Instruction 709 (Rev. 2001 ) TO I709

User Manual: TO-709

Open the PDF directly: View PDF .
Page Count: 12

Userid: ________ Leading adjust: 100% ❏Draft ❏Ok to Print

PAGER/SGML Fileid: I709.sgm (19-Nov-2001) (Init. & date)

Page 1 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Department of the Treasury

Internal Revenue Service

Instructions for Form 709

United States Gift (and Generation-Skipping Transfer) Tax Return

(For gifts made during calendar year 2001.)

For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see page 12 of the instructions.

Section references are to the Internal Revenue Code unless otherwise noted.

If you are filing this form solely to elect allocation. See the instructions for Line 5 property, whether tangible or intangible,

gift-splitting for gifts of not more than on page 11. that you made directly or indirectly, in

$20,000 per donee, you may be able to trust, or by any other means to a donee.

use Form 709-A, United States Short Photographs of Missing The gift tax applies not only to the

Form Gift Tax Return, instead of this gratuitous transfer of any kind of property,

Children

form. See Who Must File on page 3 and but also to sales or exchanges, not made

When the Consenting Spouse Must The IRS is a proud partner with the in the ordinary course of business, where

Also File a Gift Tax Return on page 5. National Center for Missing and Exploited money or money’s worth is exchanged

Children. Photographs of missing children but the value of the money (or property)

Use selected by the Center may appear in or money’s worth received is less than the

For Gifts Revision of instructions on pages that would value of what is sold or exchanged. The

Made Form 709 otherwise be blank. You can help bring gift tax is in addition to any other tax, such

After and Before Dated these children home by looking at the as Federal income tax, paid or due on the

photographs and calling transfer.

— — — January 1, November 1-800-THE-LOST (1-800-843-5678) if you The exercise or release of a general

1982 1981 recognize a child. power of appointment may be a gift by the

December January 1, January individual possessing the power. General

31, 1981 1987 1987 General Instructions powers of appointment are those in which

the holders of the power can appoint the

December January 1, December Note: If you meet all of the following property subject to the power to

31, 1986 1989 1988 requirements, you are not required to file themselves, their creditors, their estates,

Form 709: or the creditors of their estates. To qualify

December January 1, December as a power of appointment, it must be

1. You made no gifts during the year

31, 1988 1990 1989 created by someone other than the holder

to your spouse;

of the power.

2. You gave no more than $10,000

December October 9, October during the year to any one donee; and

31, 1989 1990 1990 The gift tax may also apply to the

3. All of the gifts you made were of forgiveness of a debt, to interest-free or

present interests.

October 8, January 1, November below market interest rate loans, to the

1990 1992 1991 assignment of the benefits of an

For additional information, see

insurance policy, to certain property

Transfers Not Subject to the Gift Tax

December January 1, December settlements in divorce cases, and to the

below and Who Must File on page 3.

31, 1992 1998 1996 giving up of some amount of annuity in

exchange for the creation of a survivor

Purpose of Form annuity.

Changes To Note Use Form 709 to report the following: Bonds that are exempt from Federal

•Transfers subject to the Federal gift

•For 2001, mail this form to Internal income taxes are not exempt from

and certain generation-skipping transfer

Revenue Service Center, Cincinnati, Federal gift taxes.

(GST) taxes and to figure the tax, if any,

Ohio, 45999. See Where To File on

due on those transfers, and

page 4. Code sections 2701 and 2702 provide

•Allocation of the lifetime GST

•For gifts made to spouses who are not rules for determining whether certain

exemption to property transferred during

U.S. citizens, the annual exclusion has transfers to a family member of interests

the transferor’s lifetime. (For more details,

increased to $106,000. See page 3. in corporations, partnerships, and trusts

see the instructions for Part 2—GST

•The generation-skipping transfer (GST) are gifts. The rules of section 2704

Exemption Reconciliation on page 10,

lifetime exemption has increased to determine whether the lapse of any voting

and Regulations section 26.2632-1.)

$1,060,000. See page 10. or liquidation right is a gift.

All gift and GST taxes are computed

•Act section 561 of the Economic Transfers Not Subject to the

and filed on a calendar year basis

Growth and Tax Relief Reconciliation Act regardless of your income tax accounting Gift Tax

of 2001 (code section 2632) made period.

several changes to the special rules for Three types of transfers are not subject to

allocation of GST exemption. One of the the gift tax. These are transfers to political

Transfers Subject to the Gift

changes creates an automatic allocation organizations and payments that qualify

Tax

of GST exemption to “indirect skips.” for the educational and medical

Other changes create special elections Generally, the Federal gift tax applies to exclusions. These transfers are not “gifts”

including an election out of the automatic any transfer by gift of real or personal as that term is used on Form 709 and its

Cat. No. 16784X

Page 2 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

instructions. You need not file a Form 709 payment was made and may be offset by of Form 709 under the rules contained in

to report these transfers and should not the annual exclusion if it is otherwise the gift tax portions of these instructions,

list them on Schedule A of Form 709 if available. including the split gift rules. Therefore,

you do file Form 709. transfers made to political organizations,

The medical and educational transfers that qualify for the medical or

Political organizations. The gift tax exclusions are allowed without regard to educational exclusions, transfers that are

does not apply to a transfer to a political the relationship between you and the fully excluded under the annual exclusion,

organization (defined in section 527(e)(1)) donee. For examples illustrating these and most transfers made to your spouse

for the use of the organization. exclusions, see Regulations section are not subject to the GST tax.

Educational exclusion. The gift tax 25.2503-6.

does not apply to an amount you paid on Transfers subject to the GST tax are

Qualified disclaimers. A donee’s refusal

behalf of an individual to a qualifying described in further detail in the

to accept a gift is called a disclaimer. If a

domestic or foreign educational instructions on page 6.

person makes a qualified disclaimer with

organization as tuition for the education or respect to any interest in property, the Important: Certain transfers, particularly

training of the individual. A qualifying property will be treated as if it had never transfers to a trust, that are not subject to

educational organization is one that been transferred to that person. gift tax and are therefore not subject to

normally maintains a regular faculty and Accordingly, the disclaimant is not the GST tax on Form 709 may be subject

curriculum and normally has a regularly regarded as making a gift to the person to the GST tax at a later date. This is true

enrolled body of pupils or students in who receives the property because of the even if the transfer is less than the

attendance at the place where its qualified disclaimer. $10,000 annual exclusion. In this

educational activities are regularly carried instance, you may want to apply a GST

Requirements. To be a qualified

on. See section 170(b)(1)(A)(ii) and its exemption amount to the transfer on this

disclaimer, a refusal to accept an interest

regulations. return or on a Notice of Allocation. For

in property must meet the following

The payment must be made directly to more information, see Part 2—GST

conditions:

the qualifying educational organization Exemption Reconciliation on page 10.

