Your client's father died in March 2025 with a $14.5M estate, including a $2M IRA, a jointly titled vacation house, and a $500,000 life insurance policy. Form 706 is due in nine months. You need to know what counts, what deducts, and which election locks in his spouse's tax shelter.
The gross estate under §2031 includes all property in which the decedent had an interest at death, valued at fair market value on the date of death or the alternate valuation date six months later (§2032, available only when the election reduces both the gross estate and the estate tax).
Specific inclusion sections drive the bulk of exam questions.
- §2033 property owned at death (real estate, securities, bank accounts, business interests, personal effects)
- §2035 three-year rule: life insurance transferred within three years of death plus gift tax paid on gifts made within three years
- §2036 retained life estate (decedent kept the right to income or possession or to designate who enjoys the property)
Common mistakes
- Including 100% of spousal joint property instead of 50%. The qualified joint interest rule under §2040(b) forces a flat 50% regardless of contribution. The full-consideration rule only applies to nonspousal joint tenants.
- Claiming the unlimited marital deduction for a noncitizen spouse without a QDOT. The deduction is $0 under §2056(d) unless a QDOT meets the §2056A requirements.
- Skipping the portability election on a small estate. The DSUE is lost permanently unless Form 706 is filed within the 9-month deadline or the 5-year window of Rev. Proc. 2022-32.
Bottom line
- 2025 basic exclusion $13,990,000; top estate tax rate 40%; unified credit $5,389,800
- Form 706 due 9 months after death; 6-month extension via Form 4768 (extension to file, not pay)
- Filing required when gross estate plus adjusted taxable gifts exceeds $13.99M; file anyway to elect portability of the DSUE
- Portability of the DSUE is preserved only if Form 706 is timely filed or filed within the 5-year Rev. Proc. 2022-32 window
Exam shortcut
For joint property questions: spouses split 50/50. Nonspouses trace consideration. Tenancy in common is §2033 fractional only, never §2040. For filing thresholds: gross estate plus adjusted taxable gifts. If the sum exceeds $13.99M (2025), Form 706 is required. If estate gross income hits $600, Form 1041 is required. For citizenship: U.S. citizen spouse triggers the unlimited marital deduction. Noncitizen spouse demands a QDOT or no deduction.
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Learning objectives
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