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IRS Form 706 (Schedule E) – Jointly Owned Property – When navigating the complexities of estate planning and taxation, jointly owned property often presents unique challenges. For executors and estate administrators, accurately reporting these assets is crucial to avoid IRS audits, penalties, or delays in probate. Enter IRS Form 706 Schedule E, a key component of the United States Estate (and Generation-Skipping Transfer) Tax Return. This schedule specifically addresses jointly owned property, ensuring the decedent’s interest is properly included in the gross estate.

In this comprehensive guide, we’ll break down what Schedule E entails, who needs to file it, how to complete it step by step, and tips for compliance in 2025. Whether you’re an estate professional or a family member stepping into the executor’s role, mastering Schedule E can streamline your Form 706 filing and help preserve tax benefits like portability of the deceased spouse’s unused exclusion (DSUE) amount.

 

What Is IRS Form 706?

Before diving into Schedule E, it’s essential to understand its parent form. Form 706 is the official IRS document used by the executor of a decedent’s estate to calculate federal estate taxes under Chapter 11 of the Internal Revenue Code, as well as generation-skipping transfer (GST) taxes under Chapter 13. It’s required when the gross estate—combined with adjusted taxable gifts and any specific exemptions—exceeds the basic exclusion amount.

For decedents dying in 2025, the basic exclusion amount is $13,990,000, up from prior years due to inflation adjustments. Even if no tax is due, Form 706 must be filed to elect portability, allowing a surviving spouse to use the decedent’s unused exclusion on their own future returns.

Form 706 includes multiple schedules for categorizing assets, deductions, and credits. Schedule E fits into this framework by focusing on jointly owned assets, which could otherwise be overlooked or misvalued.

The Purpose of Schedule E on Form 706

Schedule E: Jointly Owned Property is designed to report the portion of jointly held assets that must be included in the decedent’s gross estate. Joint ownership can take forms like joint tenancy with right of survivorship (JTWROS), tenancy by the entirety, or community property, and it applies to real estate, bank accounts, stocks, partnerships, and more.

Under Internal Revenue Code Section 2040, the full value of jointly owned property isn’t always includible—only the decedent’s attributable interest. Schedule E ensures transparency by requiring detailed disclosures, valuations, and justifications for the includible amount. This prevents underreporting, which could trigger IRS scrutiny, and supports accurate estate tax calculations.

Key assets reported here include:

• Real estate held jointly (cross-reference with Schedule A if fractional interests apply).
• Stocks and bonds (use CUSIP numbers, per Schedule B guidelines).
• Partnership or LLC interests (family limited partnerships often fall here).
• Personal property like vehicles or collectibles.

Failing to file Schedule E when required can invalidate elections, such as special-use valuation under Section 2032A or installment payments under Section 6166 for closely held businesses.

Who Must File Schedule E?

You must complete and attach Schedule E to Form 706 if:

• The decedent owned any jointly held property at death, regardless of whether their interest is fully includible.
• The answer to Part IV, Question 10 on Form 706 is “Yes”: “Did the decedent at the time of death own any property as a joint tenant with right of survivorship in which (a) one or more of the other joint tenants was someone other than the decedent’s spouse, and (b) less than the full value of the property is included on the return as part of the gross estate?”

Even for estates below the filing threshold filing solely for portability, consider reporting jointly owned assets eligible for marital or charitable deductions—though you may leave value columns blank under Reg. section 20.2010-2(a)(7)(ii).

Exceptions: Pure tenancies in common or solely owned partnership interests go on other schedules (e.g., Schedule F). Community property with a surviving spouse may qualify for special rules.

How to Complete Schedule E: Step-by-Step Instructions

Completing Schedule E requires precision in description, valuation, and documentation. Use the fair market value (FMV) as of the date of death (or alternate valuation date, if elected under Section 2032). For 2025 filers, attach appraisals, bank statements, or legal proofs as exhibits.

Part I: Qualified Joint Interests (With Surviving Spouse Only)

This section covers JTWROS or tenancy by the entirety where the decedent and spouse are the only joint tenants (Section 2040(b)(2)).

1. Column (a): Describe the property (e.g., “Residence at 123 Main St., Anytown, USA” or “100 shares XYZ Corp. stock, CUSIP: 123456789”).
2. Column (b): Enter the full FMV at date of death.
3. Column (c): If electing alternate valuation (6 months post-death), enter that value here.
4. Column (d): Leave blank (not applicable for qualified interests).
5. Columns (e) and (f): Enter the full value from Column (b) or (c)—50% is automatically includible for U.S. citizen spouses.

Total on Line 1: Sum Columns (b) and (c); carry 50% of the total to Form 706, Part V, Item 4.

Note: If the spouse is not a U.S. citizen, report in Part II—no special 50% rule applies.

Part II: All Other Joint Interests

For joint ownership with non-spouses (e.g., children, siblings) or non-qualified setups.

1. Column (a): List surviving co-owners’ names and addresses.
2. Column (b): Describe the property, including how title was held.
3. Column (c): Indicate the source of funds (e.g., “Decedent furnished 60%”).
4. Column (d): Enter the percentage includible (e.g., based on contribution; default 100% minus co-tenants’ proven shares).
5. Column (e): Alternate value, if elected.
6. Column (f): FMV at death.
7. Column (g): Multiply Column (f) by Column (d).

Total on Line 2: Sum includible values; carry to Form 706, Part V, Item 4.

Pro Tip: Attach an exhibit proving contributions (e.g., gift tax returns, bank records). Without proof, the IRS presumes 100% includible for gifted joint property.

If more space is needed, use Schedule W (Form 706) or additional statements.

IRS Form 706 (Schedule E) Download and Printable

Download and Print: IRS Form 706 (Schedule E)

Valuation Methods for Jointly Owned Property

Valuation is the cornerstone of Schedule E compliance. Use FMV—what a willing buyer would pay a willing seller—determined by:

• Professional appraisals for real estate or unique assets.
• Quoted market prices for stocks/bonds.
• Regulations sections 20.2031-2 (stocks) or 20.2031-3 (partnerships/LLCs) for business interests.

For alternate valuation (elected on Form 706, Part III), use values 6 months post-death or sale date. Special-use valuation (now on Schedule T) caps reductions at $1,420,000 for 2025, useful for family farms or businesses.

Joint interests in closely held entities may qualify for Section 6166 deferral (up to 14 years) if the decedent held ≥20% interest and ≤45 partners—report fully on Schedule E.

Common Mistakes to Avoid When Filing Schedule E

Even seasoned professionals slip up. Here’s how to sidestep pitfalls:

• Overlooking Documentation: Always attach proofs for non-100% inclusions—failure invites full inclusion.
• Confusing Schedules: Joint stocks go on Schedule E, not B alone; real estate cross-references Schedule A.
• Ignoring Portability Rules: For DSUE elections, report but don’t value deductible joint assets.
• Misclassifying Ownership: Verify title documents—JTWROS differs from tenancy in common.
• Forgetting Extensions: File by 9 months post-death; extend with Form 4768 (up to 6 months).

2025 Updates to Form 706 and Schedule E

The IRS has redesigned Form 706 for 2025, separating schedules into standalone PDFs for easier processing. Schedule E remains structurally similar but benefits from clearer formatting and inflation-indexed limits (e.g., exclusion at $13,990,000). No major rule changes affect jointly owned property, but note the estate tax closing letter fee drop to $56 (effective May 21, 2025) and Rev. Rul. 2025-16 updates on effective interest rates for special valuations.

Starting in 2026, the base exclusion rises to $15,000,000, potentially reducing Schedule E filings—but plan ahead for sunsetting provisions under the Tax Cuts and Jobs Act.

Final Thoughts: Ensuring Compliance for Jointly Owned Assets

Mastering IRS Form 706 Schedule E is vital for accurate estate tax reporting, especially with jointly owned property’s nuances. By detailing ownership, valuing interests correctly, and attaching robust documentation, you minimize risks and maximize deductions.

For personalized advice, consult a tax attorney or CPA familiar with estate law. Download the latest forms and instructions from IRS.gov/Form706. Timely filing not only avoids penalties but preserves legacy protections like portability.

Disclaimer: This article is for informational purposes only and not tax advice. Always refer to official IRS guidance for your situation.

Related Resources

• IRS Instructions for Form 706 (Rev. September 2025)
• Schedule E (Form 706) PDF
• Publication 559: Survivors, Executors, and Administrators

By optimizing your estate filings with tools like Schedule E, you honor the decedent’s wishes while navigating tax obligations seamlessly. Stay informed—estate laws evolve, and compliance today secures peace tomorrow.

 

IRS Form 706 (Schedule L) – Net Losses During Administration and Expenses Incurred In Administering Property Not Subject to Claims – In the complex world of estate tax planning and administration, IRS Form 706—the United States Estate (and Generation-Skipping Transfer) Tax Return—serves as the cornerstone for reporting and calculating federal estate taxes. For decedents dying in 2025, estates exceeding the basic exclusion amount must file this form within nine months of death. Among its many schedules, Schedule L (Form 706) stands out for addressing specific deductions that can significantly reduce the taxable estate: net losses during administration and expenses incurred in administering property not subject to claims.

If you’re an executor, estate administrator, or tax professional navigating Form 706, understanding Schedule L is essential. This guide breaks down its purpose, requirements, and step-by-step completion process, drawing from the official IRS Instructions for Form 706 (Rev. September 2025) and related publications. Proper use of Schedule L can help minimize estate tax liability under Internal Revenue Code (IRC) Section 2053, ensuring compliance while maximizing allowable deductions.

 

What Is IRS Form 706 Schedule L?

Schedule L is a dedicated attachment to Form 706 used to claim deductions for two key categories of estate-related costs and losses:

1. Net Losses During Administration: These are unreimbursed losses occurring after the decedent’s death but before the estate is fully settled, such as from casualties (e.g., fire, storm, theft) or dispositions of estate assets.
2. Expenses Incurred in Administering Property Not Subject to Claims: These cover costs for managing assets included in the gross estate but exempt from general creditor claims, like property passing directly to beneficiaries via trusts or joint tenancy.

Unlike Schedule J (funeral and administration expenses subject to claims) or Schedule K (debts and liens), Schedule L focuses on non-claim-protected items. Deductions here flow to Form 706, Part 5 (Recapitulation), specifically lines 19 (net losses) and 20 (such expenses), reducing the tentative tax under the unified rate schedule.

For 2025 decedents, the basic exclusion amount is inflation-adjusted (see IRS Rev. Proc. 2025-15 for exact figures), but Schedule L deductions apply regardless of whether the estate meets the filing threshold—especially if electing portability of the deceased spousal unused exclusion (DSUE).

Key Tip: Always attach Schedule L if claiming these deductions. Use Schedule W (Form 706) for additional space, and retain supporting documents like invoices, insurance reports, and appraisals for IRS audits.

Purpose of Schedule L: Reducing Taxable Estate Under IRC Section 2053

The primary goal of Schedule L is to allow estates to deduct legitimate post-death losses and administrative costs that diminish the estate’s value without benefiting creditors. This aligns with IRC Section 2053, which permits deductions for expenses “actually and necessarily incurred in the administration of the decedent’s estate.”