1. The refusal must be in writing;

and it must be for tuition. No educational 2. The refusal must be received by

exclusion is allowed for amounts paid for Transfers Subject to an “Estate

the donor, the legal representative of the

books, supplies, room and board, or other Tax Inclusion Period”

donor, the holder of the legal title to the

similar expenses that do not constitute If property that is transferred by gift in a

property to which the interest relates, or

direct tuition costs. To the extent that the GST direct skip would have been

the person in possession of the property

payment to the educational institution was includible in the donor’s estate if the

within 9 months after the later of (a) the

for something other than tuition, it is a gift donor had died immediately after the

day on which the transfer creating the

to the individual for whose benefit it was transfer (other than by reason of the

interest is made or (b) the day on which

made, and may be offset by the annual donor having died within 3 years of

the disclaimant reaches age 21;

exclusion if it is otherwise available. making the gift), the direct skip will be

3. The disclaimant must not have

Contributions to a qualified state tuition treated as having been made at the end

accepted the interest or any of its

program on behalf of a designated of the “estate tax inclusion period” (ETIP)

benefits;

beneficiary do not qualify for the rather than at the time it was actually

4. As a result of the refusal, the

educational exclusion. made. For details, see section 2642(f).

interest must pass without any direction

Medical exclusion. The gift tax does not from the disclaimant to either (a) the Report the gift portion of such a

apply to an amount you paid on behalf of spouse of the decedent or (b) a person transfer in Schedule A, Part 1, at the time

an individual to a person or institution that other than the disclaimant; and of the actual transfer. Report the GST

provided medical care for the individual. 5. The refusal must be irrevocable portion in Schedule A, Part 2, but only at

The payment must be to the care and unqualified. the close of the ETIP. Use Form 709 only

provider. The medical care must meet the to report those transfers where the ETIP

The 9-month period for making the

requirements of section 213(d) (definition closed due to something other than the

disclaimer generally is determined

of medical care for income tax deduction donor’s death. If the ETIP closed as the

separately for each taxable transfer. For

purposes). Medical care includes result of the donor’s death, report the

gifts, the period begins on the date the

expenses incurred for the diagnosis, cure, transfer on Form 706.

transfer is a completed transfer for gift tax

mitigation, treatment, or prevention of purposes. For a transfer by will, it begins

disease, or for the purpose of affecting If you are filing this Form 709 solely to

on the date of the decedent’s death.

any structure or function of the body, or report transfers subject to an ETIP,

for transportation primarily for and complete the form as you normally would

Transfers Subject to the

essential to medical care. Medical care with the following exceptions:

Generation-Skipping Transfer

also includes amounts paid for medical 1. Write “ETIP” at the top of page 1;

Tax

insurance on behalf of any individual. 2. Complete only lines 1–4, 6, 8, and

You must report on Form 709 the GST

The medical exclusion does not apply 9 of Part 1, General Information;

tax imposed on inter vivos direct skips.

to amounts paid for medical care that are 3. Complete Schedule A, Part 2, as

(See Regulations section 26.2662-1(b) for

reimbursed by the donee’s insurance. If explained in the instructions for that

instructions on how to report other

payment for a medical expense is schedule on page 8;

generation-skipping transfers.) An inter

reimbursed by the donee’s insurance 4. Complete Column B of Schedule C,

vivos direct skip is a transfer made during

company, your payment for that expense, Part 1, as explained in the instructions for

the donor’s lifetime that is: (a) subject to

to the extent of the reimbursed amount, is that schedule on page 10;

the gift tax; (b) of an interest in property;

not eligible for the medical exclusion and 5. Complete only lines 14 and 15 of

and (c) made to a skip person. (See

you have made a gift to the donee. Schedule A, Part 3. (Also list here direct

page 6.)

To the extent that the payment was for skips that are subject only to the GST tax

something other than medical care, it is a A transfer is subject to the gift tax if it as the result of the termination of an

gift to the individual on whose behalf the is required to be reported on Schedule A “estate tax inclusion period.” See

-2-

Page 3 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

instructions for Schedule C beginning on If a gift is of community property, it is •Was domiciled in a possession of the

page 10.) considered made one-half by each United States;

spouse. For example, a gift of $100,000 •Was a U.S. citizen; and

of community property is considered a gift

Section 2701 Elections •Became a U.S. citizen for a reason

of $50,000 made by each spouse, and

The special valuation rules of section other than being a citizen of a U.S.

each spouse must file a gift tax return.

2701 contain three elections that you possession or being born or residing in a

must make with Form 709. possession.

Likewise, each spouse must file a gift

tax return if they have made a gift of

1. A transferor may elect to treat a property held by them as joint tenants or Annual Exclusion

qualified payment right he or she holds tenants by the entirety.

(and all other rights of the same class) as The first $10,000 of gifts of present

other than a qualified payment right. interests to each donee during the

Citizens or Residents of the

2. A person may elect to treat a calendar year is subtracted from total gifts

United States

distribution right held by that person in a in figuring the amount of taxable gifts. For

If you are a citizen or resident of the

controlled entity as a qualified payment a gift in trust, each beneficiary of the trust

United States, you must file a gift tax

right. is treated as a separate donee for

return (whether or not any tax is ultimately

3. An interest holder may elect to treat purposes of the annual exclusion.

due) in the following situations:

as a taxable event the payment of a

All of the gifts made during the

qualified payment that occurs more than 4 Gifts to your spouse. You must file a

calendar year to a donee are fully

years after its due date. gift tax return if your spouse is not a U.S.

excluded under the annual exclusion if

citizen and the total gifts you made to

The elections described in 1 and 2they are all gifts of present interests and if

your spouse during the year exceed

must be made on the Form 709 that is they total $10,000 or less.

$106,000, or if you made any gift of a

filed by the transferor to report the terminable interest that does not meet the

transfer that is being valued under section Note: For gifts made to spouses who are

exception described in Life estate with

2701. The elections are made by not U.S. citizens, the annual exclusion

power of appointment on page 9.

attaching a statement to Form 709. For has been increased to $106,000,

You must also file a gift tax return to

information on what must be in the provided the additional $96,000 gift would

make the QTIP (Qualified Terminable

statement and for definitions and other otherwise qualify for the gift tax marital

Interest Property) election described on

details on the elections, see section 2701 deduction (as described in the line 8

page 9.

and Regulations section 25.2701-2(c). instructions on page 9).

Except as described above, you do

The election described in 3 may be A gift of a future interest cannot be

not have to file a gift tax return to report

made by attaching a statement to either a excluded under the annual exclusion.

gifts to your spouse regardless of the

timely or a late filed Form 709 filed by the

amount of these gifts and regardless of

recipient of the qualified payment for the A gift is considered a present interest if

whether the gifts are present or future

year the payment is received. If the the donee has all immediate rights to the

interests.

election is made on a timely filed return, use, possession, and enjoyment of the

the taxable event is deemed to occur on property and income from the property. A

Gifts to donees other than your

the date the qualified payment is gift is considered a future interest if the

spouse. You must file a gift tax return if

received. If it is made on a late filed donee’s rights to the use, possession,

you gave gifts to any such donee that are

return, the taxable event is deemed to and enjoyment of the property and

not fully excluded under the $10,000

occur on the first day of the month income from the property will not begin

annual exclusion (as described below).

immediately preceding the month in which until some future date. Future interests

Thus, you must file a gift tax return to

the return is filed. For information on what include reversions, remainders, and other

report any gift of a future interest

must be in the statement and for similar interests or estates.

(regardless of amount) or to report gifts to

definitions and other details on this any donee that total more than $10,000 Note: A contribution to a qualified state

election, see section 2701 and for the year. tuition plan on behalf of a designated

Regulations section 25.2701-4(d). Gifts to charities. If the only gifts you beneficiary is considered a gift of a

All of the elections may be revoked made during the year are deductible as present interest.

only with the consent of the IRS. gifts to charities, you do not need to file a A gift to a minor is considered a

return as long as you transferred your present interest if all of the following

Who Must File entire interest in the property to qualifying conditions are met:

charities. If you transferred only a partial

Only individuals are required to file gift tax

interest, or transferred part of your 1. Both the property and its income

returns. If a trust, estate, partnership, or

interest to someone other than a charity, may be expended by, or for the benefit of,

corporation makes a gift, the individual

you must still file a return. the minor before the minor reaches age

beneficiaries, partners, or stockholders

21;

are considered donors and may be liable If you are required to file a return to

for the gift and GST taxes. 2. All remaining property and its

report noncharitable gifts and you made income must pass to the minor on the

gifts to charities, you must include all of

The donor is responsible for paying the minor’s 21st birthday; and

your gifts to charities on the return.

gift tax. However, if the donor does not

3. If the minor dies before the age of

pay the tax, the person receiving the gift Gift splitting. You must file a gift tax 21, the property and its income will be

may have to pay the tax. return to split gifts (regardless of their payable either to the minor’s estate or to

amount) with your spouse as described in

If a donor dies before filing a return, whomever the minor may appoint under a

the Specific Instructions for Part 1 on

the donor’s executor must file the return. general power of appointment.

page 4.

