Part II. Notice of Election

Line 18. Because the special-use valuation election creates a potential tax liability for the recapture tax of section 2032A(c), you must list each person who receives an interest in the specially valued property on Schedule T (Form 706). If more space is needed to list all persons, attach additional copies of Part II, line 18. In column (e), Fair market value, and column (f), Special-use value, enter the total respective values of all the specially valued property interests received by each person.

GST Tax Savings To figure the additional GST tax due upon disposition (or cessation of qualified use) of the property, each “skip person” (as defined in the instructions for Schedule R (Form 706)) who receives an interest in the specially valued property must know the total GST tax savings all interests in specially valued property received. The GST tax savings is the difference between the total GST tax that was imposed on all interests in specially valued property received by the skip person valued at their special-use value and the total GST tax that would have been imposed on the same interests received by the skip person had they been valued at their FMV.

Because the GST tax depends on the executor’s allocation of the GST exemption and the grandchild exclusion, the skip person who receives the interests is unable to figure this GST tax savings. Therefore, for each skip person who receives an interest in specially valued property, you must attach a calculation of the total GST tax savings attributable to that person’s interests in specially valued property.

How to figure the GST tax savings. Before figuring each skip person’s GST tax savings, complete Schedules R (Form 706) and Schedule R-1 (Form 706) for the entire estate (using the special-use values).

For each skip person, complete two Schedules R (Form 706) (Parts II and III only) as worksheets, one showing the interests in specially valued property received by the skip person at their special-use value and one showing the same interests at their FMV.

• Schedule R (Form 706), Parts II and III, line 7—GST exemption allocation. If you completed Schedule R (Form 706), Part I, line 11, enter on line 7 the amount shown for the skip person on the line 11 special-use allocation schedule you attached to Schedule R (Form 706). If you did not complete Schedule R (Form 706), Part I, line 11, enter -0- on line 7.

Total GST tax savings. For each skip person, subtract the tax amount on line 11, Part II, of the special-use value worksheet from the tax amount on line 11, Part II, of the FMV worksheet. This difference is the skip person’s total GST tax savings.