Instructions For Form 709 - 2009 (Page 11 of 12) in pdf

Part 2—GST Exemption

Form 709 and paying the GST tax on the

some, all, or none of your available

transfer will qualify as such a statement.

exemption, as you wish, among the gifts

Reconciliation

listed in Part 3 of Schedule C. However,

Special QTIP election. If you have

the total exemption claimed in column C

Line 1

elected QTIP treatment for any gifts in

may not exceed the amount you entered

trust listed on Schedule A, then you may

Every donor is allowed a lifetime GST

on line 3 of Part 2 of Schedule C.

make an election on Schedule C to treat

exemption. The amount of the exemption

the entire trust as non-QTIP for purposes

for 2009 is $3,500,000. For transfers

You may enter an amount in column C

of the GST tax. The election must be

made through 1998, the GST exemption

that is greater than the amount you

made for the entire trust that contains the

was $1 million. The exemption amounts

entered in column B.

particular gift involved on this return. Be

for 1999 through 2009 are as follows:

Column D

sure to identify by item number the

Year

Amount

specific gift for which you are making this

Carry your computation to three decimal

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

special QTIP election.

places (for example, “1.000”).

2000 . . . . . . . . . $1,030,000

Line 5

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

2002 . . . . . . . . . $1,100,000

Enter on line 5 the amount of GST

Part 2—Tax Computation

exemption you are applying to transfers

2003 . . . . . . . . . $1,120,000

(Page 1 of Form 709)

2004 and 2005 . . . . . $1,500,000

reported in Part 3 of Schedule A.

2006, 2007, and 2008 . . . $2,000,000

Section 2632(c) provides an automatic

Lines 4 and 5

2009 . . . . . . . . . $3,500,000

allocation to indirect skips of any unused

To compute the tax for the amount on line

GST exemption. The unused exemption

In general, each annual increase can only

3 (to be entered on line 4) and the tax for

is allocated to indirect skips to the extent

be allocated to transfers made (or

the amount on line 2 (to be entered on

necessary to make the inclusion ratio

appreciation occurring) during or after the

line 5), use the Table for Computing Gift

zero for the property transferred. You may

year of the transfer.

Tax on page 12.

elect out of this automatic allocation as

explained in the instructions for Part 3 on

Example. A donor made $1,750,000

Line 7

page 9.

in GSTs through 2005, and allocated all

If you are a citizen or resident of the

$1,500,000 of the exemption to those

Line 6

United States, you must take any

transfers. In 2009, the donor makes a

available unified credit against gift tax.

$207,000 taxable generation-skipping

Notice of allocation. You may wish to

Nonresident aliens may not claim the

transfer. The donor can allocate $207,000

allocate GST exemption with this return to

unified credit. If you are a nonresident

transfers not reported on this return, such

of exemption to the 2009 transfer but

alien, delete the $345,800 entry, skip line

as a late allocation.

cannot allocate the $1,793,000 of unused

8, and write in zero on line 11.

2009 exemption to pre-2009 transfers.

To allocate your exemption to such

However, if in 2005, the donor made a

transfers, attach a statement to this Form

Line 10

$1,750,000 transfer to a trust that was not

709 and entitle it “Notice of Allocation.”

Enter 20% of the amount allowed as a

The notice must contain the following for

a direct skip, but from which generation-

specific exemption for gifts made after

each trust (or other transfer):

skipping transfers could be made in the

September 8, 1976, and before January

•

future, the donor could allocate the

Clearly identify the trust, including the

1, 1977. (These amounts will be among

increased exemption to the trust, even

trust’s EIN, if known;

those listed in Schedule B, column D, for

•

If this is a late allocation, the year the

though no additional transfers were made

gifts made in the third and fourth quarters

transfer was reported on Form 709;

to the trust. See Regulations section

of 1976.)

•

The value of the trust assets at the

26.2642-4 for details on the

redetermination of the applicable fraction

effective date of the allocation;

Line 13

•

when additional exemption is allocated to

The amount of your GST exemption

Gift tax conventions are in effect with

allocated to each gift (or a statement that

the trust.

Australia, Austria, Denmark, France,

you are allocating exemption by means of

You should keep a record of your

Germany, Japan, and the United

a formula such as “an amount necessary

transfers and exemption allocations to

Kingdom. If you are claiming a credit for

to produce an inclusion ratio of zero”);

make sure that any future increases are

payment of foreign gift tax, figure the

and

allocated correctly.

credit on an attached sheet and attach

•

The inclusion ratio of the trust after the

evidence that the foreign taxes were paid.

Enter on line 1 of Part 2 the maximum

allocation.

See the applicable convention for details

GST exemption you are allowed. This will

Total the exemption allocations and

of computing the credit.

not necessarily be the highest indexed

enter this total on line 6.

amount if you made no generation-

Line 19

Note. Where the property involved in

skipping transfers during the year of the

Make your check or money order payable

such a transfer is subject to an ETIP

increase.

to “United States Treasury” and write the

because it would be includible in the

The donor can apply this exemption to

donor’s social security number on it. You

donor’s estate if the donor died

inter vivos transfers (that is, transfers

may not use an overpayment on Form

immediately after the transfer (other than

made during the donor’s life) on Form

1040 to offset the gift and GST taxes

by reason of the donor having died within

709. The executor can apply the

owed on Form 709.

3 years of making the gift), an allocation

exemption on Form 706 to transfers

of the GST exemption at the time of the

taking effect at death. An allocation is

Signature

transfer will only become effective at the

irrevocable.

end of the ETIP. For details, see

As a donor, you must sign the return. If

In the case of inter vivos direct skips, a

Transfers Subject to an Estate Tax

you pay another person, firm, or

portion of the donor’s unused exemption

Inclusion Period (ETIP) on page 3 and

corporation to prepare your return, that

is automatically allocated to the

section 2642(f).

person must also sign the return as

transferred property unless the donor

preparer unless he or she is your regular

Part 3—Tax Computation

elects otherwise. To elect out of the

full-time employee.

automatic allocation of exemption, you

You must enter in Part 3 every gift you

must file Form 709 and attach a

Third-party designee. If you want to

listed in Part 1 of Schedule C.

statement to it clearly describing the

allow the return preparer (listed on the

Column C

transaction and the extent to which the

bottom of page 1 of Form 709, if

automatic allocation is not to apply.

You are not required to allocate your

applicable) to discuss your 2009 Form

Reporting a direct skip on a timely filed

available exemption. You may allocate

709 with the IRS, check the “Yes” box to

-11-

Instructions For Form 709 - 2009 Page 11

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