A married couple may not file a joint

The gift of a present interest to more

gift tax return. However, see Split Gifts—The term citizen of the United States

than one donee as joint tenants qualifies

Gifts by Husband or Wife to Third includes a person who, at the time of

for the annual exclusion for each donee.

Parties on page 4. making the gift:

-3-

Page 4 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

address shown below under Where To with right of survivorship and if either you

Nonresident Aliens File. You must explain the reasons for the or the donee may give up those rights by

Nonresident aliens are subject to gift and delay. You must use a letter to request severing your interest, you have made a

GST taxes for gifts of tangible property an extension of time to file your gift tax gift to the donee in the amount of half the

situated in the United States. Under return unless you are also requesting an value of the property.

certain circumstances, they are also extension to file your income tax return. If you create a joint bank account for

subject to gift and GST taxes for gifts of

yourself and the donee (or a similar kind

intangible property. (See section Where To File of ownership by which you can get back

2501(a).)

the entire fund without the donee’s

Send Form 709 to:

If you are a nonresident alien who consent), you have made a gift to the

Internal Revenue Service Center

made a gift subject to gift tax, you must donee when the donee draws on the

Cincinnati, Ohio 45999

file a gift tax return if: (a) you gave any account for his or her own benefit. The

gifts of future interests; or (b) your gifts of amount of the gift is the amount that the

Adequate Disclosure

present interests to any donee other than donee took out without any obligation to

your spouse total more than $10,000; or To begin the running of the statute repay you. If you buy a U.S. savings bond

is not a U.S. citizen total more than gift must be adequately disclosed

CAUTION

donee, there is a gift to the donee when

$106,000. on Form 709 (or an attached statement) he or she cashes the bond without any

filed for the year of the gift. obligation to account to you.

When To File In general, a gift will be considered

Form 709 is an annual return. adequately disclosed if the return or Transfer of Certain Life

Generally, you must file the 2001 Form statement provides the following: Estates

709 on or after January 1 but not later •A description of the transferred

than April 15, 2002. If you received a qualifying terminable

property and any consideration received

interest (see page 9) from your spouse for

by the donor,

If the donor died during 2001, the which a marital deduction was elected on

•The identity of, and relationship

executor must file the donor’s 2001 Form your spouse’s estate or gift tax return, you

between, the donor and each donee,

709 not later than the earlier of (a) the will be subject to the gift tax (and GST

•If the property is transferred in trust, the

due date (with extensions) for filing the tax, if applicable) if you dispose of all or

trust’s EIN and a brief description of the

donor’s estate tax return or (b) April 15, part of your life income interest (by gift,

terms of the trust (or a copy of the trust

2002. Under this rule, the 2001 Form 709 sale, or otherwise).

instrument in lieu of the description), and

may be due before April 15, 2002, if the

•Either a qualified appraisal or a detailed

donor died before July 15, 2001. If the The entire value of the property

description of the method used to

donor died after July 14, 2001, the due involved less (a) the amount you received

determine the fair market value of the gift.

date (without extensions) is April 15, on the disposition and (b) the amount (if

See Regulations section

2002. If no estate tax return is required to any) of the life income interest you

301.6501(c)-1(e) and (f) for details,

be filed, the due date for the 2001 Form retained after the transfer will be treated

including what constitutes a qualified

709 (without extensions) is April 15, 2002. as a taxable gift. That portion of the

appraisal, the information required if no

For more details, see Regulations section property’s value that is attributable to the

appraisal is provided, and the information

25.6075-1. remainder interest is a gift of a future

required for transfers under sections 2701 interest for which no annual exclusion is

Extension of Time To File and 2702. allowed. To the extent you made a gift of

There are two methods of extending the the life income interest, you may claim an

time to file the gift tax return. Neither Penalties annual exclusion, treating the person to

method extends the time to pay the gift or whom you transferred the interest as the

The law provides for penalties for both

GST taxes. If you want an extension of donee for purposes of computing the

late filing of returns and late payment of

time to pay the gift or GST taxes, you annual exclusion.

tax unless you have reasonable cause.

must request that separately. (See There are also penalties for valuation

Regulations section 25.6161-1.) understatements that cause an

By extending the time to file your underpayment of the tax, willful failure to Specific Instructions

income tax return. Any extension of file a return on time, and willful attempt to

time granted for filing your calendar year evade or defeat payment of tax.

Federal income tax return will also extend The late filing penalty will not be Part I—General

the time to file any gift tax return. Income imposed if the taxpayer can show that the

tax extensions are made by using Form Information

failure to file a timely return is due to

4868, 2688, or 2350, which have reasonable cause. Those filing late (after

checkboxes for Form 709. See Form Split Gifts—Gifts by Husband

the due date, including extensions)

4868 to get an automatic 4-month or Wife to Third Parties

should attach an explanation to the return

extension by phone using a credit card to to show reasonable cause. A married couple may not file a joint gift

pay part or all of the Federal income tax tax return.

A valuation understatement occurs

(but not gift or GST taxes) you expect to when the reported value of property However, if after reading the

owe for 2001. You may only use one of entered on Form 709 is 50% or less of the instructions below, you and your spouse

these forms to extend the time for filing actual value of the property. agree to split your gifts, you should file

your gift tax return if you are also

both of your individual gift tax returns

requesting an extension of time to file

together (i.e., in the same envelope) to

Joint Tenancy

your income tax return.

avoid correspondence from the IRS.

By letter. You can request an extension If you buy property with your own funds

of time to file your gift tax return by writing and the title to such property is held by If you and your spouse agree, all gifts

to the Cincinnati Service Center at the yourself and the donee as joint tenants (including gifts of property held with your

-4-

Page 5 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

spouse as joint tenants or tenants by the during the calendar year (while you were discount for lack of marketability, a

entirety) either of you make to third married) must be split. minority interest, a fractional interest in

parties during the calendar year will be real estate, blockage, market absorption,

If the consent is effective, the liability

considered as made one-half by each of or for any other reason, answer “Yes” to

for the entire gift and GST taxes of each

you if: the question at the top of Schedule A.

spouse is joint and several.

•You and your spouse were married to Also, attach an explanation giving the

When the Consenting Spouse Must

one another at the time of the gift; factual basis for the claimed discounts

Also File a Gift Tax Return

•If divorced or widowed after the gift, and the amount of the discounts taken.

you did not remarry during the rest of the If the spouses elect gift splitting

calendar year; Qualified State Tuition

(described under Split Gifts on page 4),

•Neither of you was a nonresident alien then both the donor spouse and the Programs

at the time of the gift; and consenting spouse must each file If your total 2001 contributions to a

•You did not give your spouse a general separate gift tax returns unless all the qualified state tuition plan on behalf of

power of appointment over the property requirements of either Exception 1 or 2any individual beneficiary exceed

interest transferred. below are met. $10,000, then for purposes of the annual

If you transferred property partly to Exception 1. During the calendar year: exclusion you may elect under section

your spouse and partly to third parties, •Only one spouse made any gifts; 529(c)(2)(B) to treat up to $50,000 of your

you can only split the gifts if the interest •The total value of these gifts to each total contributions as having been made

transferred to the third parties is third-party donee does not exceed ratably over a 5-year period beginning in

ascertainable at the time of the gift. $20,000; and 2001.

