Last week the IRS finally released a draft of the instructions for 2012 IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, to accompany the draft of the actual form which was released back on August 16. The main difference between the 2011 and 2012 forms is the addition of a separate section called Part 6 - Portability of Deceased Spousal Unused Exclusion (DSUE), which should be completed by the surviving spouse of a 2012 decedent who is electing to make use, or not make use, of the deceased spouse's unused federal estate tax exemption. The instructions explain how to complete the new section and calculate the deceased spouse's unused estate tax exemption.
That's fine and good, but the real question is when will the IRS release the final version of 2012 Form 706 and its instructions? Form 706 for a decedent who died on January 1, 2012 is due on October 1, 2012, which is less than a week away. Of course, estates can request an automatic six-month extension of time to file Form 706 by filing IRS Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate(and Generation-Skipping Transfer) Taxes, but what if the estate really wants to file the return on time since it takes on average (at least in my experience) at least 6 months for the IRS to even look at the return? Tough luck I guess.