IRS Form 706 (Schedule A) – In the complex world of estate planning and taxation, IRS Form 706 plays a crucial role for executors handling the affairs of deceased individuals with significant assets. Specifically, Schedule A of Form 706 focuses on real estate, ensuring that all property holdings are accurately reported for estate tax purposes. This guide breaks down everything you need to know about IRS Form 706 Schedule A, including how to fill it out, valuation methods, and key requirements. Whether you’re an executor, tax professional, or beneficiary, understanding this schedule can help avoid costly errors and ensure compliance with current IRS rules for 2025 and beyond.
What Is IRS Form 706?
IRS Form 706, officially known as the United States Estate (and Generation-Skipping Transfer) Tax Return, is used by the executor of a decedent’s estate to calculate the estate tax under Chapter 11 of the Internal Revenue Code. It also computes the generation-skipping transfer (GST) tax for direct skips under Chapter 13. The form must be filed for estates of U.S. citizens or residents where the gross estate exceeds the basic exclusion amount, which for decedents dying in 2025 is $13,990,000. This threshold is indexed for inflation annually.
Form 706 includes various schedules to report different asset types, deductions, and credits. It’s typically due nine months after the decedent’s death, with possible extensions. Even if no tax is due, filing may be required for portability of the deceased spousal unused exclusion (DSUE) amount or other elections.
What Is Schedule A on Form 706?
Schedule A (Form 706) is specifically dedicated to reporting real estate assets included in the decedent’s gross estate. If the estate contains any real property—such as homes, land, commercial buildings, or farms—this schedule must be completed and attached to the main Form 706. Real estate is valued at its fair market value (FMV) on the date of death, unless an alternate valuation date is elected.
Key points about Schedule A:
- It lists each parcel of real estate separately.
- Includes property the decedent owned outright, had contracted to purchase, or held interests in (e.g., fee simple, life estates, or easements).
- Does not include jointly owned property (reported on Schedule E), real estate in sole proprietorships (Schedule F), or certain transfers/powers of appointment (Schedules G or H).
For estates below the filing threshold but electing portability, you may need to report values or simply identify properties without full valuation details.
When Do You Need to File Schedule A?
You must include Schedule A if the gross estate contains any real estate. No schedule is required if the real estate value in Part V of Form 706 is zero, unless cross-referenced elsewhere. For decedents dying after December 31, 2024, use the August 2025 revision of Form 706 and its schedules.
Filing is mandatory for estates exceeding the 2025 basic exclusion of $13,990,000, but optional filings for portability or special elections may still require it. Foreign real property may need additional documentation, such as foreign probate inventories.
How to Fill Out IRS Form 706 Schedule A: Step-by-Step Instructions?
Filling out Schedule A requires detailed descriptions and accurate valuations. Here’s a breakdown based on the official layout and fields.
Step 1: Gather Decedent Information
Enter the decedent’s name and Social Security number as they appear on the main Form 706.
Step 2: List Real Estate Assets (Line 1)
Report each property in the table format:
- (i) Item Number: Start with 1 and number sequentially.
- (ii) Description: Provide a full description, including location (e.g., street address, township, landmarks), type (e.g., residential, farmland), improvements, and the decedent’s interest (e.g., fee simple, joint tenancy). Note if electing special-use valuation under section 2032A.
- (iii) Alternate Valuation Date: Fill if electing alternate valuation (six months after death or disposition date).
- (iv) Alternate Value: Value on the alternate date.
- (v) Value at Date of Death: FMV on the date of death.
If space is insufficient, use Schedule W (Continuation Schedule) or additional statements.
Step 3: Calculate Totals
- Line 2: Sum values from column (iv) or (v).
- Line 3: Add totals from attached Schedule W or statements.
- Line 4: Total of lines 2 and 3; transfer to Form 706, Part V, item 1.
Do not reduce values for homestead exemptions, dower/curtesy, or mortgages here—deduct mortgages on Schedule K.
Valuation Methods for Real Estate on Schedule A
Valuation is critical and must be supported by appraisals. Use the following methods:
| Valuation Method | Description | Key Considerations |
|---|---|---|
| Fair Market Value (FMV) | Value on date of death; highest price in open market. | Required appraisals; include accrued rents/dividends. For mortgaged property, report full value if estate is liable. |
| Alternate Valuation (Section 2032) | Value six months after death (or disposition date if earlier). | Elect in Part III; use for undistributed property; adjust for non-time-lapse changes. |
| Special-Use Valuation (Section 2032A) | Reduced value for qualified farms or businesses (up to $1,420,000 ceiling in 2025). | Requires Schedule T; based on capitalized rents, income, or comparables; must meet ownership/use thresholds (e.g., 50% of estate in qualified property). |
| Conservation Easements | Exclude up to 40-60% of land value or $500,000. | File Schedule U; value as FMV difference before/after easement; attach details. |
Required Documentation for Schedule A
Attach supporting documents to substantiate values and ownership:
- Certified copies of wills, deeds, or probate orders.
- Appraisals explaining valuation methods.
- For special-use: Statements on qualified use, material participation, and comparable properties.
- For alternate valuation: Evidence of dispositions within six months.
- Foreign property: Certified inventories and foreign tax returns.
Keep records like receipts for IRS review.
Common Mistakes and Tips for IRS Form 706 Schedule A
Avoid these pitfalls:
- Incomplete descriptions: Always include full details to prevent IRS queries.
- Incorrect valuations: Use professional appraisers; don’t undervalue to avoid penalties.
- Missing elections: Note special-use or alternate valuations clearly.
- Forgetting deductions: Report mortgages on Schedule K, not here.
Tips:
- Consult a tax professional for complex estates.
- Use the latest form (August 2025 revision for 2025 decedents).
- Download Schedule A PDF from the IRS website for reference.
- File electronically if possible for faster processing.
Conclusion
Navigating IRS Form 706 Schedule A for real estate reporting ensures accurate estate tax calculations and compliance. By understanding the requirements, using proper valuation methods, and attaching necessary documentation, executors can minimize issues. For the most current guidance, always refer to official IRS resources. If your estate involves real property, start by downloading the Schedule A PDF at https://www.irs.gov/pub/irs-pdf/f706sa.pdf and consult with an expert to tailor the process to your situation.