• Net Losses: These prevent overvaluation of the estate by accounting for real economic hits during settlement.
• Non-Claim Expenses: These ensure fair taxation of property that bypasses probate, like revocable trusts or life insurance proceeds.

Deductions are limited to amounts paid within the statute of limitations (generally three years after filing Form 706 under IRC Section 6501). Estimates are allowable if verifiable and due before expiration—attach proof. If electing alternate valuation (six months post-death), exclude losses from value reductions.

Failure to report these can lead to penalties, but protective claims via Schedule PC (Form 706) allow future refunds for non-currently deductible items. For 2025 updates, note the redesigned Form 706 schedules for better efficiency, with no specific changes to Schedule L.

Part I: Reporting Net Losses During Administration on Schedule L

Part I of Schedule L captures “net losses” from events like sales at a loss, thefts, fires, storms, shipwrecks, or other casualties during estate administration. Only unreimbursed amounts qualify—subtract insurance recoveries or other compensation.

Eligibility and Exclusions

• Eligible Losses: Must occur after death, affect estate-held property, and be documented (e.g., police reports for theft, appraisals for fire damage).
• Exclusions:
  • Losses reimbursed by insurance.
  • Depreciation or market declines (unless electing alternate valuation—then exclude).
  • Losses claimed on the estate’s income tax return (Form 1041) to avoid double-dipping.
  • Pre-death losses.

Cross-reference the affected property to its listing on Schedules A–U (e.g., real estate on Schedule A).

How to Complete Part I

Use the table format on the form (or attached sheets):

Item No.	Description (Cause, Property ID, Amount Collected)	Value (Date-of-Death or Alternate)
1	[e.g., Fire damage to Schedule A, Item 2 property; $5,000 loss after $2,000 insurance]	$3,000
…	…	…
Total		[Sum to Line 2]

• Line 1: List individual net losses.
• Line 2: Subtotal from form.
• Line 3: Total from attached Schedule(s) W.
• Line 4: Grand total—enter on Form 706, Part 5, Item 19.

Example: If estate real estate (valued at $500,000 on Schedule A) suffers storm damage yielding a $10,000 unreimbursed loss, describe it fully and deduct $10,000 here. IRS examiners verify via bills and policies.

Part II: Expenses Incurred in Administering Property Not Subject to Claims

Part II targets costs for preserving, collecting, or distributing property in the gross estate but not liable for general claims (per Treas. Reg. § 20.2053-8(d)). This includes non-probate assets like trusts or joint property.

What Qualifies as Deductible Expenses?

Deductible items are those “necessarily” tied to estate settlement:

• Trust administration fees (e.g., trustee commissions for revocable trusts).
• Asset collection costs (e.g., legal fees to gather jointly held property).
• Title clearance or transfer expenses (e.g., recording fees for beneficiary vesting).

Nondeductible Examples:

• Beneficiary-specific costs (e.g., their legal fees post-distribution).
• Ongoing maintenance unrelated to settlement.
• Expenses already deducted on Form 1041.

Per Treas. Reg. § 20.2053-8, expenses must be reasonable and supported by vouchers. For protective claims, list without values.

How to Complete Part II

Mirror Part I’s table:

Item No.	Payee Name/Address	Nature of Expense (Property ID)	Value
1	[e.g., ABC Trust Co., 123 Main St.; Trustee fees for Schedule G trust property]	$15,000
…	…	…	…
Total		[Sum to Line 6]

• Lines 1–5: Individual entries.
• Line 6: Subtotal.
• Line 7: Attached totals.
• Line 8: Grand total—enter on Form 706, Part 5, Item 20.

Pro Tip: If expenses relate to estimated asset values under Reg. § 20.2010-2(a)(7)(ii), report but omit values—include in Part 5, Items 10 and 23.

IRS Form 706 (Schedule L) Download and Printable

Download and Print: IRS Form 706 (Schedule L)

Step-by-Step Guide: How to Fill Out Schedule L for 2025 Filings

1. Gather Documents: Collect appraisals, insurance claims, invoices, and probate records. Identify property via Form 706 schedules.
2. Determine Valuation Date: Use date-of-death values unless electing alternate (attach election statement).
3. Complete Tables: Number items sequentially; round to nearest dollar.
4. Calculate Totals: Add lines and transfer to Form 706, Part 5.
5. Attach and File: Include with Form 706 by the due date (extensions via Form 4768). E-file if eligible.
6. Protective Claims: Use Schedule PC for future-deductible items.

For complex estates, consult IRS Publication 559 (Survivors, Executors, and Administrators) or a tax advisor.

Common Mistakes to Avoid When Filing Schedule L

• Double-Dipping: Don’t deduct losses/expenses claimed on Form 1041.
• Inadequate Documentation: IRS audits require proof—keep everything for at least three years.
• Misclassifying Expenses: Use Schedule J for claim-subject items; Schedule L only for non-claim property.
• Ignoring Alternate Valuation: This can disqualify certain loss deductions.
• Overlooking Inflation Adjustments: For 2025, confirm exclusion limits via IRS.gov.

Audits focus on large/unusual items (LUQs), so substantiate claims thoroughly.

2025 Updates and Resources for IRS Form 706 Schedule L

The September 2025 revision of Form 706 includes redesigned schedules for streamlined filing, but Schedule L’s core rules remain unchanged. Key notes:

• Estate tax closing letter fee reduced to $56 (effective May 21, 2025).
• Enhanced electronic payment options.
• No Schedule L-specific inflation adjustments, but general thresholds apply.

Trusted Resources:

• Download Form 706 and Schedule L: IRS.gov/Form706.
• Full Instructions: IRS Instructions for Form 706 (PDF).
• Regulations: Treas. Reg. § 20.2053-3 (losses) and § 20.2053-8 (expenses).
• Pub. 559: Guidance for executors.

For personalized advice, consult a CPA or estate attorney. Filing accurately not only avoids penalties but optimizes your estate’s tax position.

This article is for informational purposes only and not tax advice. Verify with the IRS for your situation.

 

IRS Form 706 (Schedule G) – Transfers During the Decedent’s Lifetime – When navigating the complexities of estate taxes after a loved one’s passing, executors often encounter IRS Form 706—the United States Estate (and Generation-Skipping Transfer) Tax Return. Among its many schedules, Schedule G stands out for its focus on transfers during the decedent’s lifetime that must be included in the gross estate. These lifetime transfers can significantly impact the estate’s taxable value, potentially triggering federal estate taxes if the total exceeds the 2025 basic exclusion amount of $13,990,000.

In this comprehensive guide, we’ll break down what Schedule G entails, why it’s essential for estate tax planning, and how to complete it accurately. Whether you’re an executor, estate planner, or simply researching for future needs, understanding IRS Form 706 Schedule G ensures compliance and minimizes surprises. We’ll draw from the latest IRS instructions (revised September 2025) to provide up-to-date insights.

 

What Is IRS Form 706?

Before diving into Schedule G, a quick overview of the parent form is helpful. Form 706 is filed by the executor of a U.S. citizen or resident decedent’s estate to calculate federal estate taxes under Internal Revenue Code (IRC) Chapter 11. It also computes generation-skipping transfer (GST) taxes on direct skips under Chapter 13.

Key filing requirements for 2025 decedents include:

• Gross estate + adjusted taxable gifts + specific exemption > $13,990,000: Mandatory filing.
• Portability election: File even if below the threshold to transfer the deceased spousal unused exclusion (DSUE) to a surviving spouse.

The form includes multiple schedules for categorizing assets, deductions, and credits. Schedule G (August 2025 revision) specifically addresses lifetime transfers includible in the gross estate, ensuring the IRS captures wealth shifted before death to prevent tax avoidance.

The Purpose of Schedule G on Form 706

Schedule G reports certain transfers during the decedent’s lifetime that the IRS deems part of the gross estate under IRC sections 2035 through 2038 and 2041. These rules prevent decedents from reducing their taxable estate through last-minute or retained-interest gifts.

Why does this matter? Lifetime transfers—like gifting assets to family or funding irrevocable trusts—can qualify for the annual gift tax exclusion ($19,000 per donee in 2025). However, if they involve retained control, enjoyment, or occur too close to death, they’re “pulled back” into the estate via Schedule G. This inclusion affects the unified estate-gift tax calculation, where post-1976 taxable gifts are added to the gross estate to determine the tentative tax base.

Failing to report accurately can lead to penalties, including a 20% accuracy-related penalty under IRC section 6662 for understatements. Proper completion also supports deductions like marital or charitable transfers on other schedules.

What Transfers Must Be Reported on Schedule G?

Not all lifetime gifts trigger inclusion—only those fitting specific IRC criteria. Use Worksheet TG in the Form 706 instructions to tally adjusted taxable gifts (post-1976, exceeding annual exclusions). Here’s a breakdown:

IRC Section	Description	Key Triggers
2035(a)	Transfers within 3 years of death	Revocable transfers, life estates, reversionary interests, or powers that would have been includible if retained until death. Review Forms 709 from the prior 3 years (e.g., for a 2025 death, check 2022–2025).
2035(b)	Gift taxes paid within 3 years	Gift taxes on transfers by the decedent or spouse; attach relevant Forms 709.
2036	Retained life estates or income	Transfers (not sales for full value) where decedent kept income rights, enjoyment, power to designate recipients, annuities, property use, or ≥20% voting rights in a controlled corporation (post-1976).
2037	Transfers taking effect at death	Possession/enjoyment conditional on surviving decedent; reversionary interest >5% actuarial value returning to decedent/estate.
2038	Revocable transfers or powers	Power to alter, revoke, or terminate at death (e.g., trustee powers to change beneficiaries); includes relinquishments within 3 years.
2041	Powers of appointment	General powers exercisable in favor of decedent, estate, or creditors (limited exceptions for health/education standards).

Other reportable items:

• Taxable gifts: Post-1976 gifts over annual exclusions; split gifts under section 2513 (include predeceased spouse’s portion if applicable).
• QTIP/QDOT elections: Qualified terminable interest property or domestic trusts for non-citizen spouses.
• Charitable remainder trusts: If spouse is sole non-charitable beneficiary.
• Life insurance/annuities: Proceeds with retained powers.
• Trust interests: From revocable or controlled trusts; annual exclusions apply but aren’t excludible here.

If a transfer doesn’t fit neatly, attach a statement with details (date, value, description). Report distributions (including Schedule G amounts) on Form 706, Part IV, line 5a.

IRS Form 706 (Schedule G) Download and Printable

Download and Print: IRS Form 706 (Schedule G)

How to Complete Schedule G: Step-by-Step Instructions

The redesigned 2025 Schedule G (attached to Form 706) uses columns for item number, description (CUSIP/EIN if applicable), date of death value, alternate valuation, and gift tax paid. Use Schedule W for additional space.

