Table of Contents
- Part 1—General Information
- Schedule A. Computation of Taxable Gifts
- Gifts Subject to Both Gift and GST Taxes
- Definitions
- Determining the Generation of a Donee
- Charitable Remainder Trusts
- Generation Assignment Where Intervening Parent Is Deceased
- Part 1—Gifts Subject Only to Gift Tax
- Split Gifts—Gifts Made by Spouse
- Supplemental Documents
- Part 2—Direct Skips
- Split Gifts—Gifts Made by Spouse
- Part 3—Indirect Skips
- Split Gifts—Gifts Made by Spouse
- Part 4—Taxable Gift Reconciliation
- Deductions
- Schedule B. Gifts From Prior Periods
- Schedule C. Computation of GST Tax
- Part 2—Tax Computation (Page 1 of Form 709)
- Signature
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Was domiciled in a possession of the United States,
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Was a U.S. citizen, and
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Became a U.S. citizen for a reason other than being a citizen of a U.S. possession or being born or residing in a possession.
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Was domiciled in a possession of the United States,
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Was a U.S. citizen, and
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Became a U.S. citizen only because he or she was a citizen of a possession or was born or resided in a possession.
A married couple may not file a joint gift tax return. However, if after reading the instructions below, you and your spouse agree to split your gifts, you should file both of your individual gift tax returns together (that is, in the same envelope) to help the IRS process the returns and to avoid correspondence from the IRS.
Note.
Form 709-A, United States Short Form Gift Tax Return, previously used by married couples to report nontaxable gifts they consent to split, is obsolete.
If you and your spouse agree, all gifts (including gifts of property held with your spouse as joint tenants or tenants by the entirety) either of you make to third parties during the calendar year will be considered as made one-half by each of you if:
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You and your spouse were married to one another at the time of the gift;
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If divorced or widowed after the gift, you did not remarry during the rest of the calendar year;
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Neither of you was a nonresident alien at the time of the gift; and
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You did not give your spouse a general power of appointment over the property interest transferred.
If you transferred property partly to your spouse and partly to third parties, you can only split the gifts if the interest transferred to the third parties is ascertainable at the time of the gift.
The consent is effective for the entire calendar year; therefore, all gifts made by both you and your spouse to third parties during the calendar year (while you were married) must be split.
If the consent is effective, the liability for the entire gift tax of each spouse is joint and several.
If you meet these requirements and want your gifts to be considered made one-half by you and one-half by your spouse, check the “Yes” box on line 12, page 1; complete lines 13 through 17; and have your spouse sign the consent on line 18.
If you are not married or do not wish to split gifts, skip to Schedule A.
Your spouse must sign the consent for your gift-splitting election to be valid. The consent may generally be signed at any time after the end of the calendar year. However, there are two exceptions.
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The consent may not be signed after April 15 following the end of the year in which the gift was made. But, if neither you nor your spouse has filed a gift tax return for the year on or before that date, the consent must be made on the first gift tax return for the year filed by either of you.
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The consent may not be signed after a notice of deficiency for the gift tax for the year has been sent to either you or your spouse.
The executor for a deceased spouse or the guardian for a legally incompetent spouse may sign the consent.
In general, if you and your spouse elect gift splitting, then both spouses must file his or her own, individual, gift tax return.
However, only one spouse must file a return if all the requirements of either of the exceptions below are met. In the exceptions below, “gifts” means gifts (or parts of gifts) that do not qualify for the political organization, educational, or medical exclusions.
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Only one spouse made any gifts,
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The total value of these gifts to each third-party donee does not exceed $24,000, and
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All of the gifts were of present interests.
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Only one spouse (the donor spouse) made gifts of more than $12,000 but not more than $24,000 to any third-party donee,
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The only gifts made by the other spouse (the consenting spouse) were gifts of not more than $12,000 to third-party donees other than those to whom the donor spouse made gifts, and
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All of the gifts by both spouses were of present interests.
Do not enter on Schedule A any gift or part of a gift that qualifies for the political organization, educational, or medical exclusions. In the instructions below, “gifts” means gifts (or parts of gifts) that do not qualify for the political organization, educational, or medical exclusions.
