Instructions For Form 706-Gs(T) - Internal Revenur Service (Page 5 of 6) in pdf

Explain how the values reported in

Column a. Item no. Assign an item

GST

column e were determined and attach

Year of Transfer

exemption

number to each separate expense. This

1999 . . . . . . . . . . . . . . . . .

$1,010,000

copies of any appraisals.

will not necessarily correspond with the

2000 . . . . . . . . . . . . . . . . .

$1,030,000

item numbers on Schedule A.

2001 . . . . . . . . . . . . . . . . .

$1,060,000

Schedules B(1) and B(2)

2002 . . . . . . . . . . . . . . . . .

$1,100,000

Column b. Description. List the

To determine the taxable amount for a

2003 . . . . . . . . . . . . . . . . .

$1,120,000

names and addresses of persons to

taxable termination, you may deduct

2004 and 2005 . . . . . . . . . .

$1,500,000

whom the expenses are payable and

expenses similar to those deductible

2006, 2007, and 2008 . . . . .

$2,000,000

describe the nature of the expense. List

under section 2053 from the value of

2009 . . . . . . . . . . . . . . . . .

$3,500,000

the item number(s) from Schedule A to

the property subject to the termination.

which the expense relates.

For existing trusts, transferors may

Schedule B(1)—General

allocate the additional GST exemption

Column c. Amount. If the expense

amount attributable to indexing

Trust Debts, Expenses, and

relates to more property than that

adjustments if they otherwise qualify

Taxes

involved in the termination but less than

under the existing rules for late

the entire trust, enter in column c only

Report here only those expenses

allocations. For more information, see

the amount attributable to the property

related to the entire trust. Examples of

section 2632 and Multiple transfers on

involved in the termination. Determine

such expenses are trustee’s fees,

page 6.

this amount by multiplying the total

administrative expenses, financial

Once made, allocations are

expense times a fraction. The

advisor’s fees, and accounting fees.

irrevocable.

numerator of the fraction is the value of

Column a. Item no. Assign an item

Allocation of the GST exemption is

the property involved in the termination

number to each separate expense.

made by the settlor on Form 709, and/

and to which the expense relates. The

These will not necessarily correspond

or on Form 706 by the executor of the

denominator is the total value of the

with the item numbers on Schedule A.

settlor’s estate. Therefore, you should

property to which the expense relates.

obtain information regarding the

Column b. Description. List the

allocation of the exemption to this trust

names and addresses of persons to

Schedule A (Lines 5–10)

from the settlor or the executor of the

whom the expenses are payable and

settlor’s estate, as applicable.

describe the nature of the expenses.

Line 7. Inclusion Ratio

If the settlor’s entire GST exemption

Column c. Amount. Enter here the

is not allocated by the due date

entire amount of the expense for the

The trustee must figure the inclusion

(including extensions) of the settlor’s

tax year for which the return is being

ratio for every termination. All

estate tax return, the exemption is

filed.

terminations, or any parts of a single

automatically allocated to the settlor’s

termination, that have different inclusion

Line 2. Figure the percentage of

generation-skipping transfers under the

ratios must be shown on separate

expense to allocate to the property

rules of section 2632.

Schedules A. Identify the separate

involved in the termination as follows.

Denominator. Valuation of trust

trusts by Schedule A number when

1. Divide the value of the interest

assets. In general, for an inter vivos

showing your inclusion ratio calculation.

that has been terminated by the total

transfer, you should use the gift tax

value of the trust at the time of the

The inclusion ratio is the excess of 1

value in the denominator of the

termination; and

over the applicable fraction determined

applicable fraction as long as the

2. Multiply the result by a fraction,

for the trust in which the termination

allocation of the GST exemption was

the numerator of which is the number of

occurred.

made on a timely filed gift tax return or

days in the year through the date of the

was deemed made under section

termination, and the denominator of

Applicable fraction. The applicable

2632(b)(1).

which is the total number of days in the

fraction is a fraction, the numerator of

If the allocation of the exemption to

year (or, if the entire trust was

which is the amount of the GST

an inter vivos transfer is not made on a

terminated during the year, the total

exemption. The denominator of the

timely filed gift tax return and is not

number of days the trust was in

fraction is:

deemed made under section

existence during the year).

1. The value of the property

2632(b)(1), the value for purposes of

transferred to the trust, minus

the applicable fraction is the value of

If there is more than one termination

the property transferred at the time the

2. The sum of:

during the year, you must reduce the

allocation under section 2632(a) is filed

total expense used in the allocation by

a. Any federal estate tax or state

with the IRS.

the expense allocated to the prior

death tax actually recovered from the

terminations. For example, assume that

The value of a testamentary transfer

trust attributable to the property, and

the total administrative expense for the

is generally the estate tax value.

b. Any charitable deduction allowed

year was $1,000 and $300 was

under section 2055 or 2522 with

For qualified terminable interest

allocated to the first termination. The

respect to the property.

property (QTIP) that is included in the

expense allocated to the second

estate of the surviving spouse of the

termination would be a percentage of

settlor because of section 2044, if the

Round the applicable fraction to at

$700, not of the entire $1,000.

surviving spouse is considered the

least the nearest one-thousandth (for

transferor under section 2652(a) for

Schedule B(2)—Specific

example,“.001”).

GST purposes, the value is the estate

Termination-Related Debts,

tax value in the estate of the surviving

Numerator. GST exemption. Every

Expenses, and Taxes

spouse.

individual settlor is allowed a lifetime

GST exemption against property that

Report here only those expenses

A special QTIP election allows

the individual has transferred. For

related solely to the interest that has

property for which a QTIP election was

generation-skipping transfers made

terminated. Examples of these

made for estate or gift tax purposes to

through 1998, the amount of the

expenses are property tax on real

be treated for GST tax purposes as if

exemption was $1 million. The GST

estate, the cost of selling property, or

the QTIP election had not been made.

attorney’s fees for defending the title to

exemption amounts for 1999 through

If the special QTIP election has been

property.

2009 are as follows:

made, the predeceased settlor spouse

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Instructions For Form 706-Gs(T) - Internal Revenur Service Page 5

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