Part V · Compliance · No. 05

Form 706

The federal estate tax return filed for a U.S. citizen or resident decedent whose gross estate exceeds the basic exclusion amount (adjusted by lifetime taxable gifts) — and for portability elections by smaller estates. The 706 is a substantial document; assembly, valuation, and timing are the principal tasks.

What is reported

The gross estate, deductions, taxable estate, prior taxable gifts, computation of estate tax, and elections (portability, alternate valuation, §6166, special-use valuation, GST allocation).

Who must report

Executor of the estate of a decedent with:

• Gross estate (plus adjusted taxable gifts) exceeding the basic exclusion amount at death; or
• Smaller estate making a portability election under §2010(c)(5)(A) to transfer unused exclusion to surviving spouse; or
• Estate of a nonresident not a citizen with U.S.-situs assets above $60,000 (filed on Form 706-NA).

Thresholds

For decedents dying in 2026, Form 706 is required if the gross estate plus adjusted taxable gifts (and any specific exemption) exceeds $15,000,000 — the basic exclusion amount under §2010(c)(3) as amended by the One Big Beautiful Bill Act (Pub. L. 119-21) and confirmed in Rev. Proc. 2025-32. The amount is permanent (no sunset) and is indexed for inflation from 2027. The top rate remains 40%. See estate tax.

The form

Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Due nine months after date of death (§6075(a)); an automatic six-month extension of time to file (not to pay) is available on Form 4768. Under the current instructions the return is mailed to the IRS at Kansas City, MO 64999.

Penalties

• Failure to file: 5% per month of unpaid tax, capped at 25%.
• Failure to pay: 0.5% per month of unpaid tax, capped at 25%.
• Accuracy: 20% on a substantial estate or gift tax valuation understatement (value reported is 65% or less of the correct value); 40% on a gross understatement (40% or less) (§6662(g), (h)).
• Late payment interest under §6601.

Relief procedures

• §6161 hardship extension of payment up to 12 months.
• §6166 installment payment up to 14 years for qualifying closely held business interests.
• Rev. Proc. 2022-32 extension to file portability-only Form 706 within five years of death.

Recent guidance

Rev. Proc. 2022-32 substantially extended the time to file portability-only returns (from two years to five years), reflecting practitioner demand and acknowledging the administrative cost of late awareness of unused exclusion.

The One Big Beautiful Bill Act (signed 4 July 2025) set the basic exclusion amount at $15,000,000 for 2026 with inflation indexing thereafter, replacing the scheduled reversion to pre-2018 levels. Portability of a deceased spouse’s unused exclusion (DSUE) continues to require a timely filed Form 706.

Filing-mechanic considerations for luxury-asset estates

• Schedule F — Other Miscellaneous Property — captures art, jewelry, collectibles, vehicles, vessels.
• Schedule G — Transfers During Decedent's Life — captures §2036 and §2038 inclusions.
• Schedule M — Marital Deduction Property — and Schedule O — Charitable Bequests.
• Schedule R — GST tax.
• Form 706, Part 6 — Portability of deceased spousal unused exclusion (DSUE).
• Form 706, Part 3, line 3 — §6166 installment election.
• Qualified appraisals attached for substantial-value property.

Reviewed October 2026