If the value of any gift you report in either Part 1, Part 2, or Part 3 of Schedule A reflects a discount for lack of marketability, a minority interest, a fractional interest in real estate, blockage, market absorption, or for any other reason, answer “Yes” to the question at the top of Schedule A. Also, attach an explanation giving the factual basis for the claimed discounts and the amount of the discounts taken.
If in 2008, you contributed more than $12,000 to a QTP on behalf of any one person, you may elect to treat up to $60,000 of the contribution for that person as if you had made it ratably over a 5-year period. The election allows you to apply the annual exclusion to a portion of the contribution in each of the 5 years, beginning in 2008. You can make this election for as many separate people as you made QTP contributions.
You can only apply the election to a maximum of $60,000. You must report in 2008 all of your QTP contributions for any single person that exceed $60,000 (in addition to any other gifts you made to that person).
For each of the 5 years, you report in Part 1 of Schedule A, (20%) of the amount for which you made the election. In column E of Part 1 (Schedule A), list the date of the gift as the calendar year for which you are deemed to have made the gift (that is, the year of the current Form 709 you are filing). Do not list the actual year of contribution for subsequent years.
However, if in any of the last 4 years of the election, you did not make any other gifts that would require you to file a Form 709, you do not need to file Form 709 to report that year's portion of the election amount.
In 2008, D contributed $85,000 to a QTP for the benefit of her son. D elects to treat $60,000 of this contribution as having been made ratably over a 5-year period. Accordingly, for 2008, D reports the following:
$25,000 | (the amount of the contribution that exceeded $60,000) | ||
+ | $12,000 | (the portion from the election) | |
$37,000 | the total gift to her son listed in Part 1 of Schedule A for 2008 |
In 2009, D gives a gift of $20,000 cash to her niece and no other gifts. On her 2009 Form 709, D reports in Part 1 of Schedule A, the $20,000 gift to her niece and a $12,000 gift to her son (the one-fifth portion of the 2008 gift that is treated as made in 2009). In column E of Part 1 (Schedule A), D lists “2009” as the date of the gift.
D makes no gifts in 2010, 2011, or 2012. She is not required to file Form 709 in any of those years to report the portion of the QTP gift, because she is not otherwise required to file Form 709.
You make the election by checking the box on line B at the top of Schedule A. The election must be made for the calendar year in which the contribution is made. Also attach an explanation that includes the following:
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The total amount contributed per individual beneficiary,
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The amount for which the election is being made, and
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The name of the individual for whom the contribution was made.
If you are electing gift splitting, apply the gift splitting rules before applying these rules. Each spouse would then decide individually whether to make this QTP election.
Contributions to QTPs do not qualify for the education exclusion.
After you determine which gifts you made are subject to the gift tax and therefore should be listed on Schedule A, you must divide these gifts between:
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Part 1—those subject only to the gift tax (gifts made to nonskip persons—see Part 1—Gifts Subject Only to Gift Tax on page 8),
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Part 2—those subject to both the gift and GST taxes (gifts made to skip persons—see Gifts Subject to Both Gift and GST Taxes below and Part 2—Direct Skips on page 9), and
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Part 3—those subject only to the gift tax at this time but which could later be subject to GST tax (gifts that are indirect skips, see Part 3—Indirect Skips on page 9).
If you need more space, attach a separate sheet using the same format as Schedule A.
Use the following guidelines when entering gifts on Schedule A:
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Enter a gift only once—in Part 1, Part 2, or Part 3;
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Do not enter any gift or part of a gift that qualified for the political organization, educational, or medical exclusion;
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Enter gifts under “Gifts made by spouse” only if you have chosen to split gifts with your spouse and your spouse is required to file a Form 709 (see on page 5); and
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In column F, enter the full value of the gift (including those made by your spouse, if applicable). If you have chosen to split gifts, that one-half portion of the gift is entered in column G.
You must always enter all gifts of future interests that you made during the calendar year regardless of their value.
Except for the gifts described below, you do not need to enter any of your gifts to your spouse on Schedule A.
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Subject to the gift tax,
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Of an interest in property, and
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Made to a skip person.
