessed a power of appointment, attach a certified or verified copy of the instrument granting the power and a certified or verified copy of any instrument by which the power was exercised or released. You must file these copies even if you contend that the power was not a general power of appointment, and that the property is not otherwise includible in the gross estate.

In general, you must include in the gross estate all or part of the value of any annuity that meets the following requirements:

These rules apply to all types of annuities, including pension plans, individual retirement arrangements, and purchased commercial annuities.

An annuity contract that provides periodic payments to a person for life and ceases at the person's death is not includible in the gross estate. Social Security benefits are not includible in the gross estate even if the surviving spouse receives benefits.

An annuity or other payment that is not includible in the decedent's or the survivor's gross estate as an annuity may still be includible under some other applicable provision of the law. For example, see Powers of Appointment above.

If the decedent retired before January 1, 1985, see Annuities Under Approved Plans on page 16 for rules that allow the exclusion of part or all of certain annuities.

The following rules relate to whether part or all of an otherwise includible annuity may be excluded. These rules have been repealed and apply only if the decedent either:

The amount excluded cannot exceed $100,000 unless either of the following conditions is met:

Generally, the entire amount of any lump sum distribution is included in the decedent's gross estate. However, under this special rule, all or part of a lump sum distribution from a qualified (approved) plan will be excluded if the lump sum distribution is included in the recipient's income for income tax purposes.

If the decedent was born before 1936, the recipient may be eligible to elect special “10-year averaging” rules (under repealed section 402(e)) and capital gain treatment (under repealed section 402(a)(2)) in computing the income tax on the distribution. For more information, see Pub. 575, Pension and Annuity Income. If this option is available, the estate tax exclusion cannot be claimed unless the recipient elects to forego the “10-year averaging” and capital gain treatment in computing the income tax on the distribution. The recipient elects to forego this treatment by treating the distribution as taxable on his or her income tax return as described in Regulations section 20.2039-4(d). The election is irrevocable.

The amount excluded from the gross estate is the portion attributable to the employer contributions. The portion, if any, attributable to the employee-decedent's contributions is always includible. Also, you may not compute the gross estate in accordance with this election unless you check “Yes” to line A and attach the name, address, and identifying number of the recipients of the lump sum distributions. See Regulations section 20.2039-4.

In describing an annuity, give the name and address of the grantor of the annuity. Specify if the annuity is under an approved plan.

List under “Debts of the Decedent” only valid debts the decedent owed at the time of death. List any indebtedness secured by a mortgage or other lien on property of the gross estate under the heading “Mortgages and Liens.” If the amount of the debt is disputed or the subject of litigation, deduct only the amount the estate concedes to be a valid claim. Enter the amount in contest in the column provided.

Generally, if the claim against the estate is based on a promise or agreement, the deduction is limited to the extent that the liability was contracted bona fide and for an adequate and full consideration in money or money's worth. However, any enforceable claim based on a promise or agreement of the decedent to make a contribution or gift (such as a pledge or a subscription) to or for the use of a charitable, public, religious, etc., organization is deductible to the extent that the deduction would be allowed as a bequest under the statute that applies.

Certain claims of a former spouse against the estate based on the relinquishment of marital rights are deductible on Schedule K. For these claims to be deductible, all of the following conditions must be met:

You may not deduct a claim made against the estate by a remainderman relating to section 2044 property. Section 2044 property is described in the instructions to line 6 of Part 4, General Information.

Include in this schedule notes unsecured by mortgage or other lien and give full details, including name of payee, face and unpaid balance, date and term of note, interest rate, and date to which interest was paid before death. Include the exact nature of the claim as well as the name of the creditor. If the claim is for services performed over a period of time, state the period covered by the claim. Example: Edison Electric Illuminating Co., for electric service during December 2002, $150.

If the amount of the claim is the unpaid balance due on a contract for the purchase of any property included in the gross estate, indicate the schedule and item number where you reported the property. If the claim represents a joint and separate liability, give full facts and explain the financial responsibility of the co-obligor.

List under “Mortgages and Liens” only obligations secured by mortgages or other liens on property that you included in the gross estate at its full value or at a value that was undiminished by the amount of the mortgage or lien. If the debt is enforceable against other property of the estate not subject to the mortgage or lien, or if the decedent was personally liable for the debt, you must include the full value of the property subject to the mortgage or lien in the gross estate under the appropriate schedule and may deduct the mortgage or lien on the property on this schedule.

However, if the decedent's estate is not liable, include in the gross estate only the value of the equity of redemption (or the value of the property less the amount of the debt), and do not deduct any portion of the indebtedness on this schedule.

Notes and other obligations secured by the deposit of collateral, such as stocks, bonds, etc., also should be listed under “Mortgages and Liens.”

