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Stephen G.
Stephen G., Sr Income Tax Expert
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Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Hello, I am preparing a Year 2012 Form 706. Husband passed

Resolved Question:

Hello,
I am preparing a Year 2012 Form 706. Husband passed away survived by spouse. The estate is not taxable due to the Unlimited Marital Deduction. I have 3 questions:
1. Husband & wife owned 100% of an LLC with a rental property in it. This LLC was also in their trust and considered community property. What Schedule do I report this on?
2. Husband & wife own 40% of an LLC/Partnership with commercial rental property in it, also in their trust. Is this reported on Schedule F?
3. Lastly, for the above 2 LLC's is it really necessary to attach to Form 706 a statement of assets & liabilities for the valuation date and for the 5 years before the valuation date? Appraisals were done.

Thank you in advance for your assistance
Kari
Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.

Anne :

Hi

Anne :

Thank you using justanswer

Anne :

I'm assuming that this is a revocable trust, meaning that the pay docs (1099 SSA) come in the individual's ss#

Anne :

Hi I see you're here

Customer:

Hi,

Anne :

as for the rentals, they should continue to be reported on Schedule E

Customer:

The 1099 SSA did come in the indicviduals ss#. When the husband passed away a survivors trust and a martial trust were created.

Anne :

but the wife would get the 'stepped up basis"

Customer:

Yes, appraisals were done so I have that information and that is the value I am using

Anne :

I need to check 1 thing,do you mind waiting a minute?

Customer:

No problem, thank you!

Anne :

Basically, since the husband passed, the wife inherits everything, and no 706 form is required

Anne :

You will file the tax return just as you did for prior years

Customer:

I have to do a Form 706 because the estate is over the $5,250,000.00. No tax will apply because the unlimited marital deduction is being used

Customer:

I meant 5,120,000.00 for year 2012

Anne :

I'm reading something different, so let me see if I just read it wrong.....

Anne :

Are you here?

Customer:

Yes.

Customer:

Are you reading?

Anne :

some how the rest of our conversation got lost for me

Anne :

yes

Anne :

I should be done soon.....I just want to be sure I have everythig right

Customer:

Okay, I was just sitting here, so I'm not sure what happened

Anne :

beats me........this is the first week that they're REALLY merged Justanswer and Pearl

Anne :

bound to be some quirks

Customer:

Ahh , now I understand

Anne :

I'm taking some extra time because I had always been told that you didn't need to file anything until after BOTH spouses die

Anne :

However, I've been doing this 28 years........and my long term memory is better than my short term

Anne :

I just want to be sure I don't lead you down the wrong pass

Anne :

path

Customer:

Thank you,

Anne :

your welcome

Anne :

Here's what I've found

Anne :

ost marriage-oriented trusts postpone payment of estate taxes until both spouses in a marriage have died. A marital deduction trust allows you to put property in trust with your spouse as the beneficiary. Upon your death, your spouse has the right to use the property in the trust.


No matter how valuable the property in the trust is even if it exceeds that year’s federal estate tax exemption amount, your spouse won’t owe any federal estate taxes. When your spouse dies, any leftover amount transfers to the beneficiaries that your spouse determined.

Anne :

first word is Most sorry

Anne :

This is the rule that I've always heard

Customer:

True, the there is no estate tax due at the first death, but in order to use the unlimited martial deduction a Form 706 needs to be filed.

Anne :

hang with me please my computerr is so slow I' siggning off and then right bac on should take mrew than a miu minu

Customer:

No worries...

Anne :

You're being so patient.............honest this rarely happens..I have already tuped most of the question befoeI see it

Anne :

hence the mnusspellings

Customer:

I am researching at the same time..

Anne :

I'm so sorry that my computer is acting p.....I think I need to reboot it....and since this will cause more delay for you, I will '"opt out" if you want and that will put this back on the open question board

Anne :

You've been so patient. but I understand you'd like an answer

Customer:

Yes go ahead and put me back on the open board. Thanks anyway :)

Anne :

I'm so sorry

Customer:

No worries. Have A Great Day!

