2017 Estate Tax Return (M706) Instructions

1 12017 Estate Tax Form m706 InstructionsQuestions?You can find forms and information, includ-ing answers to frequently asked questions and options for paying electronically, on our website us an email Call us at:651-556-3075 Weekdays, 8 to 4:30 write to:Minnesota Revenue Mail Station 1315 St. Paul, MN 55146-1315 Forms You May NeedM706 Estate Tax ReturnM706Q Election to Claim the Qualified Small Business and Farm Property DeductionNeed Forms?Go to to down-load forms and other information, including: Estate Tax Fact Sheet 2, Qualified Small Business Property and QualifiedFarm Property Deduction Revenue Notice regarding the alternative value, special use valuation and adminis-trative deductionsWe ll provide information in another format upon request to persons with Information.

2 1 4 Filing and Paying Requirements .. 1 2 Due Dates and Payment Options .. 2 Line Instructions .. 4 6 Tax Table .. 5 Checklist ..7 Mailing Label .. 7 For estates of decedents whose dates of death are in calendar year 2017 What s New for 2017 Estate Tax Exclusion and Filing Require-mentThe exclusion amount and filing requirement for the Estate tax are rising incrementally for tax years 2017 to 2020. For 2017 decedents, the exclusion amount and tax filing thresh-old were increased from $ million to $ million. The exclusion amount is subtracted on Form m706 , Line maximum combined qualified small business property and farm property deduc-tion is decreasing each year as the exclusion amount increases.

3 However, the sum of the exclusion and the maximum combined qualified deduction) will remain at $5 RatesFor 2017 decedents the Estate tax rate ranges from 12% to 16%.Resident and Domicile DefinitionThe definition of a resident decedent has been modified. For details about determining domicile, visit our website at and search Individual Income Tax Tax ChangesEstates that claim the qualified small busi-ness property or qualified farm property deduction are subject to a three-year holding period. If the qualified heirs do not meet cer-tain requirements during this time, the Estate is subject to a Recapture Tax. New exceptions have been added for qualified farm property during the three-year holding period.

4 None of the following situa-tions will trigger the Recapture Tax: The farm property is acquired by a gov-ernmental unit through eminent domain for a public purpose. Part of the farm property (less than 1/5 of the claimed acreage) is reclassified for property taxes from 2a (agricultural) to 2b (rural vacant land), as long as the qualified heir has not substantially altered the property. Part of the farm property (consisting of a residence, garage, and up to 1 acre of land) is reclassified for property taxes from 2a (agricultural) to 4bb (residential non-homestead). The exceptions apply retroactively to the estates of all decedents dying after June 30, RequirementsIf the decedent was a resident of Minnesota at the time of death, the Estate is required to file Form m706 if the federal gross Estate plus federal adjusted taxable gifts made within three years of the decedent s death exceeds $2,100,000 on the date of death or if the Estate is required to file a federal Estate tax the decedent was a nonresident of Min-nesota.

5 The Estate is required to file Form m706 if property with situs in Minnesota is included in the federal gross Estate and the federal gross Estate plus federal adjusted taxable gifts made within three years of the decedent s death exceeds $2,100,000 on the date of death or if the Estate is required to file a federal Estate tax Return . The federal gross Estate is determined by completing the federal Form 706 (see page 4). The federal adjusted taxable gifts are defined in section 2001(b) of the Internal Revenue Code.( , subd. 1)Who Must File?If the decedent s Estate is being probated, the Probate Court or Probate Registrar will appoint someone as personal representative also called executor or administrator of the decedent s Estate .

6 That person is then responsible for filing Form m706 for the Estate . In some cases, the Probate Court or Probate Registrar will appoint more than one person as executor. In such cases, all persons who have been appointed as executors are jointly responsible for filing the the Estate is not being probated, all per-sons who will receive assets included in the decedent s federal gross Estate (line 1 of fed-eral Form 706) are responsible for filing the Minnesota Return . If more than one person will receive the assets, all persons receiving the assets should choose a mutually agree-able person among them to file the Estate tax returns.

7 If one person cannot be agreed on, each person must file a Minnesota Return for the decedent s Estate . Each person must include on the Return not only the assets he or she is receiving, but also all of the dece-dent s assets being received by other persons and the names of the other persons. ( and )Continued2 General Information (continued)Who Must Pay? The executor is responsible for paying the Minnesota Estate tax. However, if the assets were distributed without reserving enough to pay the vari-ous taxes, the executor and beneficiaries are personally responsible for payment to the extent of the value of assets received respectively.

8 ( and )Deadline for Filing The regular due date for filing Form m706 is nine months after the date of death. ( , subd. 3)Filing extensions. The automatic extended due date for filing Form m706 is 15 months after the date of death or the amount of time granted by the Internal Revenue Service (IRS) to file the federal Estate tax Return , whichever is longer. ( , subd. 4)Any tax not paid by the regular due date is subject to penalties and interest (see Penal-ties on page 2).Deadline for Paying The Minnesota Estate tax must be paid no later than nine months after the date of death of the decedent. ( , subd. 3)If good cause exists, the department may extend the time for payment for a period of not more than six months.

9 To request a payment extension, submit your request in writing to the department prior to the regu-lar due date. ( , subd. 2)It may also be possible to pay the tax in installments if the Estate meets the require-ments explained in Paying Tax in Install-ments on the next Tax in Installments If the Minnesota Estate tax is $5,000 or more and the IRS, under IRC sections 6161 or 6166, has granted the Estate an extension of time to pay the federal Estate tax, the Estate may pay the Minnesota Estate tax in installments if the requirements explained below are be allowed to pay the Minnesota Estate tax in installments, the executor must notify the commissioner in writing no later than nine months after the date of death of the decedent.

10 The letter must indicate that the Estate will pay the Minnesota Estate tax in installments and the dates the payments will be made. The dates must be the same as the dates on which the federal Estate tax install-ments will be Determine the number of days from Jan. 1 to date of Divide step 5 by 365, and round the result to five decimal Multiply step 6 by the interest rate in ef-fect for that year (see Interest on page 3).8 Multiply step 7 by the tax still Add step 4 and step 8. This is the interest to include with your you fail to make an installment on time, you cannot continue to pay the tax in install-ments. Instead, you must pay within 90 days from the date of the missed installment the full amount of unpaid Minnesota Estate tax, a late payment penalty on the unpaid tax, plus , if you missed the installment date for what you believe is a reasonable cause, write to the Commissioner of Revenue explaining why the payment was late.