Updated October 18, 2026. Quick answer: Part III is a short list of yes or no questions about elections the executor can make. Line 1 is alternate valuation, line 2 is special-use valuation, line 3 is the section 6166 election, and line 4 is the section 6163 election for reversionary or remainder interests. The instructions explain each one, and some require an attached schedule.
What Part III asks for
The form titles the part “Elections by the Executor” and instructs “Check “Yes” or “No” for each question.” It carries a warning: “Some of the following elections may require the posting of bonds or liens.” It also points to portability: “For information on electing portability of the decedent’s DSUE amount, including how to opt out of the election, see Part VI.” That election is covered in Part VI. The return is explained on the Form 706 page.
Line 1: alternate valuation
The form asks “Do you elect alternate valuation?” The instructions start with the default: “Unless you elect at the time the return is filed to adopt alternate valuation, as authorized by section 2032, value all property included in the gross estate as of the date of the decedent’s death.” “Alternate valuation cannot be applied to only a part of the property.”
A condition applies: “You may not elect alternate valuation unless the election will decrease both the value of the gross estate and the sum (reduced by allowable credits) of the estate and GST taxes payable by reason of the decedent’s death for the property includible in the decedent’s gross estate.” To make it: “Elect alternate valuation by checking “Yes” on line 1 and filing Form 706.” “Once made, the election may not be revoked.” The timing rule is “The election may be made on a late-filed Form 706, provided it is not filed later than 1 year after the due date (including extensions actually granted).”
For the dates, “Any property not distributed, sold, exchanged, or otherwise disposed of within the 6-month period is valued as of 6 months after the date of the decedent’s death.” A plain-language walk-through is on the alternate valuation date page.
Line 2: special-use valuation
The form asks “Do you elect special-use valuation?” and states “you must complete and attach Schedule T (Form 706)”. The instructions describe it: “Under section 2032A, you may elect to value certain farm and closely held business real property at its farm or business use value rather than its FMV.” “You must file Schedule T (Form 706) and its required attachments with Form 706 for this election to be valid.”
The instructions also set a ceiling: “The total value of the property valued under section 2032A may not be decreased from FMV by more than $1,460,000 for decedents dying in 2026.” On the use test: “Qualified use means use of the property as a farm for farming purposes or in a trade or business other than farming.” The schedule is covered on the Schedules T and U page.
Line 3: section 6166
The instructions open this line with “If the gross estate includes an interest in a closely held business, you may be able to elect to pay part of the estate tax” under section 6166. On security: “The IRS may require that an estate furnish a surety bond when granting” the election. The percentage test reads “the value of the interest in the closely held business that is included in the gross estate must be more than 35% of the adjusted gross estate”. The form says “you must attach the additional information described in the instructions”.
Line 4: reversionary or remainder interests
The form asks “Do you elect to postpone the part of the taxes due to a reversionary or remainder interest as described in section 6163?” The instructions for this line are brief: “For details of this election, see section 6163 and the related regulations.”
Where the answer comes from
Each line is a yes or no answer. The answers depend on the facts the executor has gathered for the estate. Alternate valuation depends on the values on the schedules and on the dates of any sales or distributions, and special-use valuation depends on the property reported on the schedules.
Where it goes next
The alternate valuation answer drives the columns on the rest of the return. The instructions say “Do not enter any amounts in the “Alternate value” column unless you elected alternate valuation on Part III, line 1.” It also decides the column used on Part II, line 1, covered in Part II lines 1 to 8. The remaining questions are on Parts IV and V.
Edition and line numbers
This page reads the Form 706 revision dated August 2025 and the Instructions for Form 706 revision dated July 2026. Those are the current files irs.gov served on 2026-10-18, byte-identical to the archived copies. The instructions state “For decedents dying after December 31, 2025.” The form itself says “To be filed for decedents dying after December 31, 2024.” Check the revision date printed on your Form 706 and the instruction edition for the year of death, and use the line numbers on that revision, because a different revision can number or word its lines differently.
Common mistakes
- Electing alternate valuation when it would not lower both amounts. The instructions say “You may not elect alternate valuation unless the election will decrease both the value of the gross estate” and the tax.
- Checking line 2 without the schedule. The instructions say “You must file Schedule T (Form 706) and its required attachments with Form 706 for this election to be valid.”
- Expecting to reverse an alternate valuation election. The instructions say “Once made, the election may not be revoked.”
Related: Form 706, alternate valuation date, Form 706 due date and extension, and estate planning glossary.
Sources
- Instructions for Form 706 (Rev. July 2026): https://www.irs.gov/pub/irs-pdf/i706.pdf
- Form 706 (Rev. August 2025), United States Estate (and Generation-Skipping Transfer) Tax Return: https://www.irs.gov/pub/irs-pdf/f706.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.