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During the lifetime of the beneficiary, no corpus or income may be distributed to anyone other than the beneficiary and
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If the beneficiary dies before the termination of the trust, the assets of the trust will be included in the gross estate of the beneficiary.
Note.
If the property transferred in the direct skip would have been includible in the donor's estate if the donor had died immediately after the transfer, see Transfers Subject to an Estate Tax Inclusion Period (ETIP) on page 3.
in trust.
Donee below. A donee that is a trust is a skip person if all the interests in the property transferred to the trust (as defined above) are held by skip persons. A trust will also be a skip person if there are no interests in the property transferred to the trust held by any person, and future distributions or terminations from the trust can be made only to skip persons.
Generally, a generation is determined along family lines as follows.
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If the donee is a lineal descendant of a grandparent of the donor (for example, the donor's cousin, niece, nephew, etc.), the number of generations between the donor and the descendant (donee) is determined by subtracting the number of generations between the grandparent and the donor from the number of generations between the grandparent and the descendant (donee).
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If the donee is a lineal descendant of a grandparent of a spouse (or former spouse) of the donor, the number of generations between the donor and the descendant (donee) is determined by subtracting the number of generations between the grandparent and the spouse (or former spouse) from the number of generations between the grandparent and the descendant (donee).
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A person who at any time was married to a person described in (1) or (2) above is assigned to the generation of that person. A person who at any time was married to the donor is assigned to the donor's generation.
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A relationship by adoption or half-blood is treated as a relationship by whole-blood.
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A person who is not assigned to a generation according to (1), (2), (3), or (4) above is assigned to a generation based on his or her birth date as follows:
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A person who was born not more than 12½ years after the donor is in the donor's generation.
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A person born more than 12½ years, but not more than 37½ years, after the donor is in the first generation younger than the donor.
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Similar rules apply for a new generation every 25 years.
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If more than one of the rules for assigning generations applies to a donee, that donee is generally assigned to the youngest of the generations that would apply.
If an estate or trust, partnership, corporation, or other entity (other than certain charitable organizations and trusts described in sections 511(a)(2) and 511(b)(2) and governmental entities) is a donee, then each person who indirectly receives the gift through the entity is treated as a donee and is assigned to a generation as explained in the above rules.
Charitable organizations and trusts, described in sections 511(a)(2) and 511(b)(2), and governmental entities are assigned
to the donor's generation. Transfers to such organizations are therefore not subject to the GST tax. These gifts should always
be listed in
Part 1 of Schedule A.
Gifts in the form of charitable remainder annuity trusts, charitable remainder unitrusts, and pooled income funds are not transfers to skip persons and therefore are not direct skips. You should always list these gifts in Part 1 of Schedule A even if all of the life beneficiaries are skip persons.
If you made a gift to your grandchild and at the time you made the gift, the grandchild's parent (who is your or your spouse's or your former spouse's child) is deceased, then for purposes of generation assignment, your grandchild is considered to be your child rather than your grandchild. Your grandchild's children will be treated as your grandchildren rather than your great-grandchildren.
This rule is also applied to your lineal descendants below the level of grandchild. For example, if your grandchild is deceased,
your great-
grandchildren who are lineal descendants of the deceased grandchild are considered your grandchildren for purposes of the
GST tax.
This special rule may also apply in other cases of the death of a parent of the transferee. If property is transferred to an individual who is a descendant of a parent of the transferor and that individual's parent (who is a lineal descendant of the parent of the transferor) is deceased at the time the transfer is subject to gift or estate tax, then for purposes of generation assignment, the individual is treated as if he or she is a member of the generation that is one generation below the lower of:
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The transferor's generation or
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The generation assignment of the youngest living ancestor of the individual who is also a descendant of the parent of the transferor.
The same rules apply to the generation assignment of any descendant of the individual.
This rule does not apply to a transfer to an individual who is not a lineal descendant of the transferor if the transferor at the time of the transfer has any living lineal descendants.
If any transfer of property to a trust would have been a direct skip except for this generation assignment rule, then the rule also applies to transfers from the trust attributable to such property.