1. Gather Documents: Collect Forms 709 (last 3+ years), trust agreements, gift deeds, and appraisals. Answer “Yes” to Form 706, Part IV, lines 12 or 13a if applicable.
2. List Transfers: For each item:
   • Description: Detail property (e.g., “Irrevocable trust funded with $500,000 securities, EIN XX-XXXXXXX”).
   • Value: Fair market value (FMV) at death (or alternate date under section 2032); prorate partial interests; deduct encumbrances.
   • Gift Tax: Amount paid/payable by decedent/estate.
3. Complete Worksheet TG: Tally adjusted taxable gifts (line 2, column c for includible amounts).
4. Total and Attach: Sum values; carry to Form 706, Part II. Elect special-use valuation? Complete Schedule T too.
5. Special Rules: For split gifts, note predeceased spouse’s details. Estimate future interests reasonably.

File by the 9th month after death; extend via Form 4768 if needed.

Valuation Methods for Lifetime Transfers

Valuation is critical—use FMV at the transfer date for gifts, but death/alternate date for retained interests.

• Gifts: As on Form 709; apply sections 2701–2704 for family-limited partnerships.
• Retained Interests: Full property value at death, proportional for partial retention.
• Reversions/Powers: Actuarial tables from Rev. Rul. 2025-16 for >5% interests.
• Deductions: Reduce by mortgages, taxes; exclude charitable portions.

Appraisals are recommended for complex assets like real estate or closely held businesses.

Real-World Examples of Schedule G Transfers

• Retained Life Estate (Section 2036): Decedent gifts a vacation home to children but continues living there rent-free. Full FMV ($800,000) is includible, even if “informal.”
• Three-Year Gift (Section 2035): $100,000 cash gift to a grandchild in 2024; decedent dies in 2025. Include if revocable or with retained interest; plus any gift tax paid.
• Revocable Trust (Section 2038): Decedent funds an irrevocable trust but retains trustee power to revoke beneficiary designations. Entire trust value ($2M) pulls back.
• Split Gift with Predeceased Spouse: $50,000 gift split 50/50 in 2023; spouse died in 2024. Include decedent’s half plus spouse’s if in spouse’s estate.

These scenarios highlight why early estate planning—beyond simple wills—is vital.

2025 Updates and Key Changes for Form 706 Schedule G

The 2025 revisions emphasize efficiency: Schedules are now separate PDFs, with clearer numbering and portability prompts. No major Schedule G overhauls, but note:

• Inflation Adjustments: Exclusion rises to $13,990,000; annual gift exclusion $19,000.
• Closing Letter Fee: Reduced to $56 (effective May 21, 2025).
• Portability: Easier DSUE elections, but Schedule G gifts still factor into exclusions.
• GST Exemption: Matches estate exclusion at $13,990,000; report direct skips on Schedules R/R-1.

Check IRS.gov/Form706 for drafts and final forms.

Common Mistakes to Avoid When Filing Schedule G

• Overlooking the 3-Year Window: Many forget to review old Forms 709—leading to underreporting.
• Misvaluing Retained Interests: Informal arrangements (e.g., “borrowing” gifted property) count as retention.
• Ignoring Split Gifts: Predeceased spouses’ portions can sneak in unexpectedly.
• No Appraisals: DIY valuations invite audits; use qualified appraisers for FMV.
• Forgetting Attachments: Always include statements for non-standard transfers.

Penalties apply for negligence, so document everything.

Conclusion: Master Schedule G for Smarter Estate Tax Planning

IRS Form 706 Schedule G is more than paperwork—it’s a safeguard against unintended estate tax hikes from lifetime transfers. By reporting retained interests, recent gifts, and revocable powers accurately, executors can streamline filing and optimize deductions. With the 2025 exclusion at $13,990,000, most estates avoid tax, but portability and GST rules make Form 706 worthwhile for many.

Consult a tax professional or estate attorney for personalized advice, especially with trusts or international assets. Download the latest forms and instructions at IRS.gov/Form706 to stay compliant. Proper planning today preserves more for tomorrow—start reviewing those lifetime transfers now.

This article is for informational purposes only and not tax advice. Always refer to official IRS guidance.

 

IRS Form 706 (Schedule A) – Real Estate – When a loved one passes away, navigating the estate tax process can feel overwhelming, especially when it comes to valuing and reporting assets like real estate. IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, is the key document executors use to calculate federal estate taxes under Chapter 11 of the Internal Revenue Code. Within this form, Schedule A – Real Estate plays a crucial role for estates that include property such as homes, land, farms, or commercial buildings. If you’re searching for “how to fill out IRS Form 706 Schedule A” or “real estate valuation on Form 706,” this guide breaks it down step by step, using the latest 2025 instructions from the IRS.

Whether your estate exceeds the 2025 basic exclusion amount of $13,990,000 or you’re filing solely to elect portability of the deceased spouse unused exclusion (DSUE), accurate reporting on Schedule A ensures compliance and minimizes IRS scrutiny. Let’s dive into what Schedule A entails, how to complete it, and tips for avoiding common pitfalls.

 

What is IRS Form 706 Schedule A?

Schedule A of Form 706 is dedicated to listing and valuing all real estate owned by the decedent at the time of death or contracted to purchase. This includes fee simple interests, life estates, remainders, or joint tenancies (though jointly held property may also require Schedule E). Real estate encompasses residential homes, rental properties, vacant land, farms, and commercial buildings—both domestic and foreign.

The purpose? To include these assets in the gross estate’s fair market value (FMV), which determines if estate taxes apply. For 2025 decedents, estates below $13,990,000 generally owe no tax, but filing is required for portability or if gifts push the adjusted taxable estate over the threshold. Note: Real estate under sections 2035–2038 (e.g., transfers with retained interests) goes on Schedule G, not A.

In 2025, Form 706 and its schedules underwent a redesign for better efficiency, but Schedule A’s core requirements remain unchanged: detailed descriptions, valuations, and supporting documents.

When Do You Need to File Schedule A with Form 706?

File Schedule A if the gross estate includes any real estate, regardless of value—especially for portability elections. Even if the estate is below the exclusion, report assets eligible for marital or charitable deductions to claim portability properly.

Key triggers:

• Taxable Estates: Gross estate + adjusted taxable gifts > $13,990,000 (2025 threshold).
• Portability: To transfer DSUE to a surviving spouse (extended filing deadline: up to 5 years post-death under Rev. Proc. 2022-32).
• Generation-Skipping Transfer (GST) Tax: If real estate involves direct skips to skip persons.

File Form 706 within 9 months of death (extendable 6 months via Form 4768). Late filings risk penalties, but protective elections for special valuations are allowed.

Step-by-Step Guide: How to Fill Out Schedule A

Completing Schedule A requires precision. Use the August 2025 version (Rev. 9-2025) from IRS.gov. Number each item sequentially, and if space runs short, attach Schedule W or additional sheets.

Step 1: Gather Essential Documents

• Deeds, titles, and legal descriptions.
• Appraisals (required for values over $3,000 or unique properties).
• Mortgage statements (for encumbrances).
• Rental records (for accrued income).
• For farms/businesses: Proof of qualified use under section 2032A.

Step 2: Describe the Property (Column ii)

Provide a detailed description so the IRS can locate and verify it:

• Location: Street address, city, county, state, ZIP; legal details (lot, block, township, range).
• Nature of Interest: Fee simple, life estate, remainder; percentage owned.
• Acquisition: Date and method (purchase, inheritance).
• Encumbrances: Mortgages, liens (note if estate is liable).
• Other: Improvements (e.g., buildings), zoning, comparable sales.

Example: “House and lot at 123 Main St., Anytown, USA (Lot 5, Block 2, Square 10); fee simple; acquired by purchase on January 1, 2010; subject to $100,000 mortgage (estate liable).”

For trusts or entities, attach a statement with the EIN.

Step 3: Value the Property (Columns iii–v)

Report fair market value (FMV) as of the date of death (default) or alternate date (if elected). FMV is the price between a willing buyer and seller, neither compelled.

Column	Description	Key Notes
(iii) Alternate Valuation Date	Enter 6 months post-death (or sale date if earlier). Leave blank unless electing §2032.	Election must reduce gross estate and tax; irrevocable once filed.
(iv) Alternate Value	FMV on alternate date.	Include principal and income separately for rents collected post-death.
(v) Value	Full FMV (date of death or alternate).	– Mortgaged (estate liable): Full value here; deduct debt on Schedule K. – Not liable: Equity (value minus debt, not below $0). – Contracted purchase: Full value; deduct unpaid on Schedule K.

Add Accrued Items: Include unpaid rent or interest as of death (e.g., $5,400 accrued rent).

Attach appraisals explaining the method (e.g., comparable sales, income approach). Discounts (10–25%) may apply for fractional interests; explain and attach support.

Step 4: Handle Special Cases

• Partial Interests: Use actuarial tables in Reg. §20.2031-7 for life estates.
• Portability-Only Filings: Estimate values for deduction-eligible property; no detailed columns needed under Reg. §20.2010-2(a)(7)(ii).
• More Space Needed: Total on attachments and carry to Schedule A.

Step 5: Total and Transfer

Sum columns (iv) and (v); enter on Form 706, Part 5 (Recapitulation), lines 1–9.

IRS Form 706 (Schedule A) Download and Printable

Download and Print: IRS Form 706 (Schedule A)

Special-Use Valuation: Reducing Real Estate Taxes Under Section 2032A

For family farms or closely held business real property, elect special-use valuation to value at actual use (not FMV), potentially saving up to $1,420,000 in 2025. Requirements:

• Used in farming/business for 5 of 8 years pre-death.
• Material participation by decedent/heirs.
• Passes to qualified heir (e.g., family member).

How to Elect:

1. Complete Schedule A at FMV initially.
2. File Schedule T (formerly A-1) with notice, agreement, and worksheets (e.g., gross cash rental method: subtract taxes from rentals, divide by Rev. Rul. 66-70 rate).
3. Protective election: Check “Yes” on Form 706, Part 3, line 2; supplement within 60 days if qualified.

Recapture applies if heirs sell or cease qualified use (file Form 706-A).

Common Mistakes to Avoid When Filing Schedule A

• Inaccurate Descriptions: Vague details lead to IRS inquiries—be specific.
• Valuation Errors: Skipping appraisals or ignoring discounts/understating FMV can trigger 20% penalties under §6662.
• Missing Attachments: Always include appraisals and explanations.
• Alternate Valuation Oversights: Applies estate-wide; ensure it reduces taxes.
• Joint Property Mix-Up: Report on Schedule E if jointly held.

2025 Updates for IRS Form 706 Schedule A

• Inflation Adjustments: Basic exclusion $13,990,000; special-use ceiling $1,420,000; installment tax portion $1,900,000.
• Form Redesign: Streamlined layouts; Schedule T for special-use elections.
• Closing Letter Fee: Reduced to $56 (from $67) for requests after May 21, 2025—request via Pay.gov after 9 months.
• Interest Rates: Use Tables 1–2 from Rev. Rul. 2025-16 for special valuations.

Final Thoughts: Seek Professional Help for Smooth Filing

Mastering IRS Form 706 Schedule A real estate valuation ensures your estate tax return is accurate and timely. With potential penalties for errors, consult a CPA, estate attorney, or appraiser—especially for complex properties or special elections. Download the latest forms and instructions at IRS.gov, and remember: proper documentation is your best defense.