If you meet these requirements and •All of the gifts were of present interests.

want your gifts to be considered made You must report in 2001 the entire

Exception 2. During the calendar year:

one-half by you and one-half by your amount of the contribution in excess of

•Only one spouse (the donor spouse)

spouse, check the “Yes” box on line 12, $50,000.

made gifts of more than $10,000 but not

page 1; complete lines 13 through 17; more than $20,000 to any third-party You make the election by checking the

and have your spouse sign the consent donee; box on line B at the top of Schedule A.

on line 18. If you are not married or do not •The only gifts made by the other The election must be made for the

wish to split gifts, skip to Schedule A. spouse (the consenting spouse) were calendar year in which the contribution is

gifts of not more than $10,000 to

Line 15 made. Also attach an explanation that

third-party donees other than those to

If you were married to one another for the includes the following:

whom the donor spouse made gifts; and

entire calendar year, check the “Yes” box •The total amount contributed per

•All of the gifts by both spouses were of

and skip to line 17. If you were married for individual beneficiary;

present interests.

only part of the year, check the “No” box •The amount for which the election is

If either Exception 1 or 2 is met, only

and go to line 16. being made; and

the donor spouse must file a return and •The name of the individual for whom

Line 16 the consenting spouse signifies consent the contribution was made.

on that return. This return may be made

Check the box that explains the change in If you make this election, report only 1/5

on Form 709-A, United States Short

your marital status during the year and (20%) of your total contributions (up to

Form Gift Tax Return. This form is much

give the date you were married, divorced, $50,000) on the 2001 Form 709. You

easier to complete than Form 709, and

or widowed. must then report an additional 20% of the

you should consider filing it whenever total in each of the succeeding 4 years. If

Consent of Spouse either of the above exceptions is met you are electing gift splitting for the

and the gifts consist entirely of present

To have your gifts (and generation- contributions, apply the gift-splitting rules

interests in tangible personal property,

skipping transfers) considered as made before applying these rules. In this case,

cash, U.S. Savings Bonds, or stocks and

one-half by each of you, your spouse both spouses must make the section

bonds listed on a stock exchange.

must sign the consent. The consent may 529(c)(2)(B) election on their respective

generally be signed at any time after the Specific instructions for Part 2—Tax returns.

end of the calendar year. However, there Computation are continued on page 12.

are two exceptions: Because you must complete Schedules Note: Contributions to qualified state

1. The consent may not be signed A, B, and C to fill out Part 2, you will find tuition plans do not qualify for the

after April 15 following the end of the year instructions for these schedules below. educational exclusion.

in which the gift was made. (But, if neither How To Complete Schedule A

you nor your spouse has filed a gift tax

After you determine which gifts you made

return for the year on or before that date, Schedule A—Computation are subject to the gift tax and therefore

the consent must be made on the first gift of Taxable Gifts should be listed on Schedule A, you must

tax return for the year filed by either of

Do not enter on Schedule A any gift or divide these gifts between those subject

you.)

part of a gift that qualifies for the political only to the gift tax (gifts made to nonskip

2. The consent may not be signed

organization, educational, or medical persons—see page 6) and those subject

after a notice of deficiency for the gift or

exclusions. In the instructions below, to both the gift and GST taxes (gifts made

GST tax for the year has been sent to

“gifts” means gifts (or parts of gifts) that to skip persons—see page 6). Gifts made

either you or your spouse.

do not qualify for the political to nonskip persons are entered in Part 1.

The executor for a deceased spouse organization, educational, or medical Gifts made to skip persons are entered in

or the guardian for a legally incompetent exclusions. Part 2.

spouse may sign the consent.

Valuation Discounts

The consent is effective for the entire If you need more space, attach a

calendar year; therefore, all gifts made by If the value of any gift you report in either separate sheet using the same format as

both you and your spouse to third parties Part 1 or Part 2 of Schedule A reflects a Schedule A.

-5-

Page 6 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

reported as described above. However, if donee is a “natural person” or a “trust” as

Gifts to Donees Other Than you gave a gift of a future interest to your defined below.

Your Spouse spouse and you are required to report the

You must always enter all gifts of future Trust

gift on Form 709 because you gave the

interests that you made during the For purposes of the GST tax, trust

present interest to a donee other than

calendar year regardless of their value. includes not only an explicit trust, but also

your spouse, then you should enter the

If you do not elect gift splitting. If the any other arrangement (other than an

entire gift, including the future interest

total gifts of present interests to any estate) that although not explicitly a trust,

given to your spouse, on Schedule A. You

donee are more than $10,000 in the has substantially the same effect as a

should use the rules under Gifts Subject

calendar year, then you must enter all trust. For example, trust includes life

to Both Gift and GST Taxes, below, to

such gifts that you made during the year estates with remainders, terms for years,

determine whether to enter the gift on

to or on behalf of that donee, including and insurance and annuity contracts. A

Schedule A, Part 1 or Part 2.

those gifts that will be excluded under the transfer of property that is conditional on

Non-U.S. citizen spouse donee. If your

annual exclusion. If the total is $10,000 or the occurrence of an event is a transfer in

spouse is not a U.S. citizen and you gave

less, you need not enter on Schedule A trust.

him or her a gift of a future interest, you

any gifts (except gifts of future interests) must report on Schedule A all gifts to your Interest in Property

that you made to that donee. spouse for the year. If all gifts to your If a gift is made to a “natural person,” it is

If you elect gift splitting. Enter on spouse were present interests, do not always considered a gift of an interest in

Schedule A the entire value of every gift report on Schedule A any gifts to your property for purposes of the GST tax.

you made during the calendar year while spouse if the total of such gifts for the

you were married, even if the gift’s value If a gift is made to a trust, a natural

year does not exceed $106,000 and all

will be less than $10,000 after it is split on person will have an interest in the

gifts in excess of $10,000 would qualify

line 2 of Part 3. property transferred to the trust if that

for a marital deduction if your spouse

person either has a present right to

were a U.S. citizen (see the instructions

Gifts to Your Spouse receive income or corpus from the trust

for Schedule A, Part 3, line 8, on page 9).

You do not need to enter any of your gifts (such as an income interest for life) or is a

If the gifts exceed $106,000, you must

to your spouse on Schedule A unless you permissible current recipient of income or

report all of the gifts even though some

gave a gift of a terminable interest to your corpus from the trust (e.g., possesses a

may be excluded.

spouse, you gave a gift of a future interest general power of appointment).

to your spouse as described below, or Gifts Subject to Both Gift

your spouse was not a citizen of the Skip Person

United States at the time of the gift. and GST Taxes A donee who is a natural person is a skip

Terminable interest. Terminable person if that donee is assigned to a

Direct Skip

interests are defined in the instructions to generation that is two or more

line 8. If all the terminable interests you generations below the generation

The GST tax you must report on Form

gave to your spouse qualify as life estates assignment of the donor. See

709 is that imposed only on inter vivos

with power of appointment (defined on Determining the Generation of a Donee

direct skips. An “inter vivos direct skip” is

page 9) you do not need to enter any of below.

a gift that (a) is subject to the gift tax, (b)

them on Schedule A. is an interest in property, and (c) is made A donee that is a trust is a skip person

to a skip person. All three requirements

However, if you gave your spouse any if all the interests in the property

must be met before the gift is subject to

terminable interest that does not qualify transferred to the trust (as defined above)

the GST tax.

as a life estate with power of are held by skip persons.

appointment, you must report on A gift is “subject to the gift tax” if you A trust will also be a skip person if

Schedule A all gifts of terminable interests are required to list it on Schedule A of there are no interests in the property

you made to your spouse during the year. Form 709 (as described above). transferred to the trust held by any

You should not report any gifts you However, if you make a nontaxable gift person, and future distributions or

made to your spouse who is a U.S. citizen (which is a direct skip) to a trust for the terminations from the trust can be made

that are not terminable interests (except benefit of an individual, this transfer is only to skip persons.

as described under Future interest on also subject to the GST tax unless: Nonskip Person

this page); however, you must report all 1. During the lifetime of the

terminable interests, whether or not they A nonskip person is any donee who is not

beneficiary, no corpus or income may be

can be deducted. a skip person.

distributed to anyone other than the

beneficiary and

Charitable remainder trusts. If you Determining the Generation of a

2. If the beneficiary dies before the

make a gift to a charitable remainder trust Donee

termination of the trust, the assets of the

and your spouse is the only noncharitable

trust will be included in the gross estate of

beneficiary (other than yourself), the Generally, a generation is determined

the beneficiary.

interest you gave to your spouse is not along family lines as follows:

considered a terminable interest and, 1. If the donee is a lineal descendant

Note: If the property transferred in the

therefore, should not be shown on of a grandparent of the donor (e.g., the

direct skip would have been includible in

Schedule A. For definitions and rules donor’s cousin, niece, nephew, etc.), the

the donor’s estate if the donor had died

concerning these trusts, see section number of generations between the donor

immediately after the transfer, see

2056(b)(8)(B) and Regulations section and the descendant (donee) is

Transfers Subject to an “Estate Tax

20.2055-2. determined by subtracting the number of

Inclusion Period” on page 2.

