Instructions For Form 709 - 2009 (Page 2 of 12) in pdf

property, whether tangible or intangible,

instructions. You need not file a Form 709

the relationship between you and the

that you made directly or indirectly, in

to report these transfers and should not

donee. For examples illustrating these

trust, or by any other means to a donee.

list them on Schedule A of Form 709 if

exclusions, see Regulations section

you do file Form 709.

25.2503-6.

The gift tax applies not only to the

gratuitous transfer of any kind of property,

Political organizations. The gift tax

Qualified disclaimers. A donee’s

does not apply to a transfer to a political

but also to sales or exchanges, not made

refusal to accept a gift is called a

organization (defined in section 527(e)(1))

in the ordinary course of business, where

disclaimer. If a person makes a qualified

for the use of the organization.

money or money’s worth is exchanged

disclaimer with respect to any interest in

but the value of the money (or property)

property, the property will be treated as if

Educational exclusion. The gift tax

or money’s worth received is less than the

it had never been transferred to that

does not apply to an amount you paid on

value of what is sold or exchanged. The

person. Accordingly, the disclaimant is

behalf of an individual to a qualifying

gift tax is in addition to any other tax, such

not regarded as making a gift to the

domestic or foreign educational

as federal income tax, paid or due on the

person who receives the property

organization as tuition for the education or

transfer.

because of the qualified disclaimer.

training of the individual. A qualifying

educational organization is one that

The exercise or release of a general

Requirements. To be a qualified

normally maintains a regular faculty and

power of appointment may be a gift by the

disclaimer, a refusal to accept an interest

curriculum and normally has a regularly

individual possessing the power. General

in property must meet the following

enrolled body of pupils or students in

powers of appointment are those in which

conditions.

attendance at the place where its

the holders of the power can appoint the

1. The refusal must be in writing.

educational activities are regularly carried

property subject to the power to

2. The refusal must be received by

on. See section 170(b)(1)(A)(ii) and its

themselves, their creditors, their estates,

the donor, the legal representative of the

regulations.

or the creditors of their estates. To qualify

donor, the holder of the legal title to the

as a power of appointment, it must be

The payment must be made directly to

property to which the interest relates, or

created by someone other than the holder

the qualifying educational organization

the person in possession of the property

of the power.

and it must be for tuition. No educational

within 9 months after the later of:

exclusion is allowed for amounts paid for

The gift tax may also apply to the

a. the day on which the transfer

books, supplies, room and board, or other

forgiveness of a debt, to interest-free or

creating the interest is made or

similar expenses that do not constitute

below market interest rate loans, to the

b. the day on which the disclaimant

direct tuition costs. To the extent that the

assignment of the benefits of an

reaches age 21.

payment to the educational institution was

insurance policy, to certain property

3. The disclaimant must not have

for something other than tuition, it is a gift

settlements in divorce cases, and to the

accepted the interest or any of its

to the individual for whose benefit it was

giving up of some amount of annuity in

benefits.

made, and may be offset by the annual

exchange for the creation of a survivor

4. As a result of the refusal, the

exclusion if it is otherwise available.

annuity.

interest must pass without any direction

Contributions to a qualified tuition

Bonds that are exempt from federal

from the disclaimant to either:

program (QTP) on behalf of a designated

income taxes are not exempt from federal

a. the spouse of the decedent or

beneficiary do not qualify for the

gift taxes.

b. a person other than the

educational exclusion. See Line

Sections 2701 and 2702 provide rules

disclaimant, and

B — Qualified Tuition Programs (529

for determining whether certain transfers

5. The refusal must be irrevocable

Plans or Programs) beginning on page 5.

to a family member of interests in

and unqualified.

Medical exclusion. The gift tax does not

corporations, partnerships, and trusts are

apply to an amount you paid on behalf of

gifts. The rules of section 2704 determine

The 9-month period for making the

an individual to a person or institution that

whether the lapse of any voting or

disclaimer generally is determined

provided medical care for the individual.

liquidation right is a gift.

separately for each taxable transfer. For

The payment must be to the care

gifts, the period begins on the date the

Gifts to your spouse. You must file a

provider. The medical care must meet the

transfer is a completed transfer for gift tax

gift tax return if you made any gift to your

requirements of section 213(d) (definition

purposes.

spouse of a terminable interest that does

of medical care for income tax deduction

not meet the exception described in Life

Annual Exclusion

purposes). Medical care includes

estate with power of appointment on page

expenses incurred for the diagnosis, cure,

The first $13,000 of gifts of present

9 or if your spouse is not a U.S. citizen

mitigation, treatment, or prevention of

interests to each donee during the

and the total gifts you made to your

disease, or for the purpose of affecting

calendar year is subtracted from total gifts

spouse during the year exceed $133,000.

any structure or function of the body, or

in figuring the amount of taxable gifts. For

You must also file a gift tax return to

for transportation primarily for and

a gift in trust, each beneficiary of the trust

make the Qualified Terminable Interest

essential to medical care. Medical care

is treated as a separate donee for

Property (QTIP) election described under

also includes amounts paid for medical

purposes of the annual exclusion.

Line 12. Election Out of QTIP Treatment

insurance on behalf of any individual.

All of the gifts made during the

of Annuities on page 10.

The medical exclusion does not apply

calendar year to a donee are fully

Except as described above, you do not

to amounts paid for medical care that are

excluded under the annual exclusion if

have to file a gift tax return to report gifts

reimbursed by the donee’s insurance. If

they are all gifts of present interests and

to your spouse regardless of the amount

payment for a medical expense is

they total $13,000 or less.

of these gifts and regardless of whether

reimbursed by the donee’s insurance

the gifts are present or future interests.

Note. For gifts made to spouses who are

company, your payment for that expense,

not U.S. citizens, the annual exclusion

Transfers Not Subject to the

to the extent of the reimbursed amount, is

has been increased to $133,000,

not eligible for the medical exclusion and

Gift Tax

provided the additional (above the

you have made a gift to the donee.

Three types of transfers are not subject to

$13,000 annual exclusion) $120,000 gift

To the extent that the payment was for

the gift tax. These are:

would otherwise qualify for the gift tax

•

something other than medical care, it is a

Transfers to political organizations,

marital deduction (as described in the line

•

gift to the individual on whose behalf the

Payments that qualify for the

4 instructions on page 9).

payment was made and may be offset by

educational exclusion, and

•

A gift of a future interest cannot be

the annual exclusion if it is otherwise

Payments that qualify for the medical

excluded under the annual exclusion.

available.

exclusion.

These transfers are not “gifts” as that

The medical and educational

A gift is considered a present interest if

term is used on Form 709 and its

exclusions are allowed without regard to

the donee has all immediate rights to the

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Instructions For Form 709 - 2009 Page 2

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