Filing estate taxes honors your loved one’s legacy while securing your family’s future. If you have questions on “Form 706 Schedule A examples” or need personalized advice, professional guidance is invaluable. For more resources, visit the IRS Estate and Gift Tax page.

This article is for informational purposes only and not tax advice. Always refer to official IRS publications for your situation.

 

IRS Form 706 (Schedule M) – Bequests, etc., to Surviving Spouse – In estate planning, preserving wealth for your loved ones is paramount, especially amid the 40% federal estate tax rate on amounts exceeding the 2025 basic exclusion of $13,990,000. For married couples, the unlimited marital deduction under IRC Section 2056 offers a lifeline, allowing transfers to a surviving spouse to pass tax-free—deferring taxes until the second spouse’s death. This is where IRS Form 706 Schedule M comes in: the key schedule on the United States Estate (and Generation-Skipping Transfer) Tax Return for claiming this deduction.

Whether you’re an executor filing Form 706 or an advisor optimizing a client’s plan, mastering Schedule M can slash estate taxes dramatically. In this SEO-optimized guide, we’ll explore its purpose, eligibility, completion steps, and 2025 updates, drawing from the IRS’s September 2025 instructions and Section 2056 regulations. Maximize your marital deduction while ensuring compliance—your family’s financial legacy depends on it.

 

What Is IRS Form 706 Schedule M?

IRS Form 706 calculates federal estate and generation-skipping transfer (GST) taxes for decedents’ estates exceeding the applicable exclusion amount. Schedule M, revised August 2025, is the dedicated attachment for reporting the marital deduction—deducting the value of property interests passing from the decedent to the surviving spouse.

Under Section 2056(a), this unlimited deduction subtracts qualifying transfers from the gross estate (valued on Schedules A–I), reducing the taxable estate without limits. For instance, a $20 million estate leaving $10 million to a U.S. citizen spouse deducts the full $10 million, leaving only $10 million taxable (minus other deductions). It’s irrevocable and applies only to interests included in the gross estate, preventing double taxation across spouses.

Schedule M handles outright transfers, trusts, annuities, and elections like Qualified Terminable Interest Property (QTIP) under Section 2056(b)(7). For non-citizen spouses, it ties into Qualified Domestic Trusts (QDOTs) via Section 2056A. The total from Schedule M flows to Form 706, Part V, line 21.

Who Needs to File Schedule M on Form 706?

Attach Schedule M if claiming any marital deduction on Form 706, required for:

• Taxable estates: Gross estate + adjusted taxable gifts > $13,990,000 (2025 threshold).
• Portability elections: Filing solely to transfer the Deceased Spousal Unused Exclusion (DSUE) amount, even if no tax due—report estimated values for marital assets under Treas. Reg. § 20.2010-2(a)(7)(ii).
• U.S. citizen/resident decedents: With property passing to a surviving spouse.
• Non-citizen spouses: If using a QDOT; otherwise, no deduction without one.

Omit if no deduction is claimed (enter zero on Form 706). Nonresident noncitizens use Form 706-NA, with Schedule M limited to U.S.-situs property. Always verify with IRS Exempt Organizations tools or a tax pro—errors can trigger audits or lost deductions.

Qualifying Property Interests for the Marital Deduction

Section 2056 allows deductions for interests “passing” to the spouse, but terminable interests (e.g., life estates with remainders to others) are nondeductible unless electing QTIP treatment. Key qualifiers:

Eligible Transfers

• Outright bequests: Cash, real estate, stocks, or personal property directly to the spouse via will or trust.
• Joint interests: Surviving joint tenancy or tenancy by the entirety (full value if decedent furnished all consideration).
• Life estates with power: Spouse’s life interest + general power of appointment over the entire interest (exercisable alone, in all events).
• Insurance/annuities: Proceeds payable to spouse; joint/survivor annuities under Section 2039.
• Powers of appointment: Spouse as appointee or taker in default.
• QTIP property: Terminable interests (e.g., income for spouse’s life, remainder to kids) elected as QTIP—full value deductible if spouse gets all income annually/more frequently and has power over the whole.
• QDOT for non-citizens: Property to a trust with U.S. trustee(s), deferring tax on distributions.

Non-Qualifying Interests

• Terminable without QTIP: E.g., life estate where remainder goes to non-spouse, allowing post-termination enjoyment.
• Partial interests from mixed assets: Reduce by nondeductible portions (e.g., $100,000 bequest from $110,000 asset with $10,000 retained for child).
• Foreign spouses without QDOT: No deduction; annual gift exclusion rises to $190,000 in 2025.
• Disclaimers: Only if qualified under Section 2518.

Valuations use fair market value (FMV) at death (or alternate date), reduced by encumbrances, federal/state/GST taxes paid from the interest, and administration expenses. Actuarial values for life estates use Section 7520 tables (per Rev. Rul. 2025-16).

IRS Form 706 (Schedule M) Download and Printable

Download and Print: IRS Form 706 (Schedule M)

Step-by-Step Guide: How to Complete Schedule M

Use the August 2025 Schedule M (standalone PDF). Attach continuation sheets (Schedule W) if needed. Gather: will/trust docs, appraisals, tax computations.

Key Steps

1. Header and Elections:
   • Line 1: Check “Yes” for qualified disclaimer; attach copy.
   • Line 3: For Section 2039 annuities, check “Yes” to elect out of QTIP (irrevocable).
   • Part IV, Line 14: If QDOT, check box and detail trust (name, EIN, trustees, value).
2. Report Property Interests:
   • Line 4: Table for each transfer—(i) Item number; (ii) Description (CUSIP/EIN for securities, will clause); (iii) Value before taxes.
   • For QTIP: List terminable interests; presumed election if deducted.
   • Residue: Attach computation (after non-probate, legacies, taxes).
3. Adjustments:
   • Lines 5–10: Subtotals for real/personal property, annuities, other.
   • Lines 13a–13d: Subtract federal estate/GST (13a), state death/GST (13b–13c) taxes from the interest; net to Line 14.
4. Totals and Transfer:
   • Line 14: Net marital deduction to Form 706, Part V, line 21.
   • Line 15: QTIP value from predeceased spouse (Schedule F).
5. Attachments:
   • Will/certified copy, trusts, disclaimers, QDOT agreements, actuarial computations.

Line/Column	Required Info	Example
Line 4(ii) Description	Asset details, reference	“50% interest in residence at 123 Main St. (Schedule A, Item 1); Will Article III”
Line 4(iii) Value	Pre-tax FMV	“$500,000 (appraised 12/05/2025)”
Line 13a Federal Taxes	Amount paid from interest	“$20,000 estate tax allocation”
Line 14 Total	Net deduction	“$480,000 after taxes”

For partial QTIP: Use formula (deducted amount / total value).

2025 Updates to Form 706 and Schedule M

The IRS redesigned Form 706 in 2025: Schedules now standalone PDFs for easier e-filing. Key inflation adjustments:

• Basic exclusion/DSUE: $13,990,000 (up from $13.61M in 2024).
• GST exemption: Matches at $13,990,000.
• Non-citizen gift exclusion: $190,000 annual.
• Closing letter fee: $56 (down from $67, post-May 21, 2025).
• Section 7520 rates: Updated in Rev. Rul. 2025-16 for valuations.

No Schedule M-specific changes, but portability filers must estimate marital assets. Sunset risk: Post-2025, exemption halves (~$7M, inflation-adjusted), amplifying marital strategies.

Common Mistakes to Avoid on Schedule M

Pitfalls can disallow deductions:

• No QTIP election: Terminable interests default nondeductible—attach statement.
• QDOT oversights: Non-citizen transfers without U.S. trustee/withholding.
• Valuation errors: Forgetting tax reductions or using basis vs. FMV.
• Double-dipping: Deducting same property under Sections 2053/2056.
• Missing attachments: IRS rejects without proof; retain 3+ years.

Audits spike on large deductions—document everything.

Real-World Examples of Schedule M Deductions

• Outright Bequest: $2M cash to spouse (Will Clause 2)—deduct full FMV on Line 4.
• Joint Home: $1M residence (50% decedent’s)—deduct $500,000 (Schedule A cross-ref).
• QTIP Trust: $3M trust (income to spouse, remainder to kids)—elect QTIP; deduct $3M minus $100K taxes = $2.9M.
• QDOT Annuity: $500K to non-citizen spouse’s QDOT—deduct full, defer tax on distributions.
• Life Estate: Spouse (age 65) gets income from $400K property + power—actuarial value ~$200K deductible.

These save ~$1.2M in taxes (40% rate) per $3M deducted.

Final Thoughts: Leverage Schedule M for Tax-Free Spousal Transfers

IRS Form 706 Schedule M empowers couples to defer estate taxes indefinitely via the unlimited marital deduction, complementing 2025’s $13.99M exclusion and portability. Pair with QTIP/QDOT for flexibility, but plan ahead—2026 sunset looms.

Download forms at IRS.gov/Form706; consult a CPA or estate attorney for tailored advice. Secure your legacy today—tax-free transfers build tomorrow’s wealth.

This guide is informational, not advice. Verify with IRS resources for your circumstances.

 

IRS Form 706 (Schedule O) – Charitable, Public, and Similar Gifts and Bequests – In the realm of estate planning, charitable giving isn’t just a noble act—it’s a powerful tool for reducing federal estate taxes. For decedents dying in 2025, where the basic exclusion amount stands at $13,990,000, estates exceeding this threshold face a 40% tax rate on the excess. Enter IRS Form 706 Schedule O, the dedicated schedule for reporting and claiming deductions for charitable, public, and similar gifts and bequests under Internal Revenue Code (IRC) Section 2055. This unlimited deduction can significantly lower your taxable estate, potentially saving your heirs substantial taxes.

Whether you’re an executor navigating Form 706 or an estate planner advising clients, understanding Schedule O is essential. In this comprehensive guide, we’ll break down its purpose, eligibility, step-by-step completion process, and 2025-specific updates. Backed by the latest IRS instructions (revised September 2025), we’ll ensure you’re equipped to maximize these tax benefits while complying with federal rules.

 

What Is IRS Form 706 Schedule O?

IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, is filed by the executor of a U.S. citizen or resident’s estate to calculate federal estate taxes on assets transferred at death. Schedule O is a supporting schedule attached to Form 706, specifically designed to document charitable, public, and similar gifts and bequests that qualify for an estate tax deduction.

Under IRC Section 2055, these transfers are deductible from the gross estate without any dollar limit—unlike income tax charitable deductions. The deduction reduces the taxable estate, directly lowering the estate tax liability. For example, if an estate valued at $15 million includes a $2 million bequest to a qualified charity, only $13 million (plus any other deductions) becomes taxable, potentially keeping it under the 2025 exclusion threshold.

Schedule O ensures the IRS can verify that transfers meet strict qualification criteria, such as going to eligible organizations and being irrevocable. It’s particularly relevant for estates involving wills, trusts, or lifetime gifts includible in the gross estate.

