Instructions For Form 706-Gs(T) - 2006 (Page 5 of 6) in pdf

termination must be described in

terminated. Examples of these

For previous generation-skipping

enough detail that the IRS can value it.

expenses are property tax on real

transfers, the exemption amounts were

estate, the cost of selling property, or

as follows.

Column d. Unless you elected

attorney’s fees for defending the title to

alternate valuation by checking the box

Year of Transfer

GST exemption

property.

on line 3 of Schedule A, the valuation

Through 1998

$1,000,000

date should be the same as the

Column a. Assign an item number to

1999

1,010,000

termination date.

each separate expense. This will not

2000

1,030,000

Column e. Reduce the value of any

necessarily correspond with the item

2001

1,060,000

property being reported on Schedule A

numbers on Schedule A.

2002

1,100,000

by the amount of any consideration

2003

1,120,000

Column b. List the names and

provided by the skip person.

2004

1,500,000

addresses of persons to whom the

Explain how the values reported in

expenses are payable and describe the

For existing trusts, transferors may

column e were determined and attach

nature of the expense. List the item

copies of any appraisals.

allocate the additional GST exemption

number(s) from Schedule A to which

amount attributable to indexing

the expense relates.

Schedules B(1) and B(2)

adjustments if they otherwise qualify

Column c. If the expense relates to

under the existing rules for late

To determine the taxable amount for a

more property than that involved in the

allocations. For more information, see

taxable termination, you may deduct

termination but less than the entire

section 2632 and Multiple transfers on

expenses similar to those deductible

trust, enter in column c only the amount

page 6.

under section 2053 from the value of

attributable to the property involved in

Once made, allocations are

the property subject to the termination.

the termination. Determine this amount

irrevocable.

by multiplying the total expense times a

Schedule B(1)

Allocation of the GST exemption is

fraction. The numerator of the fraction

Report here only those expenses

made by the settlor on Form 709, and/

is the value of the property involved in

related to the entire trust. Examples of

or on Form 706 by the executor of the

the termination and to which the

such expenses are trustee’s fees,

settlor’s estate. Therefore, you should

expense relates. The denominator is

administrative expenses, financial

obtain information regarding the

the total value of the property to which

advisor’s fees, and accounting fees.

allocation of the exemption to this trust

the expense relates.

from the settlor or the executor of the

Column a. Assign an item number to

each separate expense. These will not

settlor’s estate, as applicable.

Schedule A (Lines 5–10)

necessarily correspond with the item

If the settlor’s entire GST exemption

numbers on Schedule A.

is not allocated by the due date

Line 7. Inclusion Ratio

Column b. List the names and

(including extensions) of the settlor’s

The trustee must figure the inclusion

addresses of persons to whom the

estate tax return, the exemption is

ratio for every termination. All

expenses are payable and describe the

automatically allocated to the settlor’s

terminations, or any parts of a single

nature of the expenses.

generation-skipping transfers under the

termination, that have different inclusion

rules of section 2632.

Column c. Enter here the entire

ratios must be shown on separate

amount of the expense for the tax year

Denominator. Valuation of trust

Schedules A. Identify the separate

for which the return is being filed.

assets. In general, for an inter vivos

trusts by Schedule A number when

transfer, you should use the gift tax

Line 2. Figure the percentage of

showing your inclusion ratio calculation.

value in the denominator of the

expense to allocate to the property

The inclusion ratio is the excess of 1

applicable fraction as long as the

involved in the termination as follows.

over the applicable fraction determined

allocation of the GST exemption was

1. Divide the value of the interest

for the trust in which the termination

made on a timely filed gift tax return or

that has been terminated by the total

occurred.

was deemed made under section

value of the trust at the time of the

2632(b)(1).

Applicable fraction. The applicable

termination; and

fraction is a fraction, the numerator of

If the allocation of the exemption to

2. Multiply the result by a fraction,

which is the amount of the GST

an inter vivos transfer is not made on a

the numerator of which is the number of

exemption. The denominator of the

timely filed gift tax return and is not

days in the year through the date of the

fraction is:

deemed made under section

termination, and the denominator of

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

which is the total number of days in the

1. The value of the property

the applicable fraction is the value of

year (or, if the entire trust was

transferred to the trust, minus

the property transferred at the time the

terminated during the year, the total

2. The sum of:

allocation under section 2632(a) is filed

number of days the trust was in

a. Any federal estate tax or state

with the IRS.

existence during the year).

death tax actually recovered from the

The value of a testamentary transfer

trust attributable to the property, and

If there is more than one termination

is generally the estate tax value.

b. Any charitable deduction allowed

during the year, you must reduce the

under section 2055 or 2522 with

For qualified terminable interest

total expense used in the allocation by

respect to the property.

property (QTIP) that is included in the

the expense allocated to the prior

estate of the surviving spouse of the

terminations. For example, assume that

Round the applicable fraction to at

settlor because of section 2044, if the

the total administrative expense for the

least the nearest one-thousandth (for

surviving spouse is considered the

year was $1,000 and $300 was

example,“.001”).

transferor under section 2652(a) for

allocated to the first termination. The

GST purposes, the value is the estate

expense allocated to the second

Numerator. GST exemption. Every

tax value in the estate of the surviving

termination would be a percentage of

individual settlor is allowed a lifetime

spouse.

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

GST exemption against property that

the individual has transferred. For

A special QTIP election allows

Schedule B(2)

generation-skipping transfers made in

property for which a QTIP election was

Report here only those expenses

2005, the amount of the exemption is

made for estate or gift tax purposes to

related solely to the interest that has

$1.5 million.

be treated for GST tax purposes as if

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Instructions For Form 706-Gs(T) - 2006 Page 5

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