Massachusetts Estate Tax Instructions FormM-706

1 Commonwealth of MassachusettsDepartment of RevenueGeneral Information2 Recent Changes2 Calculating the Estate Tax2 Line by Line Instructions4 Table of Contents6 MassachusettsEstate TaxInstructionsForm M-706 For every Estate with date of deathon or after January 1, 2003 ENESPETITPLACIDAMSVBLIBERTATEOIVTEEMNote :All references to the Internal Revenue Code,the Code or any section of the Code refer to theInternal Revenue Code in effect on December 31,2000. All references to the federal Form 706, UnitedStates Estate (and Generation-Skipping Transfer)Tax Return or to the Instructions for Form 706 re -fer to the July 1999 revisions of the federal estatetax return and the Changes The Form M-706 has been revised, and cannow be filed by entering information electronicallythrough MassTaxConnect. Filing through Mass -Tax Connect will result in faster processing, and aquicker generation of the Massachusetts EstateClosing Letter and the Certificate Releasing Mass-achusetts Estate Tax Lien.

2 The Power of Attorney sections on both theM-706 and M-4422 have been eliminated. In orderto grant a Power of Attorney, Form M-2848 mustbe filed. The Form M-4768 has been modified to accom-modate applications for an extension of time to fileand an extension of time to pay. The M-4768A hasbeen eliminated. The requirements to qualify for avalid extension of time to file and to pay remainunchanged. New lines have been added to the M-706 whichcorrespond directly to line items on the federalForm 706. (July 1999 revision). These are foundon page 2, and in Parts 5 and 6. Form M-792 will no longer need to be attachedto the M-706 to effect a release of the Massachu-setts Estate Lien. Rather, the information providedon the M-706, Part 7 will be used for this pur-pose. Once any tax due is paid, and the return isaccepted as filed, the Massachusetts Estate TaxClosing Letter, as well the Certificate ReleasingMassachusetts Estate Lien, will be issued.

3 Note: Itis important that Part 7 of the M-706 be fully com-pleted for each property needing a lien to provide all the information necessarywill delay issuance of the Certificate ReleasingMassachusetts Estate the Estate TaxEffective for dates of death on or after January 1,2003, the Massachusetts Estate tax is an amountcomputed using the credit for state death taxesallowed by section 2011 of the Internal RevenueCode in effect on December 31, 2000. , 2A. Future changes to the federal Estate taxlaw will not affect the Massachusetts Estate tax law,as the reference for Massachusetts Estate tax pur -poses is the Internal Revenue Code in effect on De -cember 31, credit for state death taxes is computed usingthe July 1999 revision of the federal Form 706,United States Estate (and Generation-SkippingTransfer) Tax Return and is entered on line 15 ofthat form. Portions of the July 1999 revision of thefederal Form 706 are not necessary for the com-putation of the credit for state death taxes and neednot be completed.

4 Completion of the following por-tions of the July 1999 revision of the federal Form706 is not required: lines 16 through 27 on page 1; the computation of the credit for federal gifttaxes on pre-1977 gifts (section 2012); Schedule P, Credit for Foreign Death Taxes; Form(s) 706-CE, Certificate of Payment ofForeign Death Tax; Schedule Q, Credit for Tax on Prior Transfers;and Schedule R, Generation-Skipping Transfer TaxThe credit for state death taxes computed on line 15of the July 1999 revision of the federal Form 706 isentered on line 2 of Part 1 of either Form M-706, Massachusetts Estate Tax Return, or Form M-4422,Application for Certificate Releasing MassachusettsEstate Tax Lien. The credit for state death taxes isused to compute the Massachusetts Estate of the Goodridge decisionon the Internal Revenue Codein effect on December 31, 2000 Beginning May 16, 2004 Massachusetts law per-mits same-sex couples to marry.

5 See Goodridgev. Department of Public Health, 440 Mass. 309(2003) and Technical Information Release 04-17, Massachusetts Tax Issues Associated with Same-Sex Marriages. As a result of the Goodridge deci-sion, the term spouse , for Massachusetts estatetax purposes, includes partners in a same-sexmarriage. The following three provisions of the De-cember 31, 2000 Internal Revenue Code reflect theMassachusetts Estate tax treatment of spouses ina same-sex deduction: A Massachusetts marital de-duction is allowable for property passing from adecedent to his/her surviving same-sex spouseto the same extent that property left to a survivinghusband or wife is allowable as a marital deduc-tion provided the requirements of IRC sec. 2056are property: Spouses in a same-sex marriageare allowed to include in the gross Estate of a de -cedent one-half the value of certain joint interestsunder IRC sec.

