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the gift or bequest, the grandchild’s

generation of any person who has an

In addition to signing and completing

parent (who is your or your spouse’s or

interest in the trust immediately after

the required information, the paid

your former spouse’s child) is

the initial transfer.

preparer must give a copy of the

deceased, then for purposes of

completed return to the taxpayer.

Penalties and Interest

generation assignment, your grandchild

Note. A paid preparer may sign

will be considered to be your child

original or amended returns by rubber

Section 6651 provides for penalties for

rather than your grandchild. Your

stamp, mechanical device, or computer

both late filing and for late payment

grandchild’s children will be treated as

software program.

unless there is reasonable cause for

your grandchildren rather than your

the delay. The law also provides

great-grandchildren.

penalties for willful attempts to evade

This rule governs generation

Specific Instructions

payment of tax.

assignment of lineal descendants below

The late filing penalty will not be

the level of grandchild. For example, if

Complete Form 706-GS(T) in the

imposed if the taxpayer can show that

your grandchild is deceased, your

following order: Parts I and II, Schedule

the failure to file a timely return is due

great-grandchildren who are lineal

A (through line 4), Schedule B,

to reasonable cause.

descendants of the deceased

Schedule A (lines 5 through 10),

Reasonable Cause Determinations.

grandchild are considered your

Part III.

If you receive a notice about penalties

grandchildren for purposes of the GST

after you file Form 706-GS(T), send an

Part I—General

tax.

explanation and we will determine if you

This rule also applies to other lineal

Information

meet reasonable cause criteria. Do not

descendants. For example, if property

attach an explanation when you file

is transferred to an individual who is a

Line 1b. Trust’s Employer

Form 706-GS(T). Explanations

descendant of a parent of the

attached to the return at the time of

Identification Number

transferor, and that individual’s parent

filing will not be considered.

(who is a lineal descendant of the

All trusts filing Form 706-GS(T) must

Section 6662 provides penalties for

parent of the transferor) is deceased at

have an employer identification number

underpayments of GST taxes which are

the time the transfer is subject to gift or

(EIN). A nonexplicit trust, defined

over $5,000 and are due to valuation

estate tax, then for purposes of

above, must have an EIN that is

understatements. A substantial

generation assignment, the individual is

separate from any other entity’s EIN

valuation understatement occurs when

treated as if he or she is a member of

and that will be used only by the entity

the reported value of property on Form

the generation that is one generation

in its capacity as the nonexplicit trust.

706-GS(T) is 65% or less of the actual

below the lower of:

A trust or nonexplicit trust that does

•

value of the property. A gross valuation

The transferor’s generation or

not have an EIN should apply for one

•

understatement occurs when the

The generation assignment of the

on Form SS-4, Application for Employer

reported value of the property listed on

youngest living ancestor of the

Identification Number. You can get

Form 706-GS(T) is 40% or less of the

individual, who is also a descendant of

Form SS-4, and other IRS tax forms

actual value of the property.

the parent of the transferor.

and publications, by calling 1-800-TAX-

Interest will be charged on taxes not

The same rules apply to the

FORM (1-800-829-3676) or by visiting

paid by their due date, even if an

generation assignment of any

IRS.gov.

extension of time to file is granted.

descendant of the individual.

Send Form SS-4 to the address

Interest is also charged on any

This rule does not apply to a transfer

listed under Where To File. If you do

additions to tax imposed by section

to an individual who is not a lineal

not receive the EIN by the due date for

6651 from the due date of the return

descendant of the transferor if the

the 706-GS(T), write “Applied for” on

(including any extensions) until the

transferor has any living lineal

line 1b.

addition to tax is paid.

descendants.

You can also apply for an EIN at

Return preparer. The Small Business

If any transfer of property to a trust

or by calling

and Work Opportunity Act of 2007

would have been a direct skip except

1-800-829-4933.

extended return preparer penalties to

for this generation assignment rule,

all return preparers. Under 6694 and its

Part II—Trust

then the rule also applies to transfers

regulations, tax return preparers who

from the trust attributable to such

prepare any return or claim for refund

Information

property.

which reflects an understatement of tax

liability due to willful or reckless conduct

Ninety-day rule. For purposes of

Line 4

can be penalized $5,000 or 50% of the

determining if an individual’s parent is

income earned (or income to be

deceased at the time of a testamentary

Whenever property is transferred into a

earned), whichever is greater, for the

transfer, an individual’s parent who dies

pre-existing trust, the inclusion ratio

preparation of each return.

no later than 90 days after a transfer

must be refigured. See Multiple

occurring by reason of the death of the

transfers, later, for the rule on how to

Signature

transferor is treated as having

refigure the inclusion ratio.

predeceased the transferor. The 90-day

Form 706-GS(T) must be signed by the

Line 7

rule applies to transfers occurring on or

trustee or by an authorized

after July 18, 2005. See Regulations

If a qualified terminable interest

representative.

section 26.2651-1(a)(2)(iii), for more

property deduction was taken by the

If you fill in your own return, leave

information.

settlor as donor spouse or by the

the Paid Preparer Use Only space

executor of a deceased settlor’s estate

Multiple Skips

blank. If someone prepares your return

for the transfer of any property into this

and does not charge you, that person

If after a generation-skipping transfer,

trust, the donor spouse or the executor,

should not sign the return.

the property transferred is held in trust,

as the case may be, may have made

then for the purpose of determining the

Generally, anyone who is paid to

an election at that time to treat such

taxability of subsequent transfers from

prepare the return must sign the return

transfer for the purpose of the GST tax

the trust involving that property, the

in the space provided and fill in the

as if it was not qualified terminable

transferor of the property is assigned to

Paid Preparer Use Only area. See

interest property. In this case, you must

the first generation above the highest

section 7701(a)(36)(B) for exceptions.

refer to the gift tax return (Form 709,

-3-

Instructions For Form 706-Gs(T) - Generation-Skipping Transfer Tax Return For Terminations - Internal Revenue Service - 2011 Page 3

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