Use Schedule E: Jointly Owned Property, when filing federal estate tax returns (Form 706), if the decedent held property of any kind jointly at his or her death. Report property held jointly with the decedent’s spouse in Part 1 of Schedule E and list all other jointly held property in Part 2. File Schedule E even if none of the jointly held property is includible in the decedent’s taxable estate.
Describe the property you report on Schedule E in the same manner as you would on its respective schedule. For instance, describe real estate as you would on Schedule A of Form 706. The amount of the property includible in the taxable estate depends on the decedent’s interest in the property.
Part 1: Qualified joint interests
Part 1 of Schedule E deals with property held by the decedent and his or her spouse as the only joint tenants (section 2040 (b)(2)).
List all the property the decedent held with his or her surviving spouse either as joint tenants with right of survivorship (if they’re the only joint tenants) or as tenants by the entirety. Include the full value of the property at the date of death. These properties are identified as qualified joint interests under section 2040(b)(2), and as such only one-half of the property is includible in the gross estate.
You may only claim the special treatment under 2042(b)(2) and list the property on Part 1 if the surviving spouse is a U.S. citizen. Otherwise, include the property on Part 2.
Total the values of the properties on line 1a, and include one-half of the value of the properties on line 1b. The amount on line 1b is the amount includible in the gross estate.
Part 2: Other jointly owned property
Part 2 of Schedule E focuses on all other joint interests. Under 2a, list the names and addresses of all other surviving joint tenants. If you have more than three joint tenants, create a continuation sheet.
In completing Part 2, enter the letter corresponding to the surviving joint tenant’s name and address in the second column. In the third column, enter the property description. In the column entitled “Percentage includible,” enter 100 percent unless you can show that any of the following apply:
Part of the property originally belonged to the surviving tenant or tenants and wasn’t acquired by gift from the decedent
Part of the property was acquired with funds that came from the surviving joint tenant or tenants
The property was acquired by the decedent and the other joint tenant(s) by gift, bequest, devise, or inheritance.
If you can prove any of the above circumstances, you may exclude an amount proportionate to what the surviving joint tenant(s) have contributed to the property from the gross estate.
If you aren’t including the full value of the joint property in the gross estate in Part 2, be sure to attach as an exhibit proof of the extent, nature, and origin of the interests of the decedent and the other joint tenants for each such property.