Future interest. Generally, you should generations between the grandparent and

not report gifts of future interests to your To determine if a gift “is of an interest the donor from the number of generations

spouse unless the future interest is also a in property” and “is made to a skip between the grandparent and the

terminable interest that is required to be person,” you must first determine if the descendant (donee).

-6-

Page 7 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

2. If the donee is a lineal descendant interest in the property transferred (the

Generation Assignment Where present right to use the house) is

of a grandparent of a spouse (or former Intervening Parent Is Dead transferred to a nonskip person (your

spouse) of the donor, the number of If you made a gift to your grandchild and daughter). Therefore, the trust is not a

generations between the donor and the at the time you made the gift, the skip person because there is an interest

descendant (donee) is determined by grandchild’s parent (who is your or your in the transferred property that is held by

subtracting the number of generations spouse’s or your former spouse’s child) is a nonskip person. The gift is not a direct

between the grandparent and the spouse dead, then for purposes of generation skip and you should list it in Part 1 of

(or former spouse) from the number of assignment, your grandchild is Schedule A. (However, on the death of

generations between the grandparent and considered to be your child rather than the daughter, a termination of her interest

the descendant (donee). your grandchild. Your grandchild’sin the trust will occur that may be subject

3. A person who at any time was children will be treated as your to the generation-skipping transfer tax.

married to a person described in 1 or 2grandchildren rather than your See the instructions for line 5, Part 2,

above is assigned to the generation of great-grandchildren. Schedule C (on page 11) for a discussion

that person. A person who at any time This rule is also applied to your lineal of how to allocate GST exemption to such

was married to the donor is assigned to descendants below the level of a trust.)

the donor’s generation. grandchild. For example, if your Example 2. You give $100,000 to

4. A relationship by adoption or grandchild is dead, your your grandchild. This gift is a direct skip

half-blood is treated as a relationship by great-grandchildren who are lineal that is not made in trust. You should list it

whole-blood. descendants of the dead grandchild are in Part 2 of Schedule A.

5. A person who is not assigned to a considered your grandchildren for

generation according to 1, 2, 3, or 4Example 3. You establish a trust that

purposes of the GST tax.

above is assigned to a generation based is required to accumulate income for 10

This special rule may also apply in

on his or her birth date as follows: years and then pay its income to your

other cases of the death of a parent of the grandchildren for their lives and upon

a. A person who was born not more transferee. Beginning with gifts made in their deaths distribute the corpus to their

than 121/2 years after the donor is in the 1998, the existing rule that applies to children. Because the trust has no current

donor’s generation. grandchildren of the decedent has been beneficiaries, there are no present

b. A person born more than 121/2extended to apply to other lineal interests in the property transferred to the

years, but not more than 371/2 years, after descendants. trust. All of the persons to whom the trust

the donor is in the first generation If property is transferred to an can make future distributions (including

younger than the donor. individual who is a descendant of a parent distributions upon the termination of

c. Similar rules apply for a new of the transferor and that individual’sinterests in property held in trust) are skip

generation every 25 years. parent (who is a lineal descendant of the persons (i.e., your grandchildren and

If more than one of the rules for parent of the transferor) is dead at the great-grandchildren). Therefore, the trust

assigning generations applies to a donee, time the transfer is subject to gift or estate itself is a skip person and you should list

that donee is generally assigned to the tax, then for purposes of generation the gift in Part 2 of Schedule A.

youngest of the generations that would assignment, the individual is treated as if Example 4. You establish a trust that

apply. he or she is a member of the generation pays all of its income to your

that is one generation below the lower of: grandchildren for 10 years. At the end of

If an estate or trust, partnership, •the transferor’s generation or 10 years, the corpus is to be distributed to

corporation, or other entity (other than •the generation assignment of the your children. Since for this purpose

certain charitable organizations and trusts youngest living ancestor of the individual interests in trusts are defined only as

described in sections 511(a)(2) and who is also a descendant of the parent of present interests, all of the interests in

511(b)(2) and governmental entities) is a the transferor. this trust are held by skip persons (the

donee, then each person who indirectly The same rules apply to the children’s interests are future interests).

receives the gift through the entity is generation assignment of any descendant Therefore, the trust is a skip person and

treated as a donee and is assigned to a of the individual. you should list the entire amount you

generation as explained in the above This rule does not apply to a transfer transferred to the trust in Part 2 of

rules. to an individual who is not a lineal Schedule A even though some of the

descendant of the transferor if the trust’s ultimate beneficiaries are nonskip

Charitable organizations and trusts transferor has any living lineal persons.

described in sections 511(a)(2) and descendants.

511(b)(2) and governmental entities are Part 1—Gifts Subject Only to

assigned to the donor’s generation. If any transfer of property to a trust Gift Tax

Transfers to such organizations are would have been a direct skip except for List gifts subject only to the gift tax in Part

therefore not subject to the GST tax. this generation assignment rule, then the 1. Generally, all of the gifts you made to

These gifts should always be listed in Part rule also applies to transfers from the your spouse (that are required to be

1 of Schedule A. trust attributable to such property. listed, as described earlier), to your

Examples children, and to charitable organizations

Charitable Remainder Trusts are not subject to the GST tax and

The generation-skipping transfer rules

Gifts in the form of charitable remainder should, therefore, be listed only in Part 1.

can be illustrated by the following

annuity trusts, charitable remainder examples:

unitrusts, and pooled income funds are Group the gifts in four categories: gifts

not transfers to skip persons and Example 1. You give your house to made to your spouse; gifts made to third

therefore are not direct skips. You should your daughter for her life with the parties that are to be split with your

always list these gifts in Part 1 of remainder then passing to her children. spouse; charitable gifts (if you are not

Schedule A even if all of the life This gift is made to a “trust” even though splitting gifts with your spouse); and other

beneficiaries are skip persons. there is no explicit trust instrument. The gifts. If a transfer results in gifts to two or

-7-

Page 8 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

more individuals (such as a life estate to For more information on adjusted Supplemental Documents

one with remainder to the other), list the basis, see Pub. 551, Basis of Assets. To support the value of your gifts, you

gift to each separately. must provide information showing how it

Date and Value of Gift was determined.

Number and describe all gifts The value of a gift is the fair market value

(including charitable, public, and similar For stock of close corporations or

of the property on the date the gift is

gifts) in the columns provided in Schedule inactive stock, attach balance sheets,

made. The fair market value is the price

A. Describe each gift in enough detail so particularly the one nearest the date of

at which the property would change

that the property can be easily identified, the gift, and statements of net earnings or

hands between a willing buyer and a

as explained below. operating results and dividends paid for

willing seller, when neither is forced to each of the 5 preceding years.

For real estate provide: buy or to sell, and when both have

•A legal description of each parcel; For each life insurance policy, attach

reasonable knowledge of all relevant

•The street number, name, and area if Form 712, Life Insurance Statement.

facts. Fair market value may not be

the property is located in a city; and determined by a forced sale price, nor by Note for single premium or paid-up

•A short statement of any improvements the sale price of the item in a market policies: In certain situations, for

made to the property. other than that in which the item is most example, where the surrender value of

For bonds, give: commonly sold to the public. The location the policy exceeds its replacement cost,

•The number of bonds transferred; of the item must be taken into account the true economic value of the policy will

•The principal amount of each bond; wherever appropriate. be greater than the amount shown on line

•Name of obligor; 59 of Form 712. In these situations, report

•Date of maturity; The fair market value of a stock or the full economic value of the policy on

•Rate of interest; bond (whether listed or unlisted) is the Schedule A. See Rev. Rul. 78-137,

•Date or dates when interest is payable; mean between the highest and lowest 1978-1 C.B. 280 for details.