Include under the “Description” column the particular schedule and item number where the property subject to the mortgage or lien is reported in the gross estate.

Include the name and address of the mortgagee, payee, or obligee, and the date and term of the mortgage, note, or other agreement by which the debt was established. Also include the face amount, the unpaid balance, the rate of interest, and date to which the interest was paid before the decedent's death.

You may deduct only those losses from thefts, fires, storms, shipwrecks, or other casualties that occurred during the settlement of the estate. You may deduct only the amount not reimbursed by insurance or otherwise.

Describe in detail the loss sustained and the cause. If you received insurance or other compensation for the loss, state the amount collected. Identify the property for which you are claiming the loss by indicating the particular schedule and item number where the property is included in the gross estate.

If you elect alternate valuation, do not deduct the amount by which you reduced the value of an item to include it in the gross estate.

Do not deduct losses claimed as a deduction on a Federal income tax return or depreciation in the value of securities or other property.

You may deduct expenses incurred in administering property that is included in the gross estate but that is not subject to claims. You may only deduct these expenses if they were paid before the section 6501 period of limitations for assessment expired.

The expenses deductible on this schedule are usually expenses incurred in the administration of a trust established by the decedent before death. They may also be incurred in the collection of other assets or the transfer or clearance of title to other property included in the decedent's gross estate for estate tax purposes, but not included in the decedent's probate estate.

The expenses deductible on this schedule are limited to those that are the result of settling the decedent's interest in the property or of vesting good title to the property in the beneficiaries. Expenses incurred on behalf of the transferees (except those described above) are not deductible. Examples of deductible and nondeductible expenses are provided in Regulations section 20.2053-8.

List the names and addresses of the persons to whom each expense was payable and the nature of the expense. Identify the property for which the expense was incurred by indicating the schedule and item number where the property is included in the gross estate. If you do not know the exact amount of the expense, you may deduct an estimate, provided that the amount may be verified with reasonable certainty and will be paid before the period of limitations for assessment (referred to above) expires. Keep all vouchers and receipts for inspection by the Internal Revenue Service.

You must complete Schedule O and file it with the return if you claim a deduction on item 21 of the Recapitulation.

You can claim the charitable deduction allowed under section 2055 for the value of property in the decedent's gross estate that was transferred by the decedent during life or by will to or for the use of any of the following:

For this purpose, certain Indian tribal governments are treated as states and transfers to them qualify as deductible charitable contributions. See Rev. Proc. 2001-15, 2001-5 I.R.B. 465, as modified and supplemented by subsequent Revenue Procedures, for a list of qualifying Indian tribal governments.

You may also claim a charitable contribution deduction for a qualifying conservation easement granted after the decedent's death under the provisions of section 2031(c)(9).

The charitable deduction is allowed for amounts that are transferred to charitable organizations as a result of either a qualified disclaimer (see Line 2, Qualified Disclaimer, below) or the complete termination of a power to consume, invade, or appropriate property for the benefit of an individual. It does not matter whether termination occurs because of the death of the individual or in any other way. The termination must occur within the period of time (including extensions) for filing the decedent's estate tax return and before the power has been exercised.

The deduction is limited to the amount actually available for charitable uses. Therefore, if under the terms of a will or the provisions of local law, or for any other reason, the Federal estate tax, the Federal GST tax, or any other estate, GST, succession, legacy, or inheritance tax is payable in whole or in part out of any bequest, legacy, or devise that would otherwise be allowed as a charitable deduction, the amount you may deduct is the amount of the bequest, legacy, or devise reduced by the total amount of the taxes.

If you elected to make installment payments of the estate tax, and the interest is payable out of property transferred to charity, you must reduce the charitable deduction by an estimate of the maximum amount of interest that will be paid on the deferred tax.

For split-interest trusts (or pooled income funds) enter in the “Amount” column the amount treated as passing to the charity. Do not enter the entire amount that passes to the trust (fund).

If you are deducting the value of the residue or a part of the residue passing to charity under the decedent's will, attach a copy of the computation showing how you determined the value, including any reduction for the taxes described above.

Also include:

The charitable deduction is allowed for amounts that are transferred to charitable organizations as a result of a qualified disclaimer. To be a qualified disclaimer, a refusal to accept an interest in property must meet the conditions of section 2518. These are explained in Regulations sections 25.2518-1 through 25.2518-3. If property passes to a charitable beneficiary as the result of a qualified disclaimer, check the “Yes” box on line 2 and attach a copy of the written disclaimer required by section 2518(b).

If the charitable transfer was made by will, attach a certified copy of the order admitting the will to probate, in addition to the copy of the will. If the charitable transfer was made by any other written instrument, attach a copy. If the instrument is of record, the copy should be certified; if not, the copy should be verified.

The valuation dates used in determining the value of the gross estate apply also on Schedule O.