Who Needs to File Schedule O on Form 706?

You must complete and attach Schedule O if the decedent’s estate claims any deduction for transfers under Section 2055. This applies to:

• Estates required to file Form 706: When the gross estate plus adjusted taxable gifts exceeds the basic exclusion amount ($13,990,000 for 2025 decedents).
• Portability elections: Even if no tax is due, filing Form 706 to elect portability of the deceased spousal unused exclusion (DSUE) may require Schedule O if charitable deductions are claimed.
• Non-filing estates: Under the special rule in Treas. Reg. § 20.2010-2(a)(7)(ii), portability filers aren’t required to report full values of marital or charitable assets but must estimate them for the gross estate total.

Executors of nonresident noncitizen estates use Form 706-NA and may attach Schedule O, but deductions are limited to U.S.-situs transfers to domestic entities unless a treaty applies. Always consult a tax professional, as errors can trigger audits or disallowed deductions.

Qualifying Gifts and Bequests for Schedule O Deductions

Not every gift to a charity qualifies. Section 2055 requires transfers to be outright, irrevocable, and for public benefit. Here’s what counts:

Eligible Recipients

Deductions are allowed for bequests, devises, legacies, or transfers to:

• Section 170(c) organizations: Charitable, religious, educational, scientific, or literary entities (e.g., 501(c)(3) nonprofits like universities, hospitals, or foundations) that don’t benefit private individuals or engage in substantial lobbying.
• Government entities: The U.S., states, local governments, or the District of Columbia for public purposes.
• Fraternal societies or trustees: Operating exclusively for religious, charitable, etc., purposes.
• Veterans’ organizations: Incorporated by Act of Congress (e.g., American Legion).
• Qualified gratuitous transfers: To employee stock ownership plans (ESOPs).
• Indian tribal governments: Treated as states under Rev. Proc. 2008-55.
• Conservation easements: Post-death grants under Section 2031(c)(9) for qualified real property interests.

Types of Qualifying Transfers

• Outright bequests: Cash, stocks, real estate, or personal property directly to the charity via will or trust.
• Lifetime transfers: Gifts includible in the gross estate (e.g., under Sections 2035–2038).
• Qualified disclaimers: Irrevocable refusals under Section 2518, if filed timely.
• Termination of powers: Releasing a power to invade or consume property for charitable benefit.
• Split-interest trusts: Only the charitable portion (e.g., in charitable remainder trusts) qualifies; report the full value but deduct only the charity’s share.

Non-Qualifying Transfers

• Conditional gifts where charity receives less than the full amount.
• Transfers benefiting private individuals (e.g., family foundations with personal perks).
• Foreign charities, unless a treaty allows (e.g., under the U.S.-Canada treaty).

The deduction is limited to the property’s fair market value (FMV) at the date of death (or alternate valuation date if elected), reduced by any estate, GST, state death, or other taxes payable from the bequest. For installment payments under Section 6166, subtract estimated interest.

IRS Form 706 (Schedule O) Download and Printable

Download and Print: IRS Form 706 (Schedule O)

Step-by-Step Guide: How to Complete Schedule O

Schedule O requires detailed reporting for each qualifying transfer. Use the redesigned 2025 version (Rev. August 2025) for decedents dying after December 31, 2024. If more space is needed, attach Schedule W (Continuation Schedule).

Key Steps

1. Gather Documentation: Collect the will, trust instruments, disclaimers, and appraisals. Verify recipient eligibility via IRS Exempt Organizations Select Check tool.
2. Value the Property: Determine FMV as of the valuation date. For non-cash assets like stock or real estate, obtain professional appraisals.
3. List Each Transfer: Use the table format on Schedule O. For each item:
   • Column (a): Description (e.g., “100 shares of XYZ Corp. stock”).
   • Column (b): Date of gift/bequest.
   • Column (c): Recipient name and address.
   • Column (d): FMV and amount deductible (after reductions).
   • Column (e): Reference to will/trust provision.
   • Column (f): Any conditions or trust details.
4. Handle Special Cases:
   • Residuary bequests: Attach a computation showing the charitable share after specific legacies and taxes.
   • Trusts: Report only the actuarial value passing to charity; include life tenant ages and income projections.
5. Total and Transfer: Sum column (d) on line 8. Enter on Form 706, Part V, line 18 (Recapitulation of Deductions).
6. Attach Supporting Evidence:
   • Certified will copy.
   • Trust agreements.
   • Disclaimer documents.
   • Sale/purchase verifications if applicable.

Column	Required Information	Example
(a) Description	Detailed asset info	“Residence at 123 Main St., valued at $500,000 FMV”
(b) Date	Transfer date	“Date of death: 06/15/2025”
(c) Recipient	Full name/address	“American Red Cross, 431 18th St NW, Washington, DC 20006”
(d) Amount Deductible	FMV minus taxes	“$500,000 minus $20,000 est. state tax = $480,000”
(e) Provision	Will clause reference	“Article V, Clause 2”
(f) Conditions	Restrictions/trust info	“For disaster relief programs only”

2025 Updates to Form 706 and Schedule O

The IRS redesigned Form 706 and its schedules in 2025 for better efficiency, separating schedules into standalone PDFs (no longer bundled with the main form). Key changes include:

• Inflation Adjustments: Basic exclusion rises to $13,990,000; special-use valuation ceiling to $1,420,000.
• Closing Letter Fee: Reduced to $56 (from $67) for requests after May 21, 2025.
• No Schedule O-Specific Changes: Procedures remain consistent, but use the updated layout for attachments.

These tweaks streamline filing but emphasize accurate valuations amid rising estate values.

Common Mistakes to Avoid When Filing Schedule O

Even seasoned executors falter here—avoid these pitfalls:

• Ineligible Recipients: Double-check 501(c)(3) status; donor-advised funds may not qualify if not outright.
• Incomplete Valuations: Forgetting tax reductions or using cost basis instead of FMV.
• Missing Attachments: IRS may disallow deductions without proof.
• Overlooking Trusts: Reporting full trust value instead of just the charitable portion.
• Portability Oversights: Underestimating charitable assets for DSUE calculations.

Audits often target large deductions, so retain records for three years post-filing.

Real-World Examples of Schedule O in Action

• Cash Bequest: A decedent leaves $100,000 to a local library (qualified under Section 170(c)). Deduct the full amount on line 1, reducing the taxable estate by $100,000—no tax on that portion.
• Appreciated Stock: $250,000 in stock (basis $50,000) to a university. Deduct FMV ($250,000); heirs avoid capital gains, and the estate saves ~$100,000 in taxes (at 40% rate).
• Residuary Gift: Estate residue of $5 million, with 20% ($1 million) to charity after $800,000 in specific legacies and taxes. Attach computation; deduct $1 million.
• Charitable Remainder Trust: $300,000 trust pays income to family for life, then to charity. Deduct the present value of the remainder interest (~$150,000, per IRS tables).

These examples illustrate how Schedule O turns philanthropy into tax efficiency.

Final Thoughts: Maximize Your Charitable Legacy with Schedule O

Claiming deductions on IRS Form 706 Schedule O isn’t just about compliance—it’s about honoring the decedent’s wishes while shielding family wealth from estate taxes. With no cap on the deduction and 2025’s higher exclusion, strategic giving via wills or trusts can eliminate tax entirely for many estates.

Ready to file? Download the latest forms from IRS.gov/Form706 and consider professional guidance for complex estates. For personalized advice, consult an estate tax attorney or CPA. Your charitable impact today builds a tax-smart tomorrow.

This article is for informational purposes only and not tax advice. Always refer to official IRS resources for your situation.

 

IRS Form 706 (Schedule J) – Funeral Expenses and Expenses Incurred In Administering Property Subject to Claims – Estate administration often involves significant outlays for final arrangements and settling affairs, but these costs aren’t lost—they can reduce your estate tax liability. IRS Form 706 Schedule J—Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims—allows executors to itemize and deduct these essential expenditures from the gross estate, potentially saving thousands in federal estate taxes for qualifying estates. With the 2025 basic exclusion amount at $13,990,000, only larger estates face taxation, but accurate Schedule J reporting is vital for compliance and portability elections.

As of December 2025, the IRS has streamlined Form 706 with redesigned schedules for easier filing, including separate attachments for Schedule J. This guide draws from official IRS resources to explain Schedule J’s role, eligible deductions, valuation rules, step-by-step completion, real examples, and pitfalls to avoid. Whether you’re an executor navigating a complex estate or a professional advisor, mastering Schedule J ensures deductions are maximized while minimizing audit risks.

 

What Is IRS Form 706 Schedule J?

Schedule J is a key deduction schedule attached to Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return. It captures two main categories: funeral expenses and administration costs related to property subject to claims—meaning assets available to pay debts, taxes, and administrative fees. These deductions reduce the taxable estate under IRC Section 2053, directly lowering the estate tax rate (up to 40%) applied to amounts over the $13,990,000 exclusion.

Unlike income tax deductions for individuals (where funeral costs are generally nondeductible), estates can claim these on Form 706 if the gross estate exceeds the filing threshold. However, if deducted here, they cannot be claimed on the estate’s income tax return (Form 1041) without a waiver—preventing double-dipping. Schedule J totals flow to Form 706, Part V, line 14, contributing to the overall deductions in the tax computation.

For 2025 decedents, filing is required if the gross estate plus adjusted taxable gifts exceeds $13,990,000, or to elect deceased spousal unused exclusion (DSUE) portability—even for smaller estates. Always attach receipts and evidence; estimates are allowed if exact amounts aren’t yet known, but protective claims via Schedule PC may be needed for contingent expenses.

When Do You Need to File Schedule J?

Complete Schedule J if the estate claims any funeral or administration expenses for property subject to claims. Even if totals are zero, answer the preliminary reimbursement question (line 1) on the schedule. This applies to all Form 706 filers, but it’s especially critical for taxable estates where deductions can slash liabilities.

The Form 706 deadline is nine months after death, extendable six months via Form 4768 (automatic for payment, but not filing). Late deductions risk disallowance, penalties (up to 25% of underpayment), and interest. For portability-only filings, estimate but don’t fully itemize marital/charitable assets under Reg. §20.2010-2(a)(7)(ii). Mail to the IRS per instructions, with Schedule J attached.

Expenses must be “necessary and reasonable” under local law, paid from estate funds, and not reimbursed (e.g., subtract Social Security’s $255 death benefit unless to the spouse).

Types of Deductions on Schedule J

Schedule J divides into funeral expenses (lines 1-5) and administration expenses (lines 6-11), with a total on line 12. Only claim costs for property subject to claims here; non-claim property goes to Schedule L. Here’s a breakdown of common deductible items:

Category	Description and Examples	Reporting Notes
Funeral Expenses	Costs for burial, cremation, memorial services, caskets, plots, monuments, and transportation.	Itemize on line A; subtract reimbursements (e.g., VA benefits). Perpetual care fees included.
Executor Commissions	Fees to the personal representative for managing the estate (e.g., 2-5% of estate value per state law).	Line B; attach Form 4421 declaration. Taxable income to executor.
Attorney and Accountant Fees	Legal/probate costs, tax preparation (Form 706/1041), and accounting services.	Lines C and D; must be court-approved or reasonable. Include final 1040 prep.
Appraisal and Valuation Fees	Professional valuations for real estate, art, businesses, etc., required for Form 706.	Line E; essential for FMV reporting.
Other Administration	Bonds, court filing fees, brokers/auctioneers (if necessary for debts/taxes), insurance during probate, interest on estate loans.	Line F; exclude post-death interest on §6166 installments.
Miscellaneous	Storage/preservation of assets, advertising for creditors, travel for administration.	Use Schedule W if space limited; must be directly tied to claims payment.

