Financial Glossary
Form 706 (Estate Tax Return)
Form 706 is the United States Estate (and Generation-Skipping Transfer) Tax Return, filed by the executor of an estate to report the value of a decedent's property and calculate any federal estate tax due. It inventories assets such as real estate, business interests, investments, and cash, then applies allowable deductions and the available exemption. It is also used to elect portability of a deceased spouse's unused exemption.
Problem & Application
For owners of closely held businesses, real estate portfolios, and family-run operations, Form 706 is where illiquid and hard-to-value assets, like a campground, rental properties, or shares in an operating company, must be appraised and reported accurately. Errors in valuation or missed elections can create large, unexpected tax bills or forfeit portability benefits for a surviving spouse. Because filing thresholds and exemption amounts change, executors should confirm current IRS guidance before assuming a return is or isn't required.
In Short
Form 706 is the central document for settling an estate's federal tax obligations, especially when business and real estate assets are involved. Accurate valuation and timely elections are what protect the family's wealth.