This is archived information that pertains only to the 2006 Tax Year. If you
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When computing the amounts to enter on Form 706-A, use the same values and estate tax that the executor reported on the Form
706 filed for the
decedent. However, if the IRS has completed the audit of the estate tax return, use the agreed values and tax rather than
the reported values and tax.
Schedule A. Disposition of Specially Valued Property or Cessation of Qualified Use
On Schedule A, list every specially valued property interest that the qualified heir disposed of or discontinued use of since
the date of the
decedent's death and for which a Form 706-A has not been previously filed. Do not list any interests that have already been
reported on Schedule A or
B of a previously filed Form 706-A. In general, do not list property interests disposed of to family members of the qualified
heir. These interests
should be listed on Schedule C.
Column A.
Number and list the property interests in chronological order of disposition or cessation.
Column B.
Use the same description in column B that the executor used for the specially valued property on the Form 706 filed
for the decedent. Please
include in column B the schedule and item number where the specially valued property was reported on the Form 706 filed for
the decedent's estate.
Column C.
Report in column C the date that the qualified heir disposed of the specially valued property or discontinued the
qualified use.
Column D.
If the qualified heir disposed of the specially valued property in an arm's length transaction, report in column D
the amount realized.
Arm's length transaction.
An
arm's length transaction is a transaction where there is no bargain or gift element for affection or other reasons.
Amount realized.
The
amount realized is the sum of the money received plus the fair market value of property (other than money) received. For the real
property taxes that must be taken into account, see section 1001(b).
If the qualified heir owned only a part of the specially valued property, report in column D the
pro rata share of the amount realized
that is allocable to the part owned by the qualified heir.
If the specially valued property is disposed of by the qualified heir in other than an arm's length transaction, or
if the qualified use is
discontinued by the qualified heir, report in column D the fair market value of the specially valued property as of the date
of disposition or
cessation of qualified use.
Fair market value.
Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being
under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
For additional information and examples, see Regulations section 20.2031-1(b). If the qualified heir owned only a
part of the specially valued
property, report in column D the
pro rata share of the fair market value allocable to the part owned by the qualified heir.
Column E.
Report in column E the special-use value at the date of the decedent's death (or alternate valuation date) of the
specially valued property that
passed from the decedent to the qualified heir who disposed of the property or discontinued the qualified use. Use the same
special-use value that the
executor reported on the Form 706 filed for the decedent's estate. If the IRS has completed the audit of the estate tax return,
use the agreed value
rather than the reported value. If the qualified heir owned only a part of the specially valued property, report in column
E the
pro rata
share of the special-use value allocable to the part owned by the qualified heir.
Schedule B. Involuntary Conversions or Exchanges
Involuntary conversions of qualified real property (under the rules of section 1033) and exchanges of qualified real property
(under the rules of
section 1031) are treated similarly when computing the additional estate tax on Form 706-A.
The rules below apply to all qualified heirs, whether or not they made an election, for involuntary conversions and exchanges
occurring after 1981.
If you are reporting an involuntary conversion or exchange, you may not use the same Form 706-A to report any cessations or
other dispositions that
are not involuntary conversions or exchanges. Use a separate Form 706-A for the cessations or other dispositions.
You may report conversions and exchanges together on the same return.
Nontaxable Involuntary Conversions or Exchanges
If the qualified heir reinvests all of the involuntary conversion proceeds in qualified replacement property or if the qualified
heir exchanges
qualified real property solely for qualified exchange property, then there is no additional estate tax.
You should complete Form 706-A, even though there is no tax, to notify the IRS that the involuntary conversion or exchange
took place. However, you
must complete only Part I, Schedule B, and Schedule A. Write “nontaxable” on line 19 of Part II.
Partially Taxable Involuntary Conversions or Exchanges
If the cost of the qualified replacement property is less than the amount realized in the involuntary conversion or if other
property in addition
to qualified exchange property is received in the exchange, the conversion or exchange is partially taxable. You should complete
all of Form 706-A and
determine the tax using Part II.
List on Schedule A all specially valued property that the qualified heir disposed of or discontinued use of, regardless of
whether he or she
received replacement or exchange property for it. List on Schedule B only the replacement or exchange property the qualified
heir actually received.
Qualified Replacement or Exchange Property
Qualified replacement property means any real property that is to be used for the qualified use and that:
Qualified exchange property means any real property that is to be used for the same qualified use that the property for which it was
exchanged was used.
The period of the decedent's or family member's ownership, qualified use, or material participation with respect to replaced
or exchanged property
is treated as the period of ownership, qualified use, or material participation with respect to the qualified replacement
or exchange property. This
applies only to that part of the fair market value of the replacement or exchange property (at the date of acquisition) that
does not exceed the fair
market value of the replaced or exchanged property (at the date of disposition).
Note.
The 10-year recapture period is extended under certain circumstances. See Two-Year Grace Period—Commencement Date on page 2.
How To Complete Schedule B
Column A.
Make one entry for each item of qualified replacement or exchange property.
Column B.
Describe the qualified replacement property with enough detail so that the IRS can locate and value it. For more information,
see the instructions
to Schedule A of Form 706.
Column C.
For an involuntary conversion, enter the cost of the replacement property. For an exchange, enter the fair market
value of the replacement
property.
Enter the total value at the estate tax valuation date of all specially valued property that the executor elected, on the
Form 706 filed for the
decedent's estate, to value at actual use rather than fair market value.
Enter the amount of the estate tax for the decedent's estate that is recomputed using fair market value at the estate tax
valuation date rather
than actual use value. Attach a schedule showing the recomputed estate tax.
Schedule C. Dispositions to Family Members of the Qualified Heir
Agreement by transferee.
You may enter a disposition to a family member of the qualified heir on Schedule C only if you file this Form 706-A
on time (including extensions)
and attach an agreement by the transferee to be personally liable for any additional estate tax under section 2032A(c) on
the interest received. For a
format of the agreement, see Form 706,
Schedule A-1.
If you are not filing this Form 706-A on time, or if the transferee does not enter into the agreement, you must enter
the disposition(s) on
Schedule A instead of Schedule C.
How To Complete Schedule C
See the instructions for completing columns A, B, and C of Schedule A, beginning on page 3.