These must be itemized with payee details and amounts; totals from continuations (Schedule W) carry over.

How to Value and Substantiate Deductions on Schedule J

Deductions are valued at actual or estimated amounts paid/incurred by the filing date, based on “reasonable” costs under IRC §2053. Attach receipts, invoices, court orders, and Form 4421 for commissions/fees. For unpaid items (e.g., pending attorney bills), estimate conservatively; use Schedule PC for protective claims on contingent expenses without entering a value.

Reimbursements (e.g., insurance, government benefits) reduce deductibility—attach a statement if potential (line 1 “Yes”). Overstatements can trigger 20% accuracy penalties under §6662; under local law, non-allowable items (e.g., excessive luncheons) get disallowed. Retain records for three years post-filing.

Step-by-Step Guide to Completing Schedule J

1. Preliminary Question (Line 1): Check “Yes” if any expense might be reimbursed; attach details.
2. Funeral Expenses (Lines 2-5): List itemized costs on line A (or Schedule W); total on line 5.
3. Administration Expenses (Lines 6-11): Break out executors (B), attorneys (C), accountants (D), appraisers (E), other (F), and miscellaneous; subtotal on line 11.
4. Grand Total (Line 12): Add lines 5 and 11; carry to Form 706, Part V, item 14.
5. Attachments: Include evidence; use Schedule W for extras. Sign Form 706.
6. Review: Ensure no double-dipping with Form 1041; elect via waiver if needed.

For digital filing (e-file available for 2025), use IRS-approved software.

Real-World Examples of Schedule J Deductions

• Funeral Costs: Estate pays $12,000 for casket, service, and plot; receives $255 SSA benefit. Deduct $11,745 on line A.
• Executor and Legal Fees: $20,000 commission (2% of $1M estate) + $15,000 probate attorney. Total $35,000 on lines B/C; attach Form 4421.
• Appraisals and Misc: $3,000 real estate appraisal + $2,500 bond premium. Deduct $5,500 on lines E/F.
• Full Admin Suite: For a $15M estate, total Schedule J: $25,000 funeral (net), $50,000 fees, $10,000 misc = $85,000 deduction, reducing taxable estate by that amount.

These illustrate how itemization supports IRS scrutiny.

Common Mistakes to Avoid on Schedule J

Executors frequently err on Schedule J, inviting audits or disallowances. Key pitfalls:

• Misclassifying Expenses: Claiming non-claim property costs here (use Schedule L instead).
• Forgetting Reimbursements: Not subtracting benefits like SSA/VA payments.
• Double-Dipping: Deducting on both Form 706 and 1041 without waiver.
• Unsubstantiated Claims: Skipping receipts or Form 4421; e.g., vague “luncheon” costs disallowed as non-eulogistic.
• Overestimating: Inflating “reasonable” fees beyond state norms, triggering penalties.

Consult professionals to verify.

Recent Changes and 2025 Updates for Schedule J

The September 2025 Form 706 revision separates schedules into standalone PDFs for efficiency, with Schedule J retaining its structure but benefiting from clearer formatting. The estate tax closing letter fee dropped to $56 (from $67) effective May 21, 2025. No Schedule J-specific overhauls, but inflation adjustments raise the exclusion to $13,990,000 and special-use ceiling to $1,420,000. Enhanced e-filing and portability rules emphasize timely, accurate deductions.

Final Thoughts: Optimize Your Estate with Schedule J

Schedule J transforms funeral and administration burdens into valuable estate tax shields, essential for 2025’s high-exclusion landscape. By itemizing meticulously, executors not only comply but also preserve more for heirs—potentially via DSUE portability. Start with detailed records, estimate wisely, and seek expert guidance for complex cases.

Download the latest at IRS.gov/Form706. Proper Schedule J use honors the decedent while streamlining probate.

This article provides general information, not tax advice. Consult a qualified estate professional for personalized guidance.# IRS Form 706 Schedule J: A Complete Guide to Deducting Funeral Expenses and Administration Costs in 2025

Estate administration often involves significant outlays for final arrangements and settling affairs, but these costs aren’t lost—they can reduce your estate tax liability. IRS Form 706 Schedule J—Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims—allows executors to itemize and deduct these essential expenditures from the gross estate, potentially saving thousands in federal estate taxes for qualifying estates. With the 2025 basic exclusion amount at $13,990,000, only larger estates face taxation, but accurate Schedule J reporting is vital for compliance and portability elections.

As of December 2025, the IRS has streamlined Form 706 with redesigned schedules for easier filing, including separate attachments for Schedule J. This guide draws from official IRS resources to explain Schedule J’s role, eligible deductions, valuation rules, step-by-step completion, real examples, and pitfalls to avoid. Whether you’re an executor navigating a complex estate or a professional advisor, mastering Schedule J ensures deductions are maximized while minimizing audit risks.

What Is IRS Form 706 Schedule J?

Schedule J is a key deduction schedule attached to Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return. It captures two main categories: funeral expenses and administration costs related to property subject to claims—meaning assets available to pay debts, taxes, and administrative fees. These deductions reduce the taxable estate under IRC Section 2053, directly lowering the estate tax rate (up to 40%) applied to amounts over the $13,990,000 exclusion.

Unlike income tax deductions for individuals (where funeral costs are generally nondeductible), estates can claim these on Form 706 if the gross estate exceeds the filing threshold. However, if deducted here, they cannot be claimed on the estate’s income tax return (Form 1041) without a waiver—preventing double-dipping. Schedule J totals flow to Form 706, Part V, line 14, contributing to the overall deductions in the tax computation.

For 2025 decedents, filing is required if the gross estate plus adjusted taxable gifts exceeds $13,990,000, or to elect deceased spousal unused exclusion (DSUE) portability—even for smaller estates. Always attach receipts and evidence; estimates are allowed if exact amounts aren’t yet known, but protective claims via Schedule PC may be needed for contingent expenses.

When Do You Need to File Schedule J?

Complete Schedule J if the estate claims any funeral or administration expenses for property subject to claims. Even if totals are zero, answer the preliminary reimbursement question (line 1) on the schedule. This applies to all Form 706 filers, but it’s especially critical for taxable estates where deductions can slash liabilities.

The Form 706 deadline is nine months after death, extendable six months via Form 4768 (automatic for payment, but not filing). Late deductions risk disallowance, penalties (up to 25% of underpayment), and interest. For portability-only filings, estimate but don’t fully itemize marital/charitable assets under Reg. §20.2010-2(a)(7)(ii). Mail to the IRS per instructions, with Schedule J attached.

Expenses must be “necessary and reasonable” under local law, paid from estate funds, and not reimbursed (e.g., subtract Social Security’s $255 death benefit unless to the spouse).

Types of Deductions on Schedule J

Schedule J divides into funeral expenses (lines 1-5) and administration expenses (lines 6-11), with a total on line 12. Only claim costs for property subject to claims here; non-claim property goes to Schedule L. Here’s a breakdown of common deductible items:

Category	Description and Examples	Reporting Notes
Funeral Expenses	Costs for burial, cremation, memorial services, caskets, plots, monuments, and transportation.	Itemize on line A; subtract reimbursements (e.g., VA benefits). Perpetual care fees included.
Executor Commissions	Fees to the personal representative for managing the estate (e.g., 2-5% of estate value per state law).	Line B; attach Form 4421 declaration. Taxable income to executor.
Attorney and Accountant Fees	Legal/probate costs, tax preparation (Form 706/1041), and accounting services.	Lines C and D; must be court-approved or reasonable. Include final 1040 prep.
Appraisal and Valuation Fees	Professional valuations for real estate, art, businesses, etc., required for Form 706.	Line E; essential for FMV reporting.
Other Administration	Bonds, court filing fees, brokers/auctioneers (if necessary for debts/taxes), insurance during probate, interest on estate loans.	Line F; exclude post-death interest on §6166 installments.
Miscellaneous	Storage/preservation of assets, advertising for creditors, travel for administration.	Use Schedule W if space limited; must be directly tied to claims payment.

These must be itemized with payee details and amounts; totals from continuations (Schedule W) carry over.

IRS Form 706 (Schedule J) Download and Printable

Download and Print: IRS Form 706 (Schedule J)

How to Value and Substantiate Deductions on Schedule J

Deductions are valued at actual or estimated amounts paid/incurred by the filing date, based on “reasonable” costs under IRC §2053. Attach receipts, invoices, court orders, and Form 4421 for commissions/fees. For unpaid items (e.g., pending attorney bills), estimate conservatively; use Schedule PC for protective claims on contingent expenses without entering a value.

Reimbursements (e.g., insurance, government benefits) reduce deductibility—attach a statement if potential (line 1 “Yes”). Overstatements can trigger 20% accuracy penalties under §6662; under local law, non-allowable items (e.g., excessive luncheons) get disallowed. Retain records for three years post-filing.

Step-by-Step Guide to Completing Schedule J

1. Preliminary Question (Line 1): Check “Yes” if any expense might be reimbursed; attach details.
2. **Funeral Expenses

 

IRS Form 706 (Schedule F) – Other Miscellaneous Property Not Reportable Under Any Other Schedule – Navigating estate taxes can be daunting, especially when dealing with assets that don’t fit neatly into standard categories. For executors handling IRS Form 706—the United States Estate (and Generation-Skipping Transfer) Tax Return—Schedule F serves as the catch-all for “Other Miscellaneous Property Not Reportable Under Any Other Schedule.” This schedule ensures that every asset in the decedent’s gross estate is accounted for, helping to accurately calculate potential estate tax liabilities.

As of 2025, the IRS has redesigned Form 706 and its schedules for greater efficiency, with the basic exclusion amount rising to $13,990,000 for decedents dying this year. Understanding Schedule F is crucial for compliance, avoiding penalties, and maximizing deductions like portability of the deceased spouse’s unused exclusion (DSUE). In this guide, we’ll break down what Schedule F entails, when to use it, valuation methods, examples, and tips to sidestep common pitfalls.

 

What Is IRS Form 706 Schedule F?

Schedule F is a dedicated attachment to Form 706 used to report miscellaneous assets that aren’t covered by Schedules A (real estate), B (stocks and bonds), C (mortgages, notes, and cash), D (insurance on the decedent’s life), or E (jointly owned property). Its primary purpose is to capture the fair market value (FMV) of these items as of the decedent’s date of death (or alternate valuation date if elected), contributing to the total gross estate reported in Part V of Form 706.

