The estate, or inheritance tax, is the tax on the right to transfer assets at the time of the owner's death, the IRS explains. The estate's administrator or executor prepares an account of every asset the decedent owned on the date of his death using the current fair market value. This is the gross estate. In 2015, if the estate and any prior taxable gifts exceed $5,430,000, Form 706, an estate tax return, must be filed.Continue Reading
The gross value of an estate includes buildings, land, trusts, annuities, business and personal assets, life insurance, cash and securities, the IRS reports. Certain deductions are allowed, including mortgages, liens, property that passes to a surviving spouse, estate administration fee and charitable contributions. Some adjustments are allowed, such as the value of an operating business, and losses such as theft or casualty damage. Once deducting these items, the net value of the estate becomes the taxable value of the estate.
Once the tax is calculated based on the net value, it is reduced by the available unified gift-tax estate credit or exemption. The remainder due is the tax owed to the IRS. A surviving spouse can claim the advantage of the remaining amount of unified credit, if he makes the proper election when filing Form 706 for the deceased spouse, explains the IRS.Learn more about Taxes