If you claim a credit on line 16 of Part 2, Tax Computation, you must complete Schedule P and file it with the return. You must attach Form(s) 706-CE, Certificate of Payment of Foreign Death Tax, to support any credit you claim.

If the foreign government refuses to certify Form 706-CE, you must file it directly with the Internal Revenue Service as instructed on the Form 706-CE. See Form 706-CE for instructions on how to complete the form and for a description of the items that must be attached to the form when the foreign government refuses to certify it.

The credit for foreign death taxes is allowable only if the decedent was a citizen or resident of the United States. However, see section 2053(d) and the related regulations for exceptions and limitations if the executor has elected, in certain cases, to deduct these taxes from the value of the gross estate. For a resident, not a citizen, who was a citizen or subject of a foreign country for which the President has issued a proclamation under section 2014(h), the credit is allowable only if the country of which the decedent was a national allows a similar credit to decedents who were U.S. citizens residing in that country.

The credit is authorized either by statute or by treaty. If a credit is authorized by a treaty, whichever of the following is the most beneficial to the estate is allowed: (a) the credit computed under the treaty; (b) the credit computed under the statute; or (c) the credit computed under the treaty, plus the credit computed under the statute for death taxes paid to each political subdivision or possession of the treaty country that are not directly or indirectly creditable under the treaty. Under the statute, the credit is authorized for all death taxes (national and local) imposed in the foreign country. Whether local taxes are the basis for a credit under a treaty depends upon the provisions of the particular treaty.

If a credit for death taxes paid in more than one foreign country is allowable, a separate computation of the credit must be made for each foreign country. The copies of Schedule P on which the additional computations are made should be attached to the copy of Schedule P provided in the return.

The total credit allowable in respect to any property, whether subjected to tax by one or more than one foreign country, is limited to the amount of the Federal estate tax attributable to the property. The anticipated amount of the credit may be computed on the return, but the credit cannot finally be allowed until the foreign tax has been paid and a Form 706-CE evidencing payment is filed. Section 2014(g) provides that for credits for foreign death taxes, each U.S. possession is deemed a foreign country.

Convert death taxes paid to the foreign country into U.S. dollars by using the rate of exchange in effect at the time each payment of foreign tax is made.

If a credit is claimed for any foreign death tax that is later recovered, see Regulations section 20.2016-1 for the notice required within 30 days.

The credit for foreign death taxes is limited to those taxes that were actually paid and for which a credit was claimed within the later of the 4 years after the filing of the estate tax return, or before the date of expiration of any extension of time for payment of the Federal estate tax, or 60 days after a final decision of the Tax Court on a timely filed petition for a redetermination of a deficiency.

For the credit allowed by the statute, the question of whether particular property is situated in the foreign country imposing the tax is determined by the same principles that would apply in determining whether similar property of a nonresident not a U.S. citizen is situated within the United States for purposes of the Federal estate tax. See the instructions for Form 706-NA.

If you are reporting any items on this return based on the provisions of a death tax treaty, you may have to attach a statement to this return disclosing the return position that is treaty based. See Regulations section 301.6114-1 for details.

You must complete Schedule Q and file it with the return if you claim a credit on line 17 of Part 2, Tax Computation.

The term “transferee” means the decedent for whose estate this return is filed. If the transferee received property from a transferor who died within 10 years before, or 2 years after, the transferee, a credit is allowable on this return for all or part of the Federal estate tax paid by the transferor's estate with respect to the transfer. There is no requirement that the property be identified in the estate of the transferee or that it exist on the date of the transferee's death. It is sufficient for the allowance of the credit that the transfer of the property was subjected to Federal estate tax in the estate of the transferor and that the specified period of time has not elapsed. A credit may be allowed with respect to property received as the result of the exercise or nonexercise of a power of appointment when the property is included in the gross estate of the donee of the power.

If the transferee was the transferor's surviving spouse, no credit is allowed for property received from the transferor to the extent that a marital deduction was allowed to the transferor's estate for the property. There is no credit for tax on prior transfers for Federal gift taxes paid in connection with the transfer of the property to the transferee.

If you are claiming a credit for tax on prior transfers on Form 706-NA, you should first complete and attach the Recapitulation from Form 706 before computing the credit on Schedule Q from Form 706.

Section 2056(d)(3) contains specific rules for allowing a credit for certain transfers to a spouse who was not a U.S. citizen where the property passed outright to the spouse, or to a “qualified domestic trust.”

The term “property” includes any interest (legal or equitable) of which the transferee received the beneficial ownership. The transferee is considered the beneficial owner of property over which the transferee received a general power of appointment. Property does not include interests to which the transferee received only a bare legal title, such as that of a trustee. Neither does it include an interest in property over which the transferee received a power of appointment that is not a general power of appointment. In addition to interests in which the transferee received the complete ownership, the credit may be allowed for annuities, life estates, terms for years, remainder interests (whether contingent or vested), and any other interest that is less than the complete ownership of the property, to the extent that the transferee became the beneficial owner of the interest.