•Series number if there is more than one selling prices quoted on the valuation If the gift was made by means of a

issue; date. If only the closing selling prices are trust, attach a certified or verified copy of

•Exchanges where listed or, if unlisted, available, then the fair market value is the the trust instrument to the return on which

give the location of the principal business mean between the quoted closing selling you report your first transfer to the trust.

office of the corporation; and price on the valuation date and on the However, to report subsequent transfers

•CUSIP number. The CUSIP number is trading day before the valuation date. To to the trust, you may attach a brief

a nine-digit number assigned by the figure the fair market value if there were description of the terms of the trust or a

American Banking Association to traded no sales on the valuation date, see the copy of the trust instrument.

securities. instructions for Schedule B of Form 706.

For stocks: Also attach any appraisal used to

•Give number of shares; Stock of close corporations or inactive determine the value of real estate or other

•State whether common or preferred; property.

stock must be valued on the basis of net

•If preferred, give the issue, par value, worth, earnings, earning and dividend If you do not attach this information,

quotation at which returned, and exact capacity, and other relevant factors. you must include in Schedule A full

name of corporation; information to explain how the value was

•If unlisted on a principal exchange, give Generally, the best indication of the determined.

location of principal business office of value of real property is the price paid for

corporation, state in which incorporated, the property in an arm’s-length Part 2—Gifts That are Direct

and date of incorporation; transaction on or before the valuation Skips and are Subject to Both

•If listed, give principal exchange; and date. If there has been no such Gift Tax and

•CUSIP number. transaction, use the comparable sales

For interests in property based on the Generation-Skipping Transfer

method. In comparing similar properties,

length of a person’s life, give the date of Tax

consider differences in the date of the

birth of the person. sale, and the size, condition, and location List in Part 2 only those gifts that are

of the properties, and make all subject to both the gift and GST taxes.

For life insurance policies, give the appropriate adjustments. You must list the gifts in Part 2 in the

name of the insurer and the policy

chronological order that you made

number. The value of all annuities, life estates, them. Number, describe, and value the

Clearly identify in the description terms for years, remainders, or reversions gifts as described in the instructions for

column which gifts create the opening of is generally the present value on the date Part 1 on page 7.

an estate tax inclusion period (ETIP) as of the gift. If you made a gift in trust, list the entire

described under Transfers Subject to an gift as one line entry in Part 2. Enter the

Sections 2701 and 2702 provide

“Estate Tax Inclusion Period” on page entire value of the property transferred to

special valuation rules to determine the

2. Describe the interest that is creating the trust even if the trust has nonskip

amount of the gift when a donor transfers

the ETIP. You may not allocate the GST person future beneficiaries.

an equity interest in a corporation or

exemption to these transfers until the

partnership (section 2701) or makes a gift

close of the ETIP. See the instructions for How to report GST transfers after the

in trust (section 2702). The rules only

Schedule C beginning on page 10. close of an ETIP. If you are reporting a

apply if, immediately after the transfer, the generation-skipping transfer that was

Donor’s Adjusted Basis of Gifts donor (or an applicable family member) subject to an “estate tax inclusion period”

holds an applicable retained interest in

Show the basis you would use for income (ETIP) (provided the ETIP closed as a

the corporation or partnership, or retains

tax purposes if the gift were sold or result of something other than the death

an interest in the trust. For details, see

exchanged. Generally, this means cost of the transferor—see Form 706), and

sections 2701 and 2702, and their

plus improvements, less applicable you are also reporting gifts made during

regulations.

depreciation, amortization, and depletion. the year, complete Schedule A as you

-8-

Page 9 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

normally would with the following a gift with your spouse, the annual the above conditions. For example, if your

changes: exclusion you claim against that gift may spouse is to receive all of the income

not be more than your half of the gift. from the entire interest, but only has a

Report the transfer subject to an ETIP power to appoint one-half of the entire

on Schedule A, Part 2. Deductions interest, then only one-half qualifies for

1. Column B. In addition to the the marital deduction.

Line 8

information already requested, describe A partial interest in property is treated

the interest that is closing the ETIP; Enter on line 8 all of the gifts to your as a specific portion of an entire interest

explain what caused the interest to spouse that you listed on Schedule A and only if the rights of your spouse to the

terminate; and list the year the gift portion for which you are claiming a marital income and to the power constitute a

of the transfer was reported and its item deduction. Do not enter any gift that fractional or percentile share of the entire

number on Schedule A that was originally you did not include on Schedule A. On property interest. This means that the

filed to report the gift portion of the ETIP the dotted line on line 8, indicate which interest or share will reflect any increase

transfer. numbered items from Schedule A are or decrease in the value of the entire

2. Column D. Give the date the ETIP gifts to your spouse for which you are property interest. If the spouse is entitled

closed rather than the date of the initial claiming the marital deduction. to receive a specified sum of income

gift. Do not enter on line 8 any gifts to annually, the capital amount that would

3. Column E. Enter “N/A” in your spouse who was not a U.S. produce such a sum will be considered

Column E. citizen at the time of the gift.

TIP

the specific portion from which the spouse

The value is entered only in Column B, is entitled to receive the income.

You may deduct all gifts of

Part 1, Schedule C. See the instructions nonterminable interests made during this Election to deduct qualified terminable

for Schedule C. time that you entered on Schedule A interest property (QTIP). You may elect

regardless of amount, and certain gifts of

Part 3—Taxable Gift to deduct a gift of a terminable interest if it

terminable interests as outlined below. meets requirements 1, 2, and 4 above,

Reconciliation even though it does not meet

Terminable interests. Generally, you

If you have made no gifts yourself and are requirement 3.

cannot take the marital deduction if the

filing this return only to report gifts made gift to your spouse is a terminable You make this election simply by

by your spouse but which are being split interest. In most instances, a terminable listing the qualified terminable interest

with you, skip lines 1–3 and enter your interest is nondeductible if someone other property on Schedule A and deducting its

share of the split gifts on line 4. than the donee spouse will have an value on line 8, Part 3, Schedule A. There

Line 2 interest in the property following the is no longer a box to check to make the

termination of the donee spouse’s

If you are not splitting gifts with your election. You are presumed to have made

interest. Some examples of terminable

spouse, skip this line and enter the the election for all qualified property that

interests are:

amount from line 1 on line 3. If you are you both list and deduct on Schedule A.

•A life estate;

splitting gifts with your spouse, show half You may not make the election on a late

•An estate for a specified number of

of the gifts you made to third parties on filed Form 709.

years; or

line 2. On the dotted line indicate which Line 9

•Any other property interest that after a

numbered items from Parts 1 and 2 of

period of time will terminate or fail.

Schedule A you treated this way. Enter the amount of the annual

If you transfer an interest to your

Generally, if you elect to split your gifts, exclusions that were claimed for the gifts

spouse as sole joint tenant with yourself

you must split all gifts made by you and you listed on line 8.

or as a tenant by the entirety, the interest

your spouse to third-party donees. The Line 11

is not considered a terminable interest

only exception is if you gave your spouse You may deduct from the total gifts made

just because the tenancy may be

a general power of appointment over a during the calendar year all gifts you gave

severed.

gift you made. to or for the use of:

Life estate with power of appointment.

