In a Form 706-NA, how do I claim a pro-rata unified credit pursuant to a treaty

To claim a pro-rata unified credit pursuant to a treaty on Form 706-NA, follow these steps:

1. Determine Eligibility: Ensure that the decedent was a resident of a country with which the United States has a death tax treaty that allows for a pro-rata unified credit. Treaties with countries such as Australia, Canada, Finland, France, Germany, Greece, Italy, Japan, and Switzerland contain provisions to which section 2102(b)(3)(A) applies.
2. Calculate the Pro-Rata Unified Credit:
   • The credit allowed under section 2102(b)(3)(A) is calculated as the amount which bears the same ratio to the applicable credit amount in effect under section 2010(c) for the calendar year which includes the date of death as the value of the part of the decedent’s gross estate situated in the United States bears to the value of the entire gross estate wherever situated.
   • For example, if the applicable credit amount under section 2010(c) for the year of death is $13,000 and the value of the decedent’s U.S.-situated assets is $100,000 while the total gross estate is $1,000,000, the pro-rata unified credit would be calculated as follows:
     [
     \text{Pro-Rata Unified Credit} = \left(\frac{\text{U.S.-situated assets}}{\text{Total gross estate}}\right) \times \text{Applicable Credit Amount}
     ]
     [
     \text{Pro-Rata Unified Credit} = \left(\frac{100,000}{1,000,000}\right) \times 13,000 = 1,300
     ]
3. Complete Form 706-NA:
   • Part II - Tax Computation: Enter the pro-rata unified credit on line 7 of Part II.
   • Attach Computation: Attach a detailed computation of the pro-rata unified credit to the return. This should include the values of the U.S.-situated assets, the total gross estate, and the applicable credit amount for the year of death.
4. Documentation:
   • Ensure that you have all necessary documentation to support the values used in your computation, such as appraisals and valuations of the decedent’s assets.
   • If the unified credit is affected by a treaty, specify the applicable treaty and attach a computation of the credit.

By following these steps, you can accurately claim a pro-rata unified credit pursuant to a treaty on Form 706-NA.

Sources:
Instructions for Form 706-NA (10/2022)
§ 2102. Credits against tax
§ 2101. Tax imposed
Instructions for Form 706 (09/2023)
Instructions for Form 706-QDT (09/2021)
Instructions for Form 709 (2023)
Instructions for Form 706-A (08/2019)