For assigning individuals to generations for purposes of the GST tax, any individual who dies no later than 90-days after a transfer occurring by reason of the death of the transferor is treated as having predeceased the transferor. The ninety-day rule applies to transfers occurring on or after July 18, 2005. See Regulations section 26.2651-1 for more information.
The GST rules can be illustrated by the following examples.
Example 1.
You give your house to your daughter for her life with the remainder then passing to her children. This gift is made to a “trust” even though there is no explicit trust instrument. The interest in the property transferred (the present right to use the house) is transferred to a nonskip person (your daughter). Therefore, the trust is not a skip person because there is an interest in the transferred property that is held by a nonskip person, and the gift is not a direct skip. The transfer is an indirect skip, however, because on the death of the daughter, a termination of her interest in the trust will occur that may be subject to the GST tax. See the instructions for Part 3, Schedule A (under Part 3—Indirect Skips on page 9) for a discussion of how to allocate GST exemption to such a trust.
Example 2.
You give $100,000 to your grandchild. This gift is a direct skip that is not made in trust. You should list it in Part 2 of Schedule A.
Example 3.
You establish a trust that is required to accumulate income for 10 years and then pay its income to your grandchildren for their lives and upon their deaths distribute the corpus to their children. Because the trust has no current beneficiaries, there are no present interests in the property transferred to the trust. All of the persons to whom the trust can make future distributions (including distributions upon the termination of interests in property held in trust) are skip persons (that is, your grandchildren and great-grandchildren). Therefore, the trust itself is a skip person and you should list the gift in Part 2 of Schedule A.
Example 4.
You establish a trust
that pays all of its income to your grandchildren for 10 years. At the end of 10 years, the corpus is to be distributed to
your children. Since for this purpose interests in trusts are defined only as present interests, all of the interests in this
trust are held by skip persons (the children's interests are future interests). Therefore, the trust is a skip person and
you should list the entire amount you transferred to the trust in Part 2 of Schedule A even though some of the trust's ultimate
beneficiaries are nonskip persons.
List in Part 1 gifts subject only to the gift tax. Generally, all of the gifts you made to your spouse (that are required to be listed, as described earlier), to your children, and to charitable organizations are not subject to the GST tax and should, therefore, be listed only in Part 1.
Group the gifts in four categories:
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Gifts made to your spouse,
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Gifts made to third parties that are to be split with your spouse,
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Charitable gifts (if you are not splitting gifts with your spouse), and
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Other gifts.
If a transfer results in gifts to two or more individuals (such as a life estate to one with remainder to the other), list the gift to each separately.
Number and describe all gifts (including charitable, public, and similar gifts) in the columns provided in
Schedule A.
Describe each gift in enough detail so that the property can be easily identified, as explained below.
For real estate, give:
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A legal description of each parcel;
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The street number, name, and area if the property is located in a city; and
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A short statement of any improvements made to the property.
For bonds, give:
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The number of bonds transferred;
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The principal amount of each bond;
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Name of obligor;
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Date of maturity;
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Rate of interest;
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Date or dates when interest is payable;
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Series number, if there is more than one issue;
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Exchanges where listed or, if unlisted, give the location of the principal business office of the corporation; and
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CUSIP number. The CUSIP number is a nine-digit number assigned by the American Banking Association to traded securities.
For stocks:
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Give number of shares;
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State whether common or preferred;
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If preferred, give the issue, par value, quotation at which returned, and exact name of corporation;
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If unlisted on a principal exchange, give the location of the principal business office of the corporation, the state in which incorporated, and the date of incorporation;
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If listed, give principal exchange; and
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CUSIP number.
For interests in property based on the length of a person's life, give the date of birth of the person. If you transfer any interest in a closely held entity, provide the EIN of the entity.
For life insurance policies, give the name of the insurer and the policy number.
Clearly identify in the description column which gifts create the opening of an ETIP as described under Transfers Subject to an Estate Tax Inclusion Period (ETIP) on page 3. Describe the interest that is creating the ETIP. An allocation of GST exemption to property subject to an ETIP that is made prior to the close of the ETIP becomes effective no earlier than the date of the close of the ETIP. See the instructions for Schedule C under Schedule C. Computation of GST Tax beginning on page 10.
