What Is Form 2055: Additional Estate Tax Return?
Learn about Form 2055, the return heirs file to address the recapture tax due when the conditions of a qualified conservation easement are no longer met.
The United States additional estate tax applies to situations involving a qualified conservation easement. This tax acts as a recapture mechanism. It comes into play when an estate has previously claimed a tax benefit by placing a conservation easement on a property to reduce its taxable value. If the conditions of the easement are later violated, the IRS requires the repayment of the tax savings.
When the Additional Estate Tax Is Due
The additional estate tax is triggered by specific events that violate the terms of a qualified conservation easement. One such trigger is the failure to implement an agreement to extinguish retained development rights. This must be done by the earlier of two years after the decedent’s death or the date the property is sold.
Another trigger is the discontinuance of the qualified use of the land. For example, if an easement was granted to preserve a natural habitat and the heirs later develop the land for commercial purposes, this would constitute a taxable event. The responsibility for paying the tax falls upon the qualified heir or heirs who inherited the property.
Calculating and Reporting the Tax
The additional estate tax is reported on Form 706, the U.S. Estate Tax Return, or an associated schedule. The calculation is based on the tax benefit that was originally received under Internal Revenue Code Section 2031.
To calculate the tax, you must have key information, including the decedent’s full name, date of death, and Social Security number. The name, address, and Social Security number for each qualified heir responsible for the tax are also needed. The date of the taxable event—the day the conservation purpose was violated—is also a required detail.
The calculation begins by determining the original estate tax liability without the qualified conservation easement exclusion. This requires recalculating the tax from the original Form 706 as if the easement deduction had never been taken. Next, you must identify the actual estate tax liability that was reported on the original return, which included the deduction. The difference between these two figures is the amount of tax that was saved. This saved amount is the additional estate tax that is now due.
How to Submit and Pay
Once the additional estate tax has been calculated, the responsible heir must submit the payment and an updated Form 706 to the IRS. The return should be mailed to the same service center where the original Form 706 for the decedent’s estate was filed. To find the correct address, refer to the instructions for the current version of Form 706.
The deadline for filing and paying the tax is the last day of the sixth month following the date of the taxable event. For instance, if a prohibited use of land occurred on March 10, the return and payment would be due by September 30. Payment can be made through IRS Direct Pay, a debit or credit card, or the Electronic Federal Tax Payment System (EFTPS). A check or money order made payable to the “U.S. Treasury” can also be mailed with the filed documents.