Line 4 •The United States, a state or political

You may deduct, without an election, a

If you are not splitting gifts, skip this line subdivision of a state or the District of

gift of a terminable interest if all four

and go to line 5. If you gave all of the Columbia, for exclusively public purposes;

requirements below are met:

gifts, and your spouse is only filing to •Any corporation, trust, community

1. Your spouse is entitled for life to all

show his or her half of those gifts, you chest, fund, or foundation organized and

of the income from the entire interest;

need not enter any gifts on line 4 of your operated only for religious, charitable,

2. The income is paid yearly or more

return or include your spouse’s half scientific, literary, or educational

often;

anywhere else on your return. Your purposes, or to prevent cruelty to children

3. Your spouse has the unlimited

spouse should enter the amount from or animals, or to foster national or

power, while he or she is alive or by will,

Schedule A, line 2, of your return on international amateur sports competition

to appoint the entire interest in all

Schedule A, line 4, of his or her return. (if none of its activities involve providing

circumstances; and athletic equipment (unless it is a qualified

If both you and your spouse make gifts 4. No part of the entire interest is amateur sports organization)), as long as

for which a return is required, the amount subject to another person’s power of no part of the earnings benefits any one

each of you shows on Schedule A, line 2, appointment (except to appoint it to your person, no substantial propaganda is

of his or her return must be shown on spouse). produced, and no lobbying or

Schedule A, line 4, of the other’s return. If either the right to income or the campaigning for any candidate for public

Line 6 power of appointment given to your office is done;

Enter the total annual exclusions you are spouse pertains only to a specific •A fraternal society, order, or

claiming for the gifts listed on Schedule A portion of a property interest, the marital association operating under a lodge

(including gifts listed on line 4). See deduction is allowed only to the extent system, if the transferred property is to be

Annual Exclusion on page 3. If you split that the rights of your spouse meet all 4 of used only for religious, charitable,

-9-

Page 10 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

scientific, literary, or educational sheet using the same format as Schedule basis for GST computation purposes. You

purposes, including the encouragement of B. must allocate the exclusion to each gift to

art and the prevention of cruelty to the maximum allowable amount and in

If you filed returns for gifts made

children or animals; chronological order, beginning with the

before 1971 or after 1981, show the

•Any war veterans’ organization earliest gift that qualifies for the exclusion.

calendar years in column A. If you filed

organized in the United States (or any of Be sure that you do not claim a total

returns for gifts made after 1970 and

its possessions), or any of its auxiliary exclusion of more than $10,000 per

before 1982, show the calendar quarters.

departments or local chapters or posts, as donee.

In column B, identify the Internal

long as no part of any of the earnings Note: You may not claim any annual

Revenue Service office where you filed

benefits any one person. exclusion for a direct skip made to a trust

the returns. If you have changed your

On line 11, show your total charitable, unless the trust meets the requirements

name, be sure to list any other names

public, or similar gifts (minus annual discussed under Direct Skip on page 6.

under which the returns were filed. If

exclusions allowed). On the dotted line, there was any other variation in the

indicate which numbered items from the Part 2—GST Exemption

names under which you filed, such as the

top of Schedule A (or line 4) are Reconciliation

use of full given names instead of initials,

charitable gifts. please explain. Line 1

Line 14 In column E, show the correct amount Every donor is allowed a lifetime GST

(the amount finally determined) of the

If you will pay GST tax with this return on exemption. The amount of the exemption

taxable gifts for each earlier period.

any direct skips reported on this return, is indexed for inflation and is published

the amount of that GST tax is also See Regulations section 25.2504-2 for annually by the IRS in a revenue

considered a gift and must be added to rules regarding the final determination of procedure. For transfers made through

your other gifts reported on this return. the value of a gift. 1998, the GST exemption was $1 million.

If you entered gifts on Part 2, or if you The increased exemption amounts are as

and your spouse elected gift splitting and follows:

Schedule C—Computation

your spouse made gifts subject to the Year Amount

1999 ......... $1,010,000

GST tax that you are required to show on of Generation-Skipping 2000 ......... $1,030,000

your Form 709, complete Schedule C,

2001 ......... $1,060,000

Transfer Tax

and enter on line 14 the total of Schedule

C, Part 3, column H. Otherwise, enter Each annual increase can only be

Part 1—Generation-Skipping

zero on line 14. allocated to transfers made during or after

Transfers the year of the transfer.

Line 17 You must enter in Part 1 all of the gifts Example. A donor had made $1.5 million

Section 2523(f)(6) creates an automatic you listed in Part 2 of Schedule A in that in GST transfers through 1998 and had

QTIP election for gifts of joint and survivor order and using those same values. allocated all $1 million of the exemption to

annuities where the spouses are the only those transfers. In 2001, the donor makes

Column B—“Transfers Subject to

possible recipients of the annuity prior to a $5,000 taxable generation- skipping

the death of the last surviving spouse. an ETIP”transfer. The donor can allocate $5,000 of

If you are reporting a generation-skipping

The donor spouse can elect out of exemption to the 2001 transfer but cannot

transfer that occurred because of the

QTIP treatment, however, by checking allocate $5,000 of the unused exemption

close of an ETIP, complete column B for

the box on line 17 and entering the item to pre-1999 transfers, $20,000 of the

such transfer as follows:

number from Schedule A for the annuities unused exemption to pre-2000 transfers,

for which you are making the election. 1. Provided the GST exemption is or $30,000 of the unused exemption to

Any annuities entered on line 17 cannot being allocated on a timely filed gift tax pre-2001 transfers.

also be entered on line 8 of Schedule A, return, enter the value as of the close of You should keep a record of your

Part 3. Any such annuities that are not the ETIP. transfers and exemption allocations to

listed on line 17 must be entered on line 8 2. If the exemption is being allocated make sure that any future increases are

of Part 3, Schedule A. If there is more after the due date (including extensions) allocated correctly.

than one such joint and survivor annuity, for the gift tax return on which the transfer

you are not required to make the election should be reported, enter the value as of Enter on line 1 of Part 2 the maximum

for all of them. Once made, the election is the time the exemption allocation was GST exemption you are allowed. This will

irrevocable. made. not necessarily be the highest indexed

amount if you have made no GST transfer

Column C during the year of the increase. For

Schedule B—Gifts From example, if your last GST transfer was in

If you elected gift splitting, enter half the

1998, your maximum GST exemption

value of each gift entered in column B. If

Prior Periods would be $1,000,000, not $1,060,000.

you did not elect gift splitting, enter zero

If you did not file gift tax returns for in column C. The donor can apply this exemption to

previous periods, check the “No” box on inter vivos transfers (i.e., transfers made

Column E

line 11a of Part 1, page 1, and skip to the during the donor’s life) on Form 709. The

Tax Computation on page 1. (However, You are allowed to claim the gift tax executor can apply the exemption on

be sure to complete Schedule C, if annual exclusion currently allowable with Form 706 to transfers taking effect at

applicable.) If you filed gift tax returns for respect to your reported direct skips death. An allocation is irrevocable.

previous periods, check the “Yes” box on (other than certain direct skips to trusts—

line 11a and complete Schedule B by see Note below), using the rules and In the case of inter vivos direct skips, a

listing the years or quarters in limits discussed earlier for the gift tax portion of the donor’s unused exemption

chronological order as described below. If annual exclusion. However, you must is automatically allocated to the

you need more space, attach a separate allocate the exclusion on a gift-by-gift transferred property unless the donor

-10-

Page 11 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

elects otherwise. To elect out of the may currently be subject to gift tax but not •The amount of your GST exemption

automatic application of exemption, you be direct skips. However, future allocated to each gift (or a statement that

must file Form 709 and attach a terminations and distributions made you are allocating exemption by means of

statement to it clearly describing the from such a trust could be subject to a formula such as “an amount necessary

transaction and the extent to which the GST tax. to produce an inclusion ratio of zero”);

automatic allocation is not to apply. and

Also, you may wish to allocate your

Reporting a direct skip on a timely filed •The inclusion ratio of the trust after the

exemption to a trust that is not involved in

Form 709 and paying the GST tax on the allocation.

a transfer listed on Schedule A or C. For

transfer will qualify as such a statement. example, if your only gift for the year was Total the exemption allocations and

Special QTIP election. If you have $10,000 transferred to a trust that had enter this total on line 5.

elected QTIP treatment for any gifts in your children as present beneficiaries and

