Instructions For Form 709 - 2007 (Page 3 of 12) in pdf

is treated as a separate donee for

inter vivos direct skip is a transfer made

If you are filing this Form 709 solely to

purposes of the annual exclusion.

during the donor’s lifetime that is:

report the GST portion of transfers

•

Subject to the gift tax,

subject to an ETIP, complete the form as

All of the gifts made during the

•

Of an interest in property, and

you normally would with the following

calendar year to a donee are fully

•

Made to a skip person. (See Gifts

exceptions:

excluded under the annual exclusion if

Subject to Both Gift and GST Taxes on

1. Write “ETIP” at the top of page 1;

they are all gifts of present interests and

page 6.)

2. Complete only lines 1 through 6, 8,

they total $12,000 or less.

and 9 of Part 1 — General Information;

A transfer is subject to the gift tax if it

Note. For gifts made to spouses who are

3. Complete Schedule A, Part 2, as

is required to be reported on Schedule A

not U.S. citizens, the annual exclusion

explained in the instructions for that

of Form 709 under the rules contained in

has been increased to $125,000,

schedule on page 9;

the gift tax portions of these instructions,

provided the additional (above the

4. Complete Schedule C. Complete

including the split gift rules. Therefore,

$12,000 annual exclusion) $113,000 gift

Column B of Schedule C, Part 1, as

transfers made to political organizations,

would otherwise qualify for the gift tax

explained in the instructions for that

transfers that qualify for the medical or

marital deduction (as described in the line

schedule on page 10;

educational exclusions, transfers that are

4 instructions on page 9).

5. Complete only lines 10 and 11 of

fully excluded under the annual exclusion,

A gift of a future interest cannot be

Schedule A, Part 4; and

and most transfers made to your spouse

excluded under the annual exclusion.

6. Complete Part 2 — Tax

are not subject to the GST tax.

Computation.

A gift is considered a present interest if

Transfers subject to the GST tax are

the donee has all immediate rights to the

described in further detail in the

use, possession, and enjoyment of the

Section 2701 Elections

instructions beginning on page 6.

property or income from the property.

The special valuation rules of section

Certain transfers, particularly

A gift is considered a future interest if

2701 contain three elections that you

transfers to a trust, that are not

the donee’s rights to the use, possession,

must make with Form 709.

subject to gift tax and are

CAUTION

and enjoyment of the property or income

1. A transferor may elect to treat a

therefore not subject to the GST tax on

from the property will not begin until some

qualified payment right he or she holds

Form 709 may be subject to the GST tax

future date. Future interests include

(and all other rights of the same class) as

at a later date. This is true even if the

reversions, remainders, and other similar

other than a qualified payment right.

transfer is less than the $12,000 annual

interests or estates.

2. A person may elect to treat a

exclusion. In this instance, you may want

distribution right held by that person in a

A contribution to a QTP on behalf of a

to apply a GST exemption amount to the

controlled entity as a qualified payment

designated beneficiary is considered a gift

transfer on this return or on a Notice of

right.

of a present interest.

Allocation. For more information, see Part

3. An interest holder may elect to treat

3 — Indirect Skips on page 9 and Part 2 —

A gift to a minor is considered a

as a taxable event the payment of a

GST Exemption Reconciliation on page

present interest if all of the following

qualified payment that occurs more than 4

11.

conditions are met:

years after its due date.

Transfers Subject to an Estate

1. Both the property and its income

may be expended by, or for the benefit of,

Tax Inclusion Period (ETIP)

The elections described in (1) and (2)

the minor before the minor reaches

Certain transfers that are direct skips

above must be made on the Form 709

age 21;

receive special treatment. If the

that is filed by the transferor to report the

2. All remaining property and its

transferred property would have been

transfer that is being valued under section

income must pass to the minor on the

includible in the donor’s estate if the

2701. The elections are made by

minor’s 21st birthday; and

donor had died immediately after the

attaching a statement to Form 709. For

3. If the minor dies before the age of

transfer (for a reason other than the donor

information on what must be in the

21, the property and its income will be

having died within 3 years of making the

statement and for definitions and other

payable either to the minor’s estate or to

gift), the direct skip will be treated as

details on the elections, see section 2701

whomever the minor may appoint under a

having been made at the end of the ETIP

and Regulations section 25.2701-2(c).

general power of appointment.

rather than at the time of the actual

The election described in (3) above

transfer.

The gift of a present interest to more

may be made by attaching a statement to

For example, if A transferred her

than one donee as joint tenants qualifies

either a timely or a late filed Form 709

house to her granddaughter, B, but

for the annual exclusion for each donee.

filed by the recipient of the qualified

retained the right to live in the house until

payment for the year the payment is

Nonresident Aliens

her death (a retained life estate), the

received. If the election is made on a

Nonresident aliens are subject to gift and

value of the house would be includible in

timely filed return, the taxable event is

GST taxes for gifts of tangible property

A’s estate if she died while still holding

deemed to occur on the date the qualified

situated in the United States. Under

the life estate. In this case, the transfer to

payment is received. If it is made on a

certain circumstances, they are also

B is a completed gift (it is a transfer of a

late filed return, the taxable event is

subject to gift and GST taxes for gifts of

future interest) and must be reported on

deemed to occur on the first day of the

intangible property. See section 2501(a).

Part 1 of Schedule A. The GST portion of

month immediately preceding the month

the transfer would not be reported until A

If you are a nonresident alien who

in which the return is filed. For information

died or otherwise gave up her life estate

made a gift subject to gift tax, you must

on what must be in the statement and for

in the house.

file a gift tax return if:

definitions and other details on this

•

You gave any gifts of future interests,

Report the gift portion of such a

election, see section 2701 and

•

Your gifts of present interests to any

transfer on Schedule A, Part 1, at the time

Regulations section 25.2701-4(d).

donee other than your spouse total more

of the actual transfer. Report the GST

All of the elections may be revoked

than $12,000, or

portion on Schedule A, Part 2, but only at

•

only with the consent of the IRS.

Your outright gifts to your spouse who

the close of the ETIP. Use Form 709 only

is not a U.S. citizen total more than

to report those transfers where the ETIP

When To File

$125,000.

closed due to something other than the

donor’s death. (If the ETIP closed as the

Form 709 is an annual return.

Transfers Subject to the

result of the donor’s death, report the

GST Tax

transfer on Form 706, United States

Generally, you must file the 2007 Form

You must report on Form 709 the GST

Estate (and Generation-Skipping

709 no earlier than January 1, 2008, but

tax imposed on inter vivos direct skips. An

Transfer) Tax Return.)

not later than April 15, 2008.

-3-

Instructions For Form 709 - 2007 Page 3

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