The maximum amount of the credit is the smaller of:

If credit for a particular foreign death tax may be taken under either the statute or a death duty convention, and on this return the credit actually is taken under the convention, then no credit for that foreign death tax may be taken into consideration in computing estate tax (a) or estate tax (b) above.

A Worksheet for Schedule Q is provided on page 30 of these instructions to allow you to compute the limits before completing Schedule Q. Transfer the appropriate amounts from the worksheet to Schedule Q as indicated on the schedule. You do not need to file the worksheet with your Form 706, but should keep it for your records.

Most of the information to complete Part I of the worksheet should be obtained from the transferor's Form 706.

Schedule R is used to compute the generation-skipping transfer (GST) tax that is payable by the estate. Schedule R-1 (Form 706) is used to compute the GST tax that is payable by certain trusts that are includible in the gross estate.

The GST tax that is to be reported on Form 706 is imposed only on “direct skips occurring at death.” Unlike the estate tax, which is imposed on the value of the entire taxable estate regardless of who receives it, the GST tax is imposed only on the value of interests in property, wherever located, that actually pass to certain transferees, who are referred to as “skip persons.”

For purposes of Form 706, the property interests transferred must be includible in the gross estate before they are subject to the GST tax. Therefore, the first step in computing the GST tax liability is to determine the property interests includible in the gross estate by completing Schedules A through I of Form 706.

The second step is to determine who the skip persons are. To do this, assign each transferee to a generation and determine whether each transferee is a “natural person” or a “trust” for GST purposes.

The third step is to determine which skip persons are transferees of “interests in property.” If the skip person is a natural person, anything transferred is an interest in property. If the skip person is a trust, make this determination using the rules under Interest in property on page 22. These first three steps are described in detail under the main heading, Determining Which Transfers Are Direct Skips.

The fourth step is to determine whether to enter the transfer on Schedule R or on Schedule R-1. See the rules under the main heading, Dividing Direct Skips Between Schedules R and R-1.

The fifth step is to complete Schedules R and R-1 using the How To Complete instructions on page 23, for each schedule.

Report all generation-skipping transfers on Schedule R unless the rules below specifically provide that they are to be reported on Schedule R-1.

Under section 2603(a)(2), the GST tax on direct skips from a trust (as defined for GST tax purposes on page 22) is to be paid by the trustee and not by the estate. Schedule R-1 serves as a notification from the executor to the trustee that a GST tax is due.

For a direct skip to be reportable on Schedule R-1, the trust must be includible in the decedent's gross estate.

If the decedent was the surviving spouse life beneficiary of a marital deduction power of appointment (or QTIP) trust created by the decedent's spouse, then transfers caused by reason of the decedent's death from that trust to skip persons are direct skips required to be reported on Schedule R-1.

If a direct skip is made “from a trust” under these rules, it is reportable on Schedule R-1 even if it is also made “to a trust” rather than to an individual.

Similarly, if property in a trust (as defined for GST tax purposes on page 22) is included in the decedent's gross estate under section 2035, 2036, 2037, 2038, 2039, 2041, or 2042 and such property is, by reason of the decedent's death, transferred to skip persons, the transfers are direct skips required to be reported on Schedule R-1.

Business interests may qualify for the exclusion if the following requirements are met:

“Qualified family-owned business interests” shall not include the following:

A person is a qualified heir of property if he or she is a member of the decedent's family and acquired or received the interest from the decedent.

If a qualified heir disposes of any qualified family-owned business interest to any member of his or her family, that person will then be treated as the qualified heir with respect to that interest.

The term member of the family includes only:

A legally adopted child of an individual is treated as a child of that individual by blood.

For the purpose of this deduction, qualified heir also includes any active employee of the trade or business to which the qualified family-owned business interest relates if the employee has been employed by the trade or business for a period of at least 10 years before the date of the decedent's death.

An interest in a business is considered to have been acquired from or to have passed from the decedent if one or more of the following apply:

To make the section 2057 election, either the decedent or a member of the decedent's family must have materially participated in the trade or business to which the ownership interest relates for at least 5 of the 8 years ending on the date of the decedent's death.

The existence of material participation is a factual determination, and the types of activities and financial risks that will support a finding of material participation will vary with the mode of ownership. No single factor is determinative of the presence of material participation, but physical work and participation in management decisions are the principal factors to be considered. Passively collecting rents, salaries, draws, dividends, or other income from the trade or business does not constitute material participation. Neither does merely advancing capital and reviewing business plans and financial reports each business year.

For more information on material participation, see page 8 of these instructions and Regulations section 20.2032A-3.