Form 706: United States Estate (And Generation-Skipping Transfer 2019-2024

Form 706: United States Estate (And Generation-Skipping Transfer: What You Should Know

IRS Form 706 & Generation S Who Must File a Form 706 on Your Estate? — You or your estate. If you are a U.S. resident (or if you have an estate subject to U.S. income tax or estate tax), then you must file Form 706 if you skip a generation. Example—Form 706-A or Form 706-B. If a donor (inherited via a will), skip generation and the gift taxes paid on the estate is less than the gifts paid during that generation and no other generation skip (and you owe income tax). See Form 6251 for estate taxation. Note the requirements are the same for U.S. and foreign gifts. It seems weird that the form is called Form 706 and the only thing listed is that you “skipped generation.” The Form 706 is required if the transfer tax calculation includes a transfer of property to which the death or the death waiver applies that was reported on Form 5471 and includes: a capital contribution (such as stock to a plan); an asset transferred from a qualified retirement plan (such as a 401(k)) but also included in the beneficiary's gross income; a qualified business or financial instrument  a property that passes to children or heirs without any change to the nature of the property; or a property of a partnership, limited partnership, or S corporation. Form 706-A and Form 706-B are the two forms that are called U.S. Estate, and Generation-Skipping Transfer Tax Return and Form 706 N are the two forms that are called Foreign Estate, and Generation-Skipping Transfer Tax Return.  Also note that it is not required to make a U.S. or foreign gifts in addition to this generation skip, just as much as you make U.S. or foreign gifts. Thus, you could also skip the transfers to a third cousin, or to a trust governed by the decedent's will, or a life trust, and the income tax on the distribution is not subject to GATT. A nonresident alien may be a United States resident (or have a U.S. estate) and still skip generation. (So might a nonresident alien who makes a donation to a U.S. charitable organization.

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