Show the basis you would use for income tax purposes if the gift were sold or exchanged. Generally, this means cost plus improvements, less applicable depreciation, amortization, and depletion.
For more information on adjusted basis, see Pub. 551, Basis of Assets.
The value of a gift is the fair market value of the property on the date the gift is made. The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, when neither is forced to buy or to sell, and when both have reasonable knowledge of all relevant facts. Fair market value may not be determined by a forced sale price, nor by the sale price of the item in a market other than that in which the item is most commonly sold to the public. The location of the item must be taken into account whenever appropriate.
The fair market value of a stock or bond (whether listed or unlisted) is the mean between the highest and lowest selling prices quoted on the valuation date. If only the closing selling prices are available, then the fair market value is the mean between the quoted closing selling price on the valuation date and on the trading day before the valuation date. To figure the fair market value if there were no sales on the valuation date, see the instructions for Schedule B of Form 706.
Stock of close corporations or inactive stock must be valued on the basis of net worth, earnings, earning and dividend capacity, and other relevant factors.
Generally, the best indication of the value of real property is the price paid for the property in an arm's-length transaction on or before the valuation date. If there has been no such transaction, use the comparable sales method. In comparing similar properties, consider differences in the date of the sale, and the size, condition, and location of the properties, and make all appropriate adjustments.
The value of all annuities, life estates, terms for years, remainders, or reversions is generally the present value on the date of the gift.
Sections 2701 and 2702 provide special valuation rules to determine the amount of the gift when a donor transfers an equity interest in a corporation or partnership (section 2701) or makes a gift in trust (section 2702). The rules only apply if, immediately after the transfer, the donor (or an applicable family member) holds an applicable retained interest in the corporation or partnership, or retains an interest in the trust. For details, see sections 2701 and 2702, and their regulations.
If you elected to split gifts with your spouse and your spouse has given a gift(s) that is being split with you, enter in this area of Part 1 information on the gift(s) made by your spouse. If only you made gifts and you are splitting them with your spouse, do not make an entry in this area.
Generally, if you elect to split your gifts, you must split all gifts made by you and your spouse to third-party donees. The only exception is if you gave your spouse a general power of appointment over a gift you made.
To support the value of your gifts, you must provide information showing how it was determined.
For stock of close corporations or inactive stock, attach balance sheets, particularly the one nearest the date of the gift, and statements of net earnings or operating results and dividends paid for each of the 5 preceding years.
For each life insurance policy, attach Form 712, Life Insurance Statement.
If the gift was made by means of a trust, attach a certified or verified copy of the trust instrument to the return on which you report your first transfer to the trust. However, to report subsequent transfers to the trust, you may attach a brief description of the terms of the trust or a copy of the trust instrument.
Also attach any appraisal used to determine the value of real estate or
other property.
If you do not attach this information, you must include in Schedule A full information to explain how the value was determined.
List in Part 2 only those gifts that are currently subject to both the gift and GST taxes. You must list the gifts in Part 2 in the chronological order that you made them. Number, describe, and value the gifts as described in the instructions for Part 1 on page 8.
If you made a transfer to a trust that was a direct skip, list the entire gift as one line entry in Part 2.
If you elect under section 2632(b)(3) to not have the automatic allocation rules of section 2632(b) apply to a transfer, enter a check in column C next to the transfer. You must also attach a statement to Form 709 clearly describing the transaction and the extent to which the automatic allocation is not to apply. Reporting a direct skip on a timely filed Form 709 and paying the GST tax on the transfer will qualify as such a statement.
In addition to the information already requested, describe the interest that is closing the ETIP; explain what caused the interest to terminate; and list the year the gift portion of the transfer was reported and its item number on Schedule A that was originally filed to report the gift portion of the ETIP transfer.
Some gifts made to trusts are subject only to gift tax at the time of the transfer but later may be subject to GST tax. The GST tax could apply either at the time of a distribution from the trust, at the termination of the trust, or both.
