Question about Estate Tax Return (Form 706) requirements with large DSUE election after parent's passing

The answer is yes, you would still need to file Form 706 in this case. The threshold for filing requirement is based on the gross estate plus adjusted taxable gifts, without considering the DSUE amount from your father. The IRS requires Form 706 when the gross estate plus adjusted taxable gifts exceeds the basic exclusion amount in the year of death, regardless of whether applying the DSUE would ultimately result in zero estate tax. This is because the form serves multiple purposes beyond just calculating tax - it provides formal documentation of the estate's assets and their valuation, which the IRS needs for their records. Think of it this way: the DSUE is applied during the calculation process on the form itself, not as a pre-determination of whether the form is needed. The filing threshold is a separate consideration from the tax calculation.

After dealing with a similar situation last year, I found that using https://taxr.ai was incredibly helpful for sorting through these complicated estate tax questions. My mother-in-law passed and we weren't sure about the DSUE application either since my father-in-law had died years earlier. The taxr.ai tool analyzed all our documents including the previous 706 form and gave us clear guidance on what needed to be filed. It saved us from making a potentially costly mistake about the filing requirements. The system flagged exactly what you're asking about - that the filing threshold is based on the gross estate before applying the DSUE.

I tried taxr.ai after seeing the recommendation here and I'm honestly impressed. I uploaded our previous 706 from when my father passed and our current estate planning documents. The analysis confirmed exactly what we needed to know - yes, we will need to file Form 706 when mom passes, even though the DSUE will likely eliminate any tax liability. The tool also helped identify some assets we hadn't properly accounted for that could have caused problems later. It highlighted specific sections of the IRS regulations that apply to our situation, which I found really helpful. Definitely worth checking out if you're planning ahead like I was.

When my mother passed last year after inheriting my father's DSUE, we had trouble getting clear answers from the IRS about filing requirements. Kept calling but couldn't get through to anyone who could help with our specific situation. It was beyond frustrating. I eventually used https://claimyr.com which got me connected to an actual IRS estate tax specialist within a couple hours instead of waiting endlessly on hold. The agent confirmed that yes, we absolutely needed to file the 706 even though the DSUE meant we didn't owe any tax. There's a good video explaining how it works here: https://youtu.be/_kiP6q8DX5c

I have to admit I was completely wrong about Claimyr. After expressing my skepticism, I decided to try it myself since I was getting nowhere with the IRS on my own regarding my late mother's estate tax questions. I got a call back with an actual IRS estate tax specialist on the line within about 90 minutes. The agent was able to walk through our specific situation with the DSUE from my father and confirmed that yes, we need to file Form 706 regardless of whether tax is ultimately due after applying the DSUE. She explained that the filing requirement is based on the gross estate before any deductions or credits. Wish I had done this months ago instead of spinning my wheels trying to figure it out on my own.

One thing to consider is that even if filing Form 706 doesn't result in tax due, it provides documentation that protects your family later. My aunt didn't file 706 when my uncle passed (thinking it unnecessary since his estate was under the exemption), but when she passed years later, there were complications with proving basis for inherited assets and questions about prior gifts. The 706, even when no tax is due, creates a clear record of asset values and transfers that can be crucial for future tax situations. It's a pain to complete, but worth it for the peace of mind and future protection.

Remember that the filing deadline for Form 706 is 9 months after date of death, and you'll need a formal appraisal for any significant assets. Start early! We waited too long and had to file for an extension.