This schedule is essential for estates exceeding the filing threshold—generally, when the gross estate plus adjusted taxable gifts surpasses the basic exclusion amount ($13,990,000 in 2025). Even if no tax is due, filing Form 706 with Schedule F may be required to elect DSUE portability, allowing a surviving spouse to use the decedent’s unused exemption on future transfers.

Key questions on Schedule F include whether the estate includes section 2044 property (e.g., qualified terminable interest property or QTIP from prior elections), digital assets, or interests in partnerships and close corporations. Answering “Yes” triggers detailed reporting and potential attachments.

When Do You Need to File Schedule F?

File Schedule F if the decedent’s estate includes any miscellaneous property not fitting other schedules. This is mandatory for complete Form 706 returns, but if values are zero across all items, you may skip it—though you must still answer the preliminary questions. For portability elections under the special rule of Reg. §20.2010-2(a)(7)(ii), estimate values for marital or charitable deduction-eligible assets without full Schedule F details.

The overall Form 706 deadline is nine months after death, with a six-month extension via Form 4768. Late filings risk penalties, interest, and invalidating DSUE elections. Attach Schedule F to the main form and mail to the IRS address in the instructions.

Types of Property Reported on Schedule F

Schedule F covers a broad array of assets, ensuring nothing slips through the cracks. Here’s a breakdown of common categories, drawn from IRS guidelines:

Category	Description and Examples	Reporting Notes
Digital Assets	Cryptocurrencies, NFTs, stablecoins, digital wallets, online accounts on distributed ledgers.	Report FMV on date of death; treated as intangible property for transfer taxes.
Section 2044 Property	QTIP from prior marital/gift tax elections (full value includible if surviving spouse retains interest).	Qualifies for marital deduction if requirements met; report full date-of-death value.
Business Interests	Partnerships (e.g., family limited), LLCs, unincorporated businesses, sole proprietorships.	Attach EIN, 5-year financials, and goodwill valuation; real estate in proprietorships described like Schedule A.
Corporate Stock	Shares in inactive/close corporations (limited shareholders, no public market).	Value per Reg. §20.2031-2; similar to Schedule B but for non-marketable stock.
Claims & Rights	Debts/refunds due decedent (e.g., tax refunds, judgments), royalties, leaseholds, reversionary/remainder interests.	Exclude notes/mortgages (Schedule C); checks payable to decedent included.
Personal & Collectibles	Household goods, apparel, vehicles, farm products/livestock/machinery, art/jewelry/coins (> $3,000 requires appraisal).	Safe-deposit box contents reported here; expert sworn appraisal for valuables.
Insurance & Accounts	Policies on another’s life (attach Form 712); Archer MSAs/HSAs (unless to spouse).	Full economic value for single-premium policies per Rev. Rul. 78-137.
Other Interests	Fractional real estate interests, trust shares, rights not elsewhere classified.	Attach trust instruments; use Schedule W for extras.

These assets must be detailed with descriptions, values, and supporting documents. If discounts apply (e.g., for lack of control/marketability), answer “Yes” on Form 706 Part IV, line 11b, and attach a statement with percentages.

How to Value Property on Schedule F

Valuation is the cornerstone of Schedule F, using FMV—the price a willing buyer/seller would agree upon. Key rules:

• Date of Death vs. Alternate Valuation: Use death date FMV unless electing six-month alternate valuation (reduces tax if values drop post-death).
• Digital Assets: Exchange rate or blockchain data on valuation date.
• Business Interests: Follow Reg. §§20.2031-2/3; include net earnings history and expert appraisals for close entities.
• Collectibles/Art: Qualified appraisals under Reg. §20.2031-6(b) for items over $3,000; attach appraiser qualifications.
• Discounts: Calculate effective rate (e.g., (pro-rata value – discounted value) / pro-rata value); substantiate with facts.

Understatements trigger 20% penalties under §6662 if values are 65% or less of actual FMV. Always retain records for IRS audits.

IRS Form 706 (Schedule F) Download and Printable

Download and Print: IRS Form 706 (Schedule F)

Step-by-Step Guide to Completing Schedule F

1. Answer Preliminary Questions: On Form 706 Part IV, disclose section 2044 property, digital assets, etc.
2. List Assets: Use columns for item description, alternate valuation value, and death-date value. Total in the recapitulation.
3. Attach Evidence: Include appraisals, Form 712 (insurance), trust docs, business financials.
4. Handle Discounts: If applicable, attach explanatory statement.
5. Integrate with Form 706: Carry totals to Part V; estimate for portability if under special rules.
6. Sign and File: Executor signs; paper-file with all attachments.

For space issues, use Schedule W or additional sheets.

Real-World Examples of Schedule F Reporting

• Digital Assets: A decedent held $50,000 in Bitcoin and an NFT collection valued at $20,000 on death date. Report descriptions (e.g., wallet addresses) and FMVs on Schedule F, citing exchange data.
• Family Business: 40% interest in a family LLC worth $200,000 pro-rata, discounted 25% for marketability to $150,000. Attach EIN and 5-year P&Ls.
• Collectibles: Jewelry appraised at $10,000; attach sworn expert report. Household items like a $5,000 car listed separately.
• QTIP Property: $300,000 home from prior spouse’s QTIP election; full value reported, eligible for marital deduction.
• Tax Refund Claim: $15,000 IRS refund due; report as a claim against the government.

These examples highlight Schedule F’s versatility for non-traditional assets.

Common Mistakes to Avoid on Schedule F

Executors often trip up on Schedule F, leading to audits or penalties. Watch for:

• Misclassification: Placing business interests on Schedule B instead of F; always check if marketable.
• Inaccurate Valuations: Skipping appraisals for valuables or ignoring discounts; results in 20% penalties.
• Missing Attachments: Forgetting Form 712 or business financials; triggers IRS requests.
• Overlooking Digital Assets: Failing to report crypto/NFTs, now explicitly required.
• Math Errors: Totalling columns incorrectly; cross-check with Part V.

Consult a tax professional early to mitigate risks.

Recent Changes and 2025 Updates for Schedule F

The 2025 Form 706 revision (September 2025) includes a redesigned layout for easier navigation, with separated schedules and updated thresholds: basic exclusion at $13,990,000, special-use valuation ceiling at $1,420,000. Digital assets get explicit mention on Schedule F, aligning with growing holdings. The estate tax closing letter fee dropped to $56 (effective May 21, 2025). No major Schedule F-specific overhauls, but enhanced portability rules emphasize timely filing.

Final Thoughts: Mastering Schedule F for a Smooth Estate Process

Schedule F ensures comprehensive reporting of miscellaneous property on IRS Form 706, safeguarding against underreporting and supporting DSUE elections. With the 2025 exclusion at $13.99 million, most estates avoid tax, but accurate Schedule F completion is key to compliance. Gather appraisals early, document everything, and consider professional help for complex assets like businesses or digital holdings.

For the latest forms and instructions, visit IRS.gov/Form706. Proper handling not only minimizes taxes but honors the decedent’s legacy efficiently.

This article is for informational purposes only and not tax advice. Consult a qualified estate tax professional for your situation.

 

IRS Form 706 (Schedule B) – Stocks and Bonds – When it comes to estate planning, accurately valuing and reporting assets like stocks and bonds is crucial for minimizing tax liabilities and ensuring compliance with IRS regulations. IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, requires executors to detail the decedent’s gross estate, and Schedule B specifically handles stocks and bonds. As of 2025, with the basic exclusion amount raised to $13,990,000, more estates may qualify for filing, especially for portability elections. This SEO-optimized guide breaks down everything you need to know about IRS Form 706 Schedule B, including instructions, valuation methods, and common pitfalls, based on the latest IRS publications.

Whether you’re an executor navigating a complex portfolio or a financial advisor preparing clients, understanding Schedule B for stocks and bonds can save time and avoid audits. Let’s dive in.

 

What Is IRS Form 706 and When Is Schedule B Required?

IRS Form 706 is filed by the executor of a U.S. citizen or resident decedent’s estate to calculate federal estate tax under Chapter 11 of the Internal Revenue Code, as well as generation-skipping transfer (GST) tax on direct skips. It’s due nine months after the date of death, with an automatic six-month extension available via Form 4768. For 2025 decedents, filing is mandatory if the gross estate plus adjusted taxable gifts exceeds the $13,990,000 basic exclusion amount—or even if below that threshold to elect portability of the deceased spouse unused exclusion (DSUE) amount to a surviving spouse.

Schedule B (Form 706) is a supporting schedule used exclusively to report stocks and bonds included in the gross estate. Attach it to Form 706 if the estate contains any such assets, even if filing solely for portability. It feeds into Part 5 of Form 706 (Recapitulation) to tally the total gross estate value. Exemptions like municipal bonds are still reported at full fair market value (FMV), though their interest may be tax-exempt.

Key Form 706 Thresholds (2025)	Amount
Basic Exclusion Amount	$13,990,000
Special-Use Valuation Reduction Limit	$1,420,000
Estate Tax Closing Letter Fee (effective May 21, 2025)	$56

Failure to complete Schedule B accurately can trigger IRS scrutiny, penalties, or delays in closing the estate.

What Assets Are Reported on Schedule B?

Schedule B covers taxable stocks and bonds owned by the decedent at death, including those in brokerage accounts, inactive corporations, or closely held entities. It excludes jointly held property (report on Schedule E) or real estate interests (Schedule A).

Stocks on Schedule B

• Common and Preferred Shares: Corporate stocks, mutual funds, and equity in partnerships or LLCs.
• Closely Held or Inactive Stocks: Family-owned companies with ≤45 shareholders and no established market; include 20%+ voting stock or equity in businesses.
• Fractional Interests: Partial shares or rights in real estate entities.
• Accrued Dividends: Declared but unpaid dividends if the decedent was the stockholder of record.

Bonds on Schedule B

• Corporate and Government Bonds: Including U.S. Treasuries, corporate debt, and municipal bonds (full FMV, despite income tax exemption).
• Accrued Interest: Interest earned up to the date of death.
• Other Debt Instruments: Notes or obligations with fixed maturity.

Special cases include stocks in trade or business corporations and bonds in trusts. For portability-only filings, report assets eligible for marital or charitable deductions but leave valuation columns blank if not required.

IRS Form 706 (Schedule B) Download and Printable

Download and Print: IRS Form 706 (Schedule B)

Step-by-Step Guide: How to Complete IRS Form 706 Schedule B

Completing Schedule B requires detailed listings to ensure IRS compliance. Use the August 2025 revision (attached to Form 706) and the September 2025 instructions. Number items sequentially starting from 1, and use Schedule W as a continuation sheet if needed.