Section 2632(c) defines indirect skips and applies special rules to the allocation of GST exemption to such transfers. In general, an indirect skip is a transfer of property that is subject to gift tax (other than a direct skip) and is made to a GST trust. A GST trust is a trust that could have a generation-skipping transfer with respect to the transferor, unless the trust provides for certain distributions of trust corpus to non-skip persons. See section 2632(c)(3)(B) for details.
List in Part 3 those gifts that are indirect skips as defined in section 2632(c) or may later be subject to GST tax. This includes indirect skips for which election (2), described below, will be made in the current year or has been made in a previous year. You must list the gifts in Part 3 in the chronological order that you made them.
Section 2632(c) provides for the automatic allocation of the donor's unused GST exemption to indirect skips. This section also sets forth three different elections you may make regarding the allocation of exemption.See section 2632(c)(5) for details.
To make one of these elections, check column C next to the transfer to which the election applies. You must also attach an explanation as described below. If you are making election (2) or (3) on a return on which the transfer is not reported, simply attach the statement described below.
If you are reporting a transfer to a trust for which election (2) or (3) was made on a previously filed return, do not make an entry in column C for that transfer and do not attach a statement.
Enter on line 4 all of the gifts to your spouse that you listed on Schedule A and for which you are claiming a marital deduction. Do not enter any gift that you did not include on Schedule A. On the dotted line on line 4, indicate which numbered items from Schedule A are gifts to your spouse for which you are claiming the marital deduction.
Do not enter on line 4 any gifts to your spouse who was not a U.S. citizen at the time of the gift.
You may deduct all gifts of nonterminable interests made during the year that you entered on Schedule A regardless of amount, and certain gifts of terminable interests as outlined below.
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A life estate,
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An estate for a specified number of years, or
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Any other property interest that after a period of time will terminate or fail.
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Your spouse is entitled for life to all of the income from the entire interest;
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The income is paid yearly or more often;
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Your spouse has the unlimited power, while he or she is alive or by will, to appoint the entire interest in all circumstances; and
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No part of the entire interest is subject to another person's power of appointment (except to appoint it to your spouse).
Enter the amount of the annual exclusions that were claimed for the gifts you listed on line 4.
You may deduct from the total gifts made during the calendar year all gifts you gave to or for the use of:
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The United States, a state or political subdivision of a state or the District of Columbia, for exclusively public purposes;
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Any corporation, trust, community chest, fund, or foundation organized and operated only for religious, charitable, scientific, literary, or educational purposes, or to prevent cruelty to children or animals, or to foster national or international amateur sports competition (if none of its activities involve providing athletic equipment unless it is a qualified amateur sports organization), as long as no part of the earnings benefits any one person, no substantial propaganda is produced, and no lobbying or campaigning for any candidate for public office is done;
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A fraternal society, order, or association operating under a lodge system, if the transferred property is to be used only for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; or
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Any war veterans' organization organized in the United States (or any of its possessions), or any of its auxiliary departments or local chapters or posts, as long as no part of any of the earnings benefits any one person.
On line 7, show your total charitable, public, or similar gifts (minus annual exclusions allowed). On the dotted line, indicate which numbered items from the top of Schedule A are charitable gifts.
If you will pay GST tax with this return on any direct skips reported on this return, the amount of that GST tax is also considered a gift and must be added to your other gifts reported on this return.
If you entered gifts on Part 2, or if you and your spouse elected gift splitting and your spouse made gifts subject to the GST tax that you are required to show on your Form 709, complete Schedule C, and enter on line 10 the total of Schedule C, Part 3, column H. Otherwise, enter zero on line 10.
Section 2523(f)(6) creates an automatic QTIP election for gifts of joint and survivor annuities where the spouses are the only possible recipients of the annuity prior to the death of the last surviving spouse.
The donor spouse can elect out of QTIP treatment, however, by checking the box on line 12 and entering the item number from Schedule A for the annuities for which you are making the election. Any annuities entered on line 12 cannot also be entered on line 4 of Schedule A, Part 4. Any such annuities that are not listed on line 12 must be entered on line 4 of Part 4, Schedule A. If there is more than one such joint and survivor annuity, you are not required to make the election for all of them. Once made, the election is irrevocable.
