J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

39.9 Estate Tax for 2012

The estate tax is figured by the executor on Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return). An executor must file Form 706 for the estate of an individual dying in 2012 if the gross estate, plus adjusted taxable gifts made after 1976, is more than $5,120,000, the basic estate tax exemption for 2012. A timely Form 706 also must be filed, regardless of the size of the decedent’s gross estate, if the executor wants to make the portability election (see below) to permit the decedent’s surviving spouse to use the decedent’s unused exclusion amount. Form 706 must be filed within nine months after the date of death; an automatic six-month filing extension can be obtained by filing Form 4768.

The estate tax rates from Table 39-1 are applied to the taxable estate (gross estate minus allowable deductions as figured on the schedules of Form 706). If taxable gifts (over the annual gift tax exclusion) were made after 1976, the gifts are added to the taxable estate and the tax is figured on the total. The tentative tax from the rate table is reduced by the gift taxes paid or payable on the post-1976 gifts (refigured as required by the Form 706 instructions).

The resulting gross estate tax is then reduced by the applicable credit. The credit equals the tax on the exemption amount. The basic exemption for 2012 is $5,120,000, so the 2012 applicable credit is $1,772,800, the tax on a taxable estate of $5,120,000. The exemption is increased ...