Required Columns on Schedule B

Column	Description	Example
(a) Item No.	Sequential number	1
(b) Description	Full details of the asset	“100 shares common stock, XYZ Corp., CUSIP 123456789”
(c) EIN/CUSIP No.	9-digit identifier (use EIN for unlisted)	12-3456789
(d) Unit Value (Date of Death)	FMV per unit	$50.00
(e) Unit Value (Alternate Date)	If alternate valuation elected	$45.00
(f) Total Value (Alternate Date)	Total for alternate	$4,500
(g) Total Value (Date of Death)	Final FMV total	$5,000

Detailed Reporting for Stocks

1. Description: Include corporation name, number of shares, class (common/preferred), par value, principal exchange (e.g., NYSE), and CUSIP number. For unlisted stocks, add the business office address and state of incorporation.
2. Valuation: Use FMV at death (or alternate date). For listed stocks, average high/low prices from the date of death.
3. Closely Held Stocks: Describe ownership (e.g., “Family limited, 10 shareholders”), attach balance sheets, 5-year dividend history, and appraisals. Reference Reg. §20.2031-2 for factors like earnings power and net worth.

Detailed Reporting for Bonds

1. Description: Quantity/denomination, obligor name, maturity date, interest rate, due date, principal exchange, and CUSIP. For unlisted bonds, include the issuer’s business office.
2. Valuation: FMV plus accrued interest. Calculate accrual: (Days since last payment / 365) × annual interest.
3. Exempt Bonds: Report full value, e.g., municipal bonds at face + accrual.

Round values to the nearest dollar (drop cents under 50; round up 50+). Retain evidence like brokerage statements or WSJ quotes.

Valuation Methods for Stocks and Bonds on Schedule B

Valuation is the heart of Schedule B, governed by FMV rules under Reg. §20.2031-1: the price a willing buyer/seller would agree upon, without compulsion.

Stocks Valuation

• Publicly Traded: Mean of high/low closing prices on death date (or adjacent trading days if none). Use broker statements or services like the Wall Street Journal.
• Closely Held: No market? Factor in book value, recent irregular sales, dividends, and appraisals. Attach financial statements.
• Accrued Dividends: Report separately if declared pre-death but unpaid.

Bonds Valuation

• Listed Bonds: Mean of high/low quoted prices, or bid/asked average if no trades.
• Unlisted Bonds: FMV based on similar securities; add accrued interest prorated daily.
• Example: A $10,000 bond with 5% interest, last paid 90 days before death: Accrued = ($10,000 × 0.05 × 90/365) ≈ $1,232. Total FMV = Face + Accrued.

Alternate Valuation Election

Elect on Form 706 Part 3 to value assets six months post-death (or disposition date if sold earlier). Useful for volatile markets, but it applies estate-wide and requires adjustments for changes (e.g., dividends paid post-death).

For no/nominal value assets, list last with explanations.

Common Mistakes to Avoid When Filing Schedule B

• Omitting CUSIP/EIN: Always include; it’s mandatory for identification.
• Incorrect Accruals: Miscalculating bond interest can inflate values—use 365-day proration.
• Ignoring Closely Held Rules: Failing to attach financials for inactive stocks invites audits.
• Forgetting Evidence: Keep broker letters, appraisals, and sales records; IRS may request them.
• Portability Oversights: Even small estates must report deductible assets if electing DSUE.

2025 Updates for IRS Form 706 Schedule B

The September 2025 instructions reflect redesigned forms for efficiency, with inflation adjustments: basic exclusion at $13,990,000 and special-use cap at $1,420,000. The estate tax closing letter fee dropped to $56 starting May 21, 2025. No major changes to Schedule B valuation, but enhanced guidance on estimating under Reg. §20.2010-2(a)(7)(ii) for large estates. Always check IRS.gov/Form706 for legislation post-publication.

Conclusion: Master Schedule B for Smooth Estate Tax Filing

Navigating IRS Form 706 Schedule B ensures your estate tax return accurately reflects stocks and bonds, potentially saving thousands in taxes or penalties. With the 2025 exclusion hike, proactive filing for portability is key. Consult a tax professional for complex portfolios, and download the latest forms from IRS.gov.

Keywords: IRS Form 706 Schedule B, estate tax stocks bonds, 2025 Form 706 instructions, Schedule B valuation methods, estate tax reporting guide.

For official resources:

• Instructions for Form 706 (09/2025)
• About Form 706
• Schedule B PDF (August 2025)

 

IRS Form 706 (Schedule D) – Insurance on the Decedent’s Life – When a loved one passes away, navigating estate taxes can feel overwhelming. One critical component is accurately reporting life insurance policies on IRS Form 706 Schedule D, which ensures compliance with federal estate tax rules. Whether you’re an executor handling a complex estate or simply educating yourself on estate planning, this guide breaks down everything you need to know about Schedule D—its purpose, filing requirements, and step-by-step instructions. Updated for decedents dying in 2025, this article draws from official IRS resources to help you file confidently and avoid costly penalties.

 

What Is IRS Form 706 and Why Does Schedule D Matter?

IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, is filed by the executor of a decedent’s estate to calculate federal estate taxes under Internal Revenue Code Chapter 11. It also computes generation-skipping transfer (GST) taxes on direct skips. For decedents dying in 2025, Form 706 is required if the gross estate, plus adjusted taxable gifts and the specific gift tax exemption, exceeds the basic exclusion amount of $13,990,000.

Within Form 706, Schedule D (Form 706) specifically addresses “Insurance on the Decedent’s Life.” Its primary purpose is to report every life insurance policy insuring the decedent’s life, regardless of whether the proceeds are includible in the gross estate. This includes traditional policies, death benefits from fraternal societies, or even no-fault automobile insurance if unconditionally payable upon death.

Why report non-includible policies? The IRS requires full disclosure to verify inclusion under Section 2042 of the IRC. Failing to attach Schedule D when required can delay processing or trigger penalties. In 2025, the form and its schedules have been redesigned for efficiency, with schedules now as separate PDFs and parts renumbered using Roman numerals (I-VI).

When Must You File Form 706 Schedule D?

You must complete and attach Schedule D to Form 706 if:

• Form 706 is required (e.g., gross estate over $13,990,000 for 2025 decedents).
• There was any insurance on the decedent’s life, even if proceeds go directly to beneficiaries outside the estate.
• You answer “Yes” to Part IV, lines 9a or 9b on Form 706, indicating life insurance exists (includible or not).

Even if filing solely for portability of the deceased spousal unused exclusion (DSUE) amount, consider reporting insurance assets eligible for marital or charitable deductions—though values may not need entry if not required. File by the due date: nine months after death, with possible extensions via Form 4768. Note: As of 2025, e-filing is not supported; mail to the IRS in Kansas City, MO.

Key Rules: What Life Insurance Proceeds Are Includible in the Gross Estate?

Under IRC Section 2042, life insurance proceeds are includible if:

1. Receivable by the Estate: Full proceeds if payable to the executor or usable for estate benefits (e.g., paying taxes, debts, or charges), even if premiums were paid by others.
2. Incidents of Ownership: The decedent possessed rights at death, including:
   • Right to economic benefits.
   • Power to change the beneficiary.
   • Ability to surrender or cancel the policy.
   • Power to assign or revoke assignment.
   • Right to pledge as loan collateral or borrow against cash value.
   • Reversionary interest exceeding 5% of the policy’s value immediately before death (e.g., if the decedent regains rights upon a contingency like the beneficiary’s predecease).

Policies owned by the decedent on their own life are typically includible, but exclusions apply if no incidents of ownership exist (e.g., employer-owned group life insurance). Non-includible proceeds under Section 2042 may still count via other sections (e.g., 2035-2038 for transfers); check Schedule G.

Inclusion Criteria	Examples	Includible Amount
Receivable by/for Estate	Policy pays estate debts	100% of proceeds
Incidents of Ownership	Decedent could change beneficiary	Full face value
Reversionary Interest >5%	Contingent regain of control	Full value if threshold met
Non-Includible (No Ownership)	Irrevocable trust-owned policy	$0 (explain in attachment)

Step-by-Step Guide: How to Complete IRS Form 706 Schedule D

Schedule D is straightforward but requires precision. List policies consecutively, starting with number 1. Use the redesigned 2025 form from IRS.gov.

Required Information and Columns

• Column (i): Item number (1, 2, etc.).
• Column (ii) Description: Insurance company name and policy number. Reference attached Form 712 as an exhibit.
• Column (iii) Beneficiary: Name and relationship to decedent.
• Column (iv) Alternate Valuation: Value as of six months after death (if elected on Form 706).
• Column (v) Value at Date of Death: Primary valuation column—enter net proceeds if paid in one sum (Form 712, line 24) or interpolated terminal reserve if not (line 25).
• Total: Sum column (v) and carry to Form 706, Part V, line 9.

For non-includible policies, enter $0 in value columns but fully describe and attach an explanation (e.g., “No incidents of ownership per policy terms”).

Valuation Methods for Life Insurance Policies

Valuation ensures fair market value at death:

Policy Type	Valuation Method	Source
One-Sum Proceeds	Net death benefit minus loans/fees	Form 712, line 24
Installment/Non-One-Sum	Interpolated terminal reserve (actuarial value)	Form 712, line 25
Single Premium/Paid-Up	Higher of surrender value or replacement cost	Rev. Rul. 78-137; Form 712, line 59
Alternate Election	Six-month post-death value (if elected)	Column (iv)

If Form 712 is unavailable, attach alternatives like policy riders, assignments, or proceeds checks.

IRS Form 706 (Schedule D) Download and Printable

Download and Print: IRS Form 706 (Schedule D)

Essential Documents: Don’t Forget Form 712

The cornerstone for Schedule D is Form 712, Life Insurance Statement, requested from each insurer. It provides policy details, proceeds, and values—attach one per policy. Other attachments:

• Explanations for exclusions.
• Death certificate and will copy (for overall Form 706).
• Prior gift tax returns (Form 709) if relevant.

Pro tip: Request Form 712 when claiming proceeds to avoid delays.

2025 Updates to Form 706 and Schedule D

The 2025 revisions streamline filing:

• Redesign: Main form now Parts I-VI (Roman numerals); schedules as separate downloads.
• Basic Exclusion: $13,990,000 (inflation-adjusted).
• Closing Letter Fee: Reduced to $56 (from $67) for requests after May 21, 2025—request via Pay.gov after 9 months.
• No major Schedule D changes, but enhanced instructions for portability elections.

Common Mistakes to Avoid When Filing Schedule D

Executors often trip up here—steer clear:

1. Omitting Policies: Report all insurance, even excluded ones.
2. Missing Form 712: Always attach or explain alternatives.
3. Valuation Errors: Use Form 712 lines correctly; don’t guess.
4. No Explanations: Attach details for $0 values to avoid audits.
5. Late Filing: Penalties under Section 6651 apply without extension.

Final Thoughts: Seek Professional Help for Peace of Mind

Completing IRS Form 706 Schedule D accurately safeguards the estate from penalties and ensures smooth processing. With the 2025 basic exclusion at $13,990,000, fewer estates need to file, but life insurance reporting remains crucial for those that do. Always consult a tax professional or estate attorney for personalized advice, especially with redesigns and portability elections.

For the latest forms and instructions, visit IRS.gov/Form706. Proper planning today can honor your loved one’s legacy tomorrow.

This article is for informational purposes only and not tax advice. Verify with current IRS publications.

Related Searches: IRS Form 706 filing deadline 2025, life insurance estate tax inclusion, Form 712 life insurance statement.