Final answer:
The estate tax return (Form 706) must be filed when the Gross Estate and Lifetime Taxable Gifts exceed the IRS exemption threshold, which was over $5 million in recent years and applies to a small percentage of wealthy estates.
Step-by-step explanation:
An estate tax return (Form 706) is required to be filed for a U.S. citizen when the value of the Gross Estate plus the value of the Lifetime Taxable Gifts exceeds the applicable exemption amount established by the IRS code. This exemptive threshold has historically seen increases; for instance, in 2013, an estate tax only applied to estates above $5.25 million and then rose to $5.43 million in 2015 as per the Center on Budget and Policy Priorities. As such, the estate tax affects only a small portion of those with substantial wealth, suggesting an intention to limit the amount of wealth that can be passed on as an inheritance.
Therefore, the correct answer to the student’s question is c. when the value of the Gross Estate plus the value of the Lifetime Taxable Gifts exceeds the applicable exemption amount established by the IRS code. The tax considerations involve complex calculations, including the valuation of a decedent's assets and lifetime gifts relative to the IRS's exemption threshold.