Discussion:Form 706-estate tax penalties

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Advanced Tax Questions --> Form 706-estate tax penalties
Discussion Forum Index --> Tax Questions --> Form 706-estate tax penalties

Tdh555 (talk\|edits) said:	2 December 2009
Is the penalty for "under valuing" assets 50% of the related tax due (or 20%)? Also, is there a late penalty for filing past the extended due date if all taxes have been paid with a form 4768 deposit? I have not done a 706 which owed taxes in several years. Thank you.

DaveFogel (talk|edits) said:

3 December 2009

IRC §6662(b)(5) imposes a 20% penalty for "Any substantial estate or gift tax valuation understatement." IRC §6662(g)(1) defines a “substantial estate or gift tax valuation understatement” as where the value of any property claimed on the estate or gift tax return is 65% or less of the correct amount.

However, if the value of the property claimed on the estate or gift tax return is 40% or less of the correct amount, then the penalty rate goes up from 20% to 40%. See IRC §6662(h)(2)(C).

There is usually no late filing penalty for a late-filed 706 if all taxes have been paid in by the due date. This is because there is no "net amount due" upon which the IRS can impose the penalty, see IRC §6651(b). However, if the IRS audits the return and the corrected tax liability in the audit is more than the tax paid in by the due date, then a late filing penalty will be imposed.

Dennis (talk\|edits) said:	3 December 2009
Ooooh. Scary. Fortunately when it comes to appraisals there is no such thing as a "correct amount". You do, however, want to pay for credentials.