6 2040(b) in the same manner that ahusband and wife are permitted this treatment pro -vided the interest in property meets the require-ments of IRC sec. 2040(b)(2).Gifts to a third party: IRC sec. 2513 permits a giftmade by one spouse to any person to be consid-ered as made one-half by the donor and one-halfby the donor s spouse. This election is available tospouses in a same-sex marriage. Although Mass-achusetts does not have a gift tax, this sectioncan affect the application of related Estate tax pro -visions ( , the filing threshold). Note:This elec-tion requires the filing of pro forma federal gift taxreturns with the Massachusetts Estate Tax same-sex marriage is not recognized forfederal tax purposes, partners who elect to have agift of one spouse considered as made one-halfby each spouse are required to file pro forma fed-eral Form 709 or Form 709-A in accordance withthe filing requirements of IRC sec.

7 6075(b). Acopy of the federal gift tax returns filed with theInternal Revenue Service must also be filed withthe pro forma gift tax Act NoticeUnder the authority of 42 sec. 405(c)(2)(C)(i),and c. 62C, sec. 5, the Department of Rev-enue has the right to require an individual to furnishhis or her Social Security number on a state taxreturn. This information is mandatory. The Depart -ment of Revenue uses Social Security numbersfor taxpayer identification to assist in processingand keeping track of returns and in determiningand collecting the proper amount of tax due. c. 62C, sec. 40, the taxpayer s identifyingnumber is required to process a refund of overpaidtaxes. Although tax return information is generallyconfidential pursuant to c. 62C, sec. 21, theDepartment of Revenue may disclose return infor -mation to other taxing authorities and those enti-ties specified in c.

8 62C, secs. 21, 22 or 23,and as otherwise authorized by FilingRequirementsThe filing thresholds and exempt amounts for Mass -achusetts Estate tax purposes are the following:Year of deathThreshold/exemption2003 .. $2,700,0002004 .. $2,850,0002005 .. $2,950,0002006 and thereafter .. $1,000,000To determine whether a return must be filed for adecedent s Estate , add:1. the adjusted taxable gifts (under section 2001(b))made by the decedent after December 31, 1976; 2. the total specific exemption allowed under sec-tion 2521 (as in effect before its repeal by the TaxReform Act of 1976) for gifts made by the dece-dent after September 8, 1976; and3. the decedent s gross Estate valued at the dateof executor/personal representative must fileForm M-706, Massachusetts Estate Tax Return,2 General Informationfor any Estate in which the sum of the above threeitems exceeds the exempt amount for the year ofthe decedent s death.

9 For further information, seeTechnical Information Release 02-18, Tax ChangesContained in An Act Enhancing State Revenues and Related Acts and DOR Directive 03-2, IssuesArising from De coupl ing the Massachusetts EstateTax from the Federal Estate Tax. In addition, see Which Estates Must File on page 2 of the July1999 revision of the In structions for Form with deaths oc curring in 2003, the filingthresholds and exempt amounts are lower forMassachusetts Estate tax purposes than for fed-eral Estate tax taxable gifts affect the Massachusetts fil-ing threshold but are not added to the taxable es-tate (page 1, line 4 of the July 1999 revision of thefederal Form 706) for the computation of the creditfor state death taxes. Adjusted taxable gifts areadded to the taxable Estate for the computation oftentative tax using Table A, the unified rate sched-ule, that is on page 12 of the July 1999 revision ofthe Instructions for Form July 1999 revision of the Instructions for Form706 has information concerning adjusted taxablegifts in the Instructions for Part 2.

10 Lines 4 and 9 on page 4 and in the Worksheet TG-Taxable GiftsReconciliation and the Line 4 Worksheet- Adjusted Taxable Gifts Made After 1976 on page5. See the Instructions for Part 2. Line 12 forinfor mation concerning gifts made after Septem-ber 8, 1976 and before January 1, executor/personal representative of a nonres-ident decedent who owned or transferred, for lessthan full and adequate consideration, real Estate ortangible personal property located in Massachu-setts must file a Form M-706, Massachusetts Es-tate Tax Return, if the sum of the three items de-scribed above exceeds the exempt amount for theyear of the decedent s death. The Estate of a non-resident decedent may have a Massachusetts fil-ing requirement even if the value of the Massachu-setts real or tangible personal property is less thanthe exempt amount for the year of the decedent sdeath. The Estate tax for the Estate of a nonresi-dent decedent with Massachusetts property iscomputed in Part 3 of Form M-706 or FormM-4422.