If you did not file gift tax returns for previous periods, check the “No” box on page 1 of Form 709, line 11a of Part 1—General Information and skip to Part 2—Tax Computation on the same page. (However,
be sure to complete Schedule C, if applicable.) If you filed gift tax returns for previous periods, check the “Yes” box on line 11a and complete Schedule B by listing the years or quarters in chronological order as described below. If you
need more space, attach a separate sheet using the same format as
Schedule B.
If you filed returns for gifts made before 1971 or after 1981, show the calendar years in column A. If you filed returns for gifts made after 1970 and before 1982, show the calendar quarters.
In column B, identify the Internal Revenue Service office where you filed the returns. If you have changed your name, be sure to list any other names under which the returns were filed. If there was any other variation in the names under which you filed, such as the use of full given names instead of initials, please explain.
In column C, enter the amount of unified credit actually applied in the prior period. If you are required to reduce your allowable unified credit because of gifts you made after September 8, 1976, and before January 1, 1977, enter the unified credit determined after the reduction.
In column E, show the correct amount (the amount finally determined) of the taxable gifts for each earlier period.
See Regulations section 25.2504-2 for rules regarding the final determination of the value of a gift.
You must enter in Part 1 all of the gifts you listed in Part 2 of Schedule A, in that order and using those same values.
If you are reporting a generation-skipping transfer that occurred because of the close of an ETIP, complete column B for such transfer as follows.
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Provided the GST exemption is being allocated on a timely filed gift tax return, enter the value as of the close of the ETIP.
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If the exemption is being allocated after the due date (including extensions) for the gift tax return on which the transfer should be reported, enter the value as of the time the exemption allocation was made.
You are allowed to claim the gift tax annual exclusion currently allowable with respect to your reported direct skips (other than certain direct skips to trusts—see Note below), using the rules and limits discussed earlier for the gift tax annual exclusion. However, you must allocate the exclusion on a gift-by-gift basis for GST computation purposes. You must allocate the exclusion to each gift to the maximum allowable amount and in chronological order, beginning with the earliest gift that qualifies for the exclusion. Be sure that you do not claim a total exclusion of more than $12,000 per donee.
Note.
You may not claim any annual exclusion for a transfer made to a trust unless the trust meets the requirements discussed under Direct skip on page 6.
Every donor is allowed a lifetime GST exemption. The amount of the exemption for 2008 is $2,000,000. For transfers made through 1998, the GST exemption was $1 million. The exemption amounts for 1999 through 2008 are as follows:
Year | Amount |
1999 | $1,010,000 |
2000 | $1,030,000 |
2001 | $1,060,000 |
2002 | $1,100,000 |
2003 | $1,120,000 |
2004 and 2005 | $1,500,000 |
2006, 2007, and 2008 | $2,000,000 |
In general, each annual increase can only be allocated to transfers made (or appreciation occurring) during or after the year of the transfer.
A donor made $1,750,000 in GSTs through 2005, and allocated all $1,500,000 of the exemption to those transfers. In 2008, the donor makes a $207,000 taxable generation-skipping transfer. The donor can allocate $207,000 of exemption to the 2008 transfer but cannot allocate the $293,000 of unused 2008 exemption to pre-2008 transfers.
However, if in 2005, the donor made a $1,750,000 transfer to a trust that was not a direct skip, but from which generation- skipping transfers could be made in the future, the donor could allocate the increased exemption to the trust, even though no additional transfers were made to the trust. See Regulations section 26.2642-4 for details on the redetermination of the applicable fraction when additional exemption is allocated to the trust.
You should keep a record of your transfers and exemption allocations to make sure that any future increases are allocated correctly.
Enter on line 1 of Part 2 the maximum GST exemption you are allowed. This will not necessarily be the highest indexed amount if you made no generation- skipping transfers during the year of the increase.
The donor can apply this exemption to inter vivos transfers (that is, transfers made during the donor's life) on Form 709. The executor can apply the exemption on Form 706 to transfers taking effect at death. An allocation is irrevocable.
In the case of inter vivos direct skips, a portion of the donor's unused exemption is automatically allocated to the transferred property unless the donor elects otherwise. To elect out of the automatic allocation of exemption, you must file Form 709 and attach a statement to it clearly describing the transaction and the extent to which the automatic allocation is not to apply. Reporting a direct skip on a timely filed Form 709 and paying the GST tax on the transfer will qualify as such a statement.