Anne :

you too!

Expert:  Stephen G. replied 1 year ago.

Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.

First a couple of questions;

Are you using the August 2012 Revision of the 706 & instructions and when did you download it? (There was an error in the initial version of the instructions which has now been corrected).

Since you are in a Community Property State, the husbands Gross estate only includes his share of the community property, much like you would a tenants in common interest.

Therefore for any community property, you do not include anything on Schedule E - Jointly Held Property.

 

So, Basically everything in the Trust belonging to the Husband under the community property rules would be reported under the valuation of the Trust on Schedule G of the 706 with the information required by Schedule G provided.

 

Hopefully your 706 is on extension.

 

Note.

An executor can only elect to transfer the DSUE amount to the surviving spouse if the Form 706 is filed timely; that is, within 9 months of the decedent's date of death or, if you have received an extension of time to file, before the 6-month extension period ends.

 

Here's a link to the final corrected version of the 706 Instructions for the August 2012 Revision of the 706 as currently published on IRS.gov

 

http://www.irs.gov/pub/irs-prior/i706--2012.pdf

 

 

Customer: replied 1 year ago.

Hello,
I am preparing a Year 2012 Form 706. Husband passed away survived by spouse. The estate is not taxable due to the Unlimited Marital Deduction. I have 3 questions:
1. Husband & wife owned 100% of an LLC with a rental property in it. This LLC was also in their trust and considered community property. What Schedule do I report this on?
2. Husband & wife own 40% of an LLC/Partnership with commercial rental property in it, also in their trust. Is this reported on Schedule F?
3. Lastly, for the above 2 LLC's is it really necessary to attach to Form 706 a statement of assets & liabilities for the valuation date and for the 5 years before the valuation date? Appraisals were done.

Thank you in advance for your assistance
Kari

Expert:  Stephen G. replied 1 year ago.
As far as your last question is concerned, the appraisals of the property in the trust should be sufficient in these circumstances.

There's no trade or business here; just rental property; I'm sure the trust doesn't normally prepare financial statements every year, so any 5-year Assets & Liability statement wouldn't be readily available; also, once the assets were in the trust, there weren't transfers in & out of the trust in any attempt to avoid estate taxes, so there would be no point in providing historical data.

The date of death fair market values of the rental property, factored down for the decedent's interest in the trust would govern in any case.

Since there's no estate tax due no matter what the valuation, the estate tax auditors (who are mostly attorneys) are most interested in estate where there may be additional estate tax due. They don't really focus on the income tax basis of the assets transferred to the beneficiaries of the estate.
Expert:  Stephen G. replied 1 year ago.
Did you not see my answers to your first two questions?

Here's a copy of my post:

Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.

First a couple of questions;

Are you using the August 2012 Revision of the 706 & instructions and when did you download it? (There was an error in the initial version of the instructions which has now been corrected).

Since you are in a Community Property State, the husbands Gross estate only includes his share of the community property, much like you would a tenants in common interest.

Therefore for any community property, you do not include anything on Schedule E - Jointly Held Property.

 

So, Basically everything in the Trust belonging to the Husband under the community property rules would be reported under the valuation of the Trust on Schedule G of the 706 with the information required by Schedule G provided.

 

Hopefully your 706 is on extension.

 

Note.

An executor can only elect to transfer the DSUE amount to the surviving spouse if the Form 706 is filed timely; that is, within 9 months of the decedent's date of death or, if you have received an extension of time to file, before the 6-month extension period ends.

 

Here's a link to the final corrected version of the 706 Instructions for the August 2012 Revision of the 706 as currently published on IRS.gov

 

http://www.irs.gov/pub/irs-prior/i706--2012.pdf

 

 



Edited by Stephen G. on 11/6/2013 at 3:09 PM EST
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4193
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Stephen G.
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