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certified copy of the order as part of the evidence. The IRS may require you to submit additional evidence, if necessary. If the alternate valuation method is used, the values of life estates, remainders, and similar interests are figured using the age of the recipient on the date of the decedent's death and the value of the property on the alternate valuation date. Line 2. Special-Use Valuation of Section 2032A In general. 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. Both special-use valuation and alternate valuation may be elected. To elect special-use valuation, check “Yes” on line 2 and complete and attach Schedule A-1 and its required additional statements. You must file Schedule A-1 and its required attachments with Form 706 for this election to be valid. You may make the election on a late-filed return so long as it’s the first return filed. The total value of the property valued under section 2032A may not be decreased from FMV by more than $1,230,000 for decedents dying in 2022. Real property may qualify for the section 2032A election if: 1. The decedent was a U.S. citizen or resident at the time of death; 2. The real property is located in the United States; 3. At the decedent's death, the real property was used by the decedent or a family member for farming or in a trade or business, or was rented for such use by either the surviving spouse or a lineal descendant of the decedent to a family member on a net cash basis; 4. The real property was acquired from or passed from the decedent to a qualified heir of the decedent; 5. The real property was owned and used in a qualified manner by the decedent or a member of the decedent's family during 5 of the 8 years before the decedent's death; 6. There was material participation by the decedent or a member of the decedent's family during 5 of the 8 years before the decedent's death; and 7. The property meets the following percentage requirements. a. At least 50% of the adjusted value of the gross estate must consist of the adjusted value of real or personal property that was being used as a farm or in a closely held business and that was acquired from, or passed from, the decedent to a qualified heir of the decedent. b. At least 25% of the adjusted value of the gross estate must consist of the adjusted value of qualified farm or closely held business real property. For this purpose, adjusted value is the value of property determined without regard to its special-use value. The value is reduced for unpaid mortgages on the property or any indebtedness against the property, if the full value of the decedent's interest in the property (not reduced by such mortgage or indebtedness) is included in the value of the gross estate. The adjusted value of the qualified real and personal property used in different businesses may be combined to meet the 50% and 25% requirements. Qualified Real Property Qualified use. Qualified use means use of the property as a farm for farming purposes or in a trade or business other than farming. Trade or business applies only to the active conduct of a business. It does not apply to passive investment activities or the mere passive rental of property to a person other than a member of the decedent's family. Also, no trade or business is present in the case of activities not engaged in for profit. Ownership. To qualify as special-use property, the decedent or a member of the decedent's family must have owned and used the property in a qualified use for 5 of the last 8 years before the decedent's death. Ownership may be direct or indirect through a corporation, a partnership, or a trust. If the ownership is indirect, the business must qualify as a closely held business under section 6166. The indirect ownership, when combined with periods of direct ownership, must meet the requirements of section 6166 on the date of the decedent's death and for a period of time that equals at least 5 of the 8 years preceding death. Directly owned property leased by the decedent to a separate closely held business is considered qualified real property if the business entity to which it was rented was a closely held business (as defined by section 6166) for the decedent on the date of the decedent's death and for sufficient time to meet the “5 in 8 years” test explained above. Structures and other real property improvements. Qualified real property includes residential buildings and other structures and real property improvements regularly occupied or used by the owner or lessee of real property (or by the employees of the owner or lessee) to operate a farm or other closely held business. A farm residence that the decedent occupied is considered to have been occupied for the purpose of operating the farm even when a family member and not the decedent was the person materially participating in the operation of the farm. Qualified real property also includes roads, buildings, and other structures and improvements functionally related to the qualified use. Elements of value such as mineral rights that are not related to the farm or business use are not eligible for special-use valuation. Property acquired from the decedent. Property is considered to have been acquired from or to have passed from the decedent if one of the following applies. • The property is considered to have been acquired from or to have passed from the decedent under section 1014(b) (relating to basis of property acquired from a decedent). • The property is acquired by any person from the estate. • The property is acquired by any person from a trust, to the extent the property is includible in the gross estate. Qualified heir. A person is a qualified heir of property if the person is a member of the decedent's family and acquired or received the property from the decedent. If a qualified heir disposes of any interest in qualified real property to any member of the qualified heir’s family, that person will then be treated as the qualified heir for that interest. A member of the family includes only: • An ancestor (parent, grandparent, etc.) of the individual; • The spouse of the individual; -12- Instructions for Form 706 (Rev. 09-2022)