Enter on line 5 the amount of GST exemption you are applying to transfers reported in Part 3 of Schedule A.
Section 2632(c) provides an automatic allocation to indirect skips of any unused GST exemption. The unused exemption is allocated to indirect skips to the extent necessary to make the inclusion ratio zero for the property transferred. You may elect out of this automatic allocation as explained in the instructions for Part 3 on page 9.
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Clearly identify the trust, including the trust's EIN, if known;
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If this is a late allocation, the year the transfer was reported on Form 709;
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The value of the trust assets at the effective date of the allocation;
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The amount of your GST exemption allocated to each gift (or a statement that you are allocating exemption by means of a formula such as “an amount necessary to produce an inclusion ratio of zero”); and
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The inclusion ratio of the trust after the allocation.
Note.
Where the property involved in such a transfer is subject to an ETIP because it would be includible in the donor's estate if the donor died immediately after the transfer (other than by reason of the donor having died within 3 years of making the gift), an allocation of the GST exemption at the time of the transfer will only become effective at the end of the ETIP. For details, see Transfers Subject to an Estate Tax Inclusion Period (ETIP) on page 3 and section 2642(f).
You must enter in Part 3 every gift you listed in Part 1 of Schedule C.
You are not required to allocate your available exemption. You may allocate some, all, or none of your available exemption, as you wish, among the gifts listed in Part 3 of Schedule C. However, the total exemption claimed in column C may not exceed the amount you entered on line 3 of Part 2 of Schedule C.
You may enter an amount in column C that is greater than the amount you entered in column B.
To compute the tax for the amount on line 3 (to be entered on line 4) and the tax for the amount on line 2 (to be entered on line 5), use the Table for Computing Gift Tax on page 12.
If you are a citizen or resident of the United States, you must take any available unified credit against gift tax. Nonresident aliens may not claim the unified credit. If you are a nonresident alien, delete the $345,800 entry, skip line 8, and write in zero on line 11.
Enter 20% of the amount allowed as a specific exemption for gifts made after September 8, 1976, and before January 1, 1977. (These amounts will be among those listed in Schedule B, column D, for gifts made in the third and fourth quarters of 1976.)
Gift tax conventions are in effect with Australia, Austria, Denmark, France, Germany, Japan, Sweden, and the United Kingdom. If you are claiming a credit for payment of foreign gift tax, figure the credit on an attached sheet and attach evidence that the foreign taxes were paid. See the applicable convention for details of computing the credit.
As a donor, you must sign the return. If you pay another person, firm, or corporation to prepare your return, that person must also sign the return as preparer unless he or she is your regular full-time employee.
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Give the IRS any information that is missing from your return,
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Call the IRS for information about the processing of your return or the status of your payment(s),
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Receive copies of notices or transcripts related to your return, upon request, and
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Respond to certain IRS notices about math errors, offsets, and return preparation.
Table for Computing Gift Tax
Column A | Column B | Column C | Column D |
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Taxable amount over |
Taxable amount not over— |
Tax on amount in Column A |
Rate of tax on excess over amount in Column A |
- - - - - | $10,000 | - - - - - | 18% |
$10,000 | 20,000 | $1,800 | 20% |
20,000 | 40,000 | 3,800 | 22% |
40,000 | 60,000 | 8,200 | 24% |
60,000 | 80,000 | 13,000 | 26% |
80,000 | 100,000 | 18,200 | 28% |
100,000 | 150,000 | 23,800 | 30% |
150,000 | 250,000 | 38,800 | 32% |
250,000 | 500,000 | 70,800 | 34% |
500,000 | 750,000 | 155,800 | 37% |
750,000 | 1,000,000 | 248,300 | 39% |
1,000,000 | 1,250,000 | 345,800 | 41% |
1,250,000 | 1,500,000 | 448,300 | 43% |
1,500,000 | 2,000,000 | 555,800 | 45% |
2,000,000 | - - - - - - - | 780,800 | 45% |
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