Instructions For Form 709 - 2007 (Page 11 of 12) in pdf

must allocate the exclusion to each gift to

In the case of inter vivos direct skips, a

Transfers Subject to an Estate Tax

the maximum allowable amount and in

portion of the donor’s unused exemption

Inclusion Period (ETIP) on page 3 and

chronological order, beginning with the

is automatically allocated to the

section 2642(f).

earliest gift that qualifies for the exclusion.

transferred property unless the donor

Part 3—Tax Computation

Be sure that you do not claim a total

elects otherwise. To elect out of the

You must enter in Part 3 every gift you

exclusion of more than $12,000 per

automatic allocation of exemption, you

listed in Part 1 of Schedule C.

donee.

must file Form 709 and attach a

statement to it clearly describing the

Note. You may not claim any annual

Column C

transaction and the extent to which the

exclusion for a transfer made to a trust

You are not required to allocate your

automatic allocation is not to apply.

unless the trust meets the requirements

available exemption. You may allocate

Reporting a direct skip on a timely filed

discussed under Direct skip on page 6.

some, all, or none of your available

Form 709 and paying the GST tax on the

exemption, as you wish, among the gifts

Part 2—GST Exemption

transfer will qualify as such a statement.

listed in Part 3 of Schedule C. However,

Reconciliation

Special QTIP election. If you have

the total exemption claimed in column C

elected QTIP treatment for any gifts in

may not exceed the amount you entered

Line 1

trust listed on Schedule A, then you may

on line 3 of Part 2 of Schedule C.

make an election on Schedule C to treat

Every donor is allowed a lifetime GST

You may enter an amount in column C

the entire trust as non-QTIP for purposes

exemption. The amount of the exemption

that is greater than the amount you

of the GST tax. The election must be

for 2007 is $2,000,000. For transfers

entered in column B.

made for the entire trust that contains the

made through 1998, the GST exemption

particular gift involved on this return. Be

Column D

was $1 million. The exemption amounts

sure to identify by item number the

for 1999 through 2006 are as follows:

Carry your computation to three decimal

specific gift for which you are making this

places (for example, “1.000”).

Year

Amount

special QTIP election.

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

Line 5

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

Part 2—Tax Computation

Enter on line 5 the amount of GST

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

exemption you are applying to transfers

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

(Page 1 of Form 709)

reported in Part 3 of Schedule A.

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

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

Lines 4 and 5

Section 2632(c) provides an automatic

2006 . . . . . . . . . $2,000,000

allocation to indirect skips of any unused

To compute the tax for the amount on line

GST exemption. The unused exemption

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

In general, each annual increase can only

is allocated to indirect skips to the extent

the amount on line 2 (to be entered on

be allocated to transfers made (or

necessary to make the inclusion ratio

line 5), use the Table for Computing Gift

appreciation occurring) during or after the

zero for the property transferred. You may

Tax on page 12.

year of the transfer.

elect out of this automatic allocation as

Line 7

explained in the instructions for Part 3 on

Example. A donor made $1,750,000

page 9.

If you are a citizen or resident of the

in GSTs through 2005, and allocated all

United States, you must take any

$1,500,000 of the exemption to those

Line 6

available unified credit against gift tax.

transfers. In 2007, the donor makes a

Notice of allocation. You may wish to

Nonresident aliens may not claim the

$207,000 taxable generation-skipping

allocate GST exemption with this return to

unified credit. If you are a nonresident

transfer. The donor can allocate $207,000

transfers not reported on this return, such

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

of exemption to the 2007 transfer but

as a late allocation.

8, and write in zero on line 11.

cannot allocate the $293,000 of unused

2007 exemption to pre-2007 transfers.

To allocate your exemption to such

Line 10

transfers, attach a statement to this Form

However, if in 2005, the donor made a

Enter 20% of the amount allowed as a

709 and entitle it “Notice of Allocation.”

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

specific exemption for gifts made after

The notice must contain the following for

a direct skip, but from which generation-

September 8, 1976, and before January

each trust (or other transfer):

skipping transfers could be made in the

•

1, 1977. (These amounts will be among

Clearly identify the trust, including the

future, the donor could allocate the

those listed in Schedule B, column D, for

trust’s EIN, if known;

increased exemption to the trust, even

•

gifts made in the third and fourth quarters

If this is a late allocation, the year the

though no additional transfers were made

of 1976.)

transfer was reported on Form 709;

to the trust. See Regulations section

•

The value of the trust assets at the

Line 13

26.2642-4 for details on the

effective date of the allocation;

redetermination of the applicable fraction

Gift tax conventions are in effect with

•

The amount of your GST exemption

when additional exemption is allocated to

Australia, Austria, Denmark, France,

allocated to each gift (or a statement that

the trust.

Germany, Japan, Sweden, and the United

you are allocating exemption by means of

Kingdom. If you are claiming a credit for

You should keep a record of your

a formula such as “an amount necessary

payment of foreign gift tax, figure the

transfers and exemption allocations to

to produce an inclusion ratio of zero”);

credit on an attached sheet and attach

make sure that any future increases are

and

evidence that the foreign taxes were paid.

•

allocated correctly.

The inclusion ratio of the trust after the

See the applicable convention for details

allocation.

Enter on line 1 of Part 2 the maximum

of computing the credit.

GST exemption you are allowed. This will

Total the exemption allocations and

Line 19

not necessarily be the highest indexed

enter this total on line 6.

amount if you made no generation-

Make your check or money order payable

Note. Where the property involved in

skipping transfers during the year of the

to “United States Treasury” and write the

such a transfer is subject to an ETIP

increase.

donor’s social security number on it. You

because it would be includible in the

may not use an overpayment on Form

The donor can apply this exemption to

donor’s estate if the donor died

1040 to offset the gift and GST taxes

inter vivos transfers (that is, transfers

immediately after the transfer (other than

owed on Form 709.

made during the donor’s life) on Form

by reason of the donor having died within

709. The executor can apply the

3 years of making the gift), an allocation

Signature

exemption on Form 706 to transfers

of the GST exemption at the time of the

taking effect at death. An allocation is

transfer will only become effective at the

As a donor, you must sign the return. If

irrevocable.

end of the ETIP. For details, see

you pay another person, firm, or

-11-

Instructions For Form 709 - 2007 Page 11

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