Note: Where the property involved in

trust listed on Schedule A, Part 1, then your grandchildren as future beneficiaries, such a transfer is subject to an estate tax

you may make an election on Schedule C you would not be required to file Form inclusion period because it would be

to treat the entire trust as non-QTIP for 709 for the year. However, future

includible in the donor’s estate if the

purposes of the GST tax. The election distributions from the trust or the

donor died immediately after the transfer

must be made for the entire trust that termination of the trust may result in GST

(other than by reason of the donor having

contains the particular gift involved on this tax being due. In this case, you may want

died within 3 years of making the gift),

return. Be sure to identify by item number to allocate GST exemption to the transfer

the specific gift for which you are making you cannot allocate the GST exemption at

at the time of the transfer.

this special QTIP election. the time of the transfer but must wait until

Notice of allocation. To allocate your the end of the estate tax inclusion period

exemption to such transfers, attach a

Line 5 (ETIP). Also, an automatic allocation

statement to this Form 709 and entitle it

New section 2632(c) provides for the would not take effect until the end of the

“Notice of Allocation.” You may file one

automatic allocation of the donor’sETIP. For details, see Transfers Subject

Notice of Allocation and consolidate on it

unused exemption to indirect skips. In to an “Estate Tax Inclusion Period” on

all of your Schedule A, Part 1, transfers,

general, an indirect skip is the transfer of page 2, and section 2642(f).

plus all transfers not appearing on Form

property that is subject to gift tax (other 709, to which you wish to allocate your

than a direct skip) and is made to a GST Part 3—Tax Computation

exemption. The notice must contain the

trust. A GST trust is a trust that could You must enter in Part 3 every gift you

following for each trust:

have a generation-skipping transfer with listed in Part 1 of Schedule C.

•Clearly identify the trust, including the

respect to the transferor, unless the trust trust’s EIN, if known;

provides for certain distributions of trust Column C

•The item number(s) from column A,

corpus to non-skip persons. See section You are not required to allocate your

Schedule A, Part 1, of the gifts to that

2632(c)(3)(B) for details. See Elections available exemption. You may allocate

trust (if applicable);

below for the rules on electing out of this some, all, or none of your available

•The values shown in column E,

automatic allocation and electing to treat exemption, as you wish, among the gifts

Schedule A, Part 1, for the gifts (adjusted

a trust as a GST trust. listed in Part 3 of Schedule C. However,

to account for split gifts, if any, reported

Elections. There are three different the total exemption claimed in column C

on Schedule A, Part 3, line 2) (or, if the

elections you may make. may not exceed the amount you entered

allocation is late, the value of the trust

1. You may elect not to have the assets at the time of the allocation); on line 3 of Part 2 of Schedule C.

automatic allocation rules apply to an

indirect skip.

2. You may elect not to have the

automatic rules apply to any or all

transfers made to a particular trust.

3. You may elect to treat any trust as

a GST trust for purposes of the automatic

allocation rules.

See section 2632(c)(5)for details.

When to make an election. Election

1 is timely filed if it is filed on a timely

filed gift tax return for the year the transfer

was made or was deemed to have been

made.

Elections 2 and 3 may be made on a

timely filed gift tax return for the year for

which the election is to become effective.

Attachment. To make these

elections, attach a statement to Form 709

that describes the election you are

making and clearly identifies the trusts

and/or transfers to which the election

applies.

Other transfers in trust. You may wish

to allocate your exemption to transfers

made in trust that do not qualify under the

automatic allocation rules. Such transfers

Table for Computing Tax

Column A Column B Column C Column D

Rate of tax

Taxable Taxable Tax on on excess

amount amount amount in over amount

over— not over— Column A 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 2,500,000 780,800 49%

2,500,000 3,000,000 1,025,800 53%

3,000,000 10,000,000 1,290,800 55%

10,000,000 17,184,000 5,140,800 60%

17,184,000 - - - - - 9,451,200 55%

-11-

Page 12 of 12 Instructions for Form 709 11:10 - 19-NOV-2001

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

You may enter an amount in column C corporation to prepare your return, that Form 709 to the Comptroller General to

that is greater than the amount you person must also sign the return as review the Internal Revenue Service. We

entered in column B. preparer unless he or she is your regular may also disclose the information on your

full-time employee. Form 709 to Committees of Congress;

Column D Federal, state and local child support

Carry your computation to three decimal agencies; and to other Federal agencies

Disclosure, Privacy Act, and

places (e.g., “1.000”). for the purpose of determining entitlement

Paperwork Reduction Act Notice. We for benefits or the eligibility for, and the

ask for the information on this form to repayment of, loans.

carry out the Internal Revenue laws of the

Part 2—Tax Computation If you are required to but do not file a

United States. We need the information to Form 709, or do not provide the

(Page 1 of Form) figure and collect the right amount of tax. information requested on the form, or

Form 709 is used to report (1) transfers provide fraudulent information, you may

Line 7 subject to the Federal gift and certain be charged penalties and be subject to

generation-skipping transfer (GST) taxes

If you are a citizen or resident of the criminal prosecution.

and to figure the tax, if any, due on those

United States, you must take any

You are not required to provide the

transfers, and (2) allocation of the lifetime

available unified credit against gift tax.

information requested on a form that is

GST exemption to property transferred

Nonresident aliens may not claim the

subject to the Paperwork Reduction Act

during the transferor’s lifetime.

unified credit. If you are a nonresident

unless the form displays a valid OMB

alien, delete the $220,550 entry and write Our legal right to ask for the control number. Books or records relating

in zero on line 11. information requested on this form is to a form or its instructions must be

sections 6001, 6011, and 6019, and their

Line 10 retained as long as their contents may

regulations. You are required to provide

Enter 20% of the amount allowed as a become material in the administration of

the information requested on this form.

specific exemption for gifts made after any Internal Revenue law.

Section 6109 requires that you provide

September 8, 1976, and before January The time needed to complete and file

your social security number; this is so we

1, 1977. (These amounts will be among this form will vary depending on individual

know who you are, and can process your

those listed in column D of Schedule B, circumstances. The estimated average

Form 709.

for gifts made in the third and fourth time is:

Generally, tax returns and return

quarters of 1976.) information are confidential, as stated in Recordkeeping .......... 39 min.

Line 13 section 6103. However, section 6103

allows or requires the Internal Revenue Learning about the law or the

Gift tax conventions are in effect with

Service to disclose or give such form .................. 1 hr., 8 min.

Australia, Austria, Denmark, France,

information shown on your Form 709 to

Germany, Japan, Sweden, and the United Preparing the form ........ 1 hr., 55 min.

the Department of Justice to enforce the

Kingdom. If you are claiming a credit for

Copying, assembling, and

tax laws, both civil and criminal, and to

payment of foreign gift tax, figure the sending the form to the IRS 1 hr., 3 min.

cities, states, the District of Columbia,

credit on an attached sheet and attach

U.S. commonwealths or possessions, and

evidence that the foreign taxes were paid. If you have comments concerning the

certain foreign governments for use in

See the applicable convention for details accuracy of these time estimates or

administering their tax laws.

of computing the credit. suggestions for making this form simpler,

We may disclose the information on we would be happy to hear from you. You

Line 19 your Form 709 to the Department of the can write to the Tax Forms Committee,

Make your check or money order payable Treasury and contractors for tax Western Area Distribution Center,

to “United States Treasury” and write the administration purposes; and to other Rancho Cordova, CA 95743-0001. Do

donor’s social security number on it. You persons as necessary to obtain not send the tax form to this office.

may not use an overpayment on Form information which we cannot get in any Instead, see Where To File on page 4.

1040 to offset the gift and GST taxes other way for purposes of determining the

owed on Form 709. amount of or to collect the tax you owe.

We may disclose the information on your

Signature

As a donor, you must sign the return. If

you pay another person, firm, or

-12-

Printed on recycled paper

Instruction 709 (Rev. 2001 ) TO I709

Navigation menu

Versions of this User Manual:

Views

Navigation