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All of the gifts made during the

Subject to the gift tax,

If you are filing this Form 709 solely to

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calendar year to a donee are fully

Of an interest in property, and

report the GST portion of transfers

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excluded under the annual exclusion if

Made to a skip person. (See Gifts

subject to an ETIP, complete the form as

they are all gifts of present interests and

Subject to Both Gift and GST Taxes on

you normally would with the following

they total $12,000 or less.

page 6.)

exceptions:

1. Write “ETIP” at the top of page 1;

Note. For gifts made to spouses who are

A transfer is subject to the gift tax if it

2. Complete only lines 1 through 6, 8,

not U.S. citizens, the annual exclusion

is required to be reported on Schedule A

and 9 of Part 1 — General Information;

has been increased to $120,000,

of Form 709 under the rules contained in

3. Complete Schedule A, Part 2, as

provided the additional (above the

the gift tax portions of these instructions,

explained in the instructions for that

$12,000 annual exclusion) $108,000 gift

including the split gift rules. Therefore,

schedule on page 8;

would otherwise qualify for the gift tax

transfers made to political organizations,

4. Complete Schedule C. Complete

marital deduction (as described in the line

transfers that qualify for the medical or

Column B of Schedule C, Part 1, as

4 instructions on page 9).

educational exclusions, transfers that are

explained in the instructions for that

fully excluded under the annual exclusion,

A gift of a future interest cannot be

schedule on page 10;

and most transfers made to your spouse

excluded under the annual exclusion.

5. Complete only lines 10 and 11 of

are not subject to the GST tax.

A gift is considered a present interest if

Schedule A, Part 4; and

the donee has all immediate rights to the

Transfers subject to the GST tax are

6. Complete Part 2 — Tax

use, possession, and enjoyment of the

described in further detail in the

Computation.

property or income from the property.

instructions beginning on page 6.

A gift is considered a future interest if

Section 2701 Elections

Certain transfers, particularly

the donee’s rights to the use, possession,

The special valuation rules of section

transfers to a trust, that are not

and enjoyment of the property or income

2701 contain three elections that you

subject to gift tax and are

CAUTION

from the property will not begin until some

must make with Form 709.

therefore not subject to the GST tax on

future date. Future interests include

Form 709 may be subject to the GST tax

1. A transferor may elect to treat a

reversions, remainders, and other similar

at a later date. This is true even if the

qualified payment right he or she holds

interests or estates.

transfer is less than the $12,000 annual

(and all other rights of the same class) as

A contribution to a QTP on behalf of a

exclusion. In this instance, you may want

other than a qualified payment right.

designated beneficiary is considered a gift

to apply a GST exemption amount to the

2. A person may elect to treat a

of a present interest.

transfer on this return or on a Notice of

distribution right held by that person in a

Allocation. For more information, see Part

A gift to a minor is considered a

controlled entity as a qualified payment

3 — Indirect Skips on page 9 and Part 2 —

present interest if all of the following

right.

GST Exemption Reconciliation on page

conditions are met:

3. An interest holder may elect to treat

10.

as a taxable event the payment of a

1. Both the property and its income

qualified payment that occurs more than 4

may be expended by, or for the benefit of,

Transfers Subject to an Estate

years after its due date.

the minor before the minor reaches

Tax Inclusion Period (ETIP)

age 21;

The elections described in (1) and (2)

Certain transfers that are direct skips

2. All remaining property and its

above must be made on the Form 709

receive special treatment. If the

income must pass to the minor on the

that is filed by the transferor to report the

transferred property would have been

minor’s 21st birthday; and

transfer that is being valued under section

includible in the donor’s estate if the

3. If the minor dies before the age of

2701. The elections are made by

donor had died immediately after the

21, the property and its income will be

attaching a statement to Form 709. For

transfer (for a reason other than the donor

payable either to the minor’s estate or to

having died within 3 years of making the

information on what must be in the

whomever the minor may appoint under a

gift), the direct skip will be treated as

statement and for definitions and other

general power of appointment.

having been made at the end of the ETIP

details on the elections, see section 2701

The gift of a present interest to more

rather than at the time of the actual

and Regulations section 25.2701-2(c).

than one donee as joint tenants qualifies

transfer.

The election described in (3) above

for the annual exclusion for each donee.

may be made by attaching a statement to

For example, if A transferred her

Nonresident Aliens

either a timely or a late filed Form 709

house to her granddaughter, B, but

filed by the recipient of the qualified

retained the right to live in the house until

Nonresident aliens are subject to gift and

payment for the year the payment is

her death (a retained life estate), the

GST taxes for gifts of tangible property

received. If the election is made on a

value of the house would be includible in

situated in the United States. Under

timely filed return, the taxable event is

A’s estate if she died while still holding

certain circumstances, they are also

deemed to occur on the date the qualified

the life estate. In this case, the transfer to

subject to gift and GST taxes for gifts of

payment is received. If it is made on a

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

intangible property. See section 2501(a).

late filed return, the taxable event is

future interest) and must be reported on

If you are a nonresident alien who

deemed to occur on the first day of the

Part 1 of Schedule A. The GST portion of

made a gift subject to gift tax, you must

month immediately preceding the month

the transfer would not be reported until A

file a gift tax return if:

in which the return is filed. For information

died or otherwise gave up her life estate

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You gave any gifts of future interests,

on what must be in the statement and for

in the house.

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Your gifts of present interests to any

definitions and other details on this

donee other than your spouse total more

Report the gift portion of such a

election, see section 2701 and

than $12,000, or

transfer on Schedule A, Part 1, at the time

Regulations section 25.2701-4(d).

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Your outright gifts to your spouse who

of the actual transfer. Report the GST

All of the elections may be revoked

is not a U.S. citizen total more than

portion on Schedule A, Part 2, but only at

only with the consent of the IRS.

$120,000.

the close of the ETIP. Use Form 709 only

to report those transfers where the ETIP

Transfers Subject to the

When To File

closed due to something other than the

GST Tax

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

Form 709 is an annual return.

You must report on Form 709 the GST

result of the donor’s death, report the

tax imposed on inter vivos direct skips. An

transfer on Form 706, United States

Generally, you must file the 2006 Form

inter vivos direct skip is a transfer made

Estate (and Generation-Skipping

709 no earlier than January 1, 2007, but

during the donor’s lifetime that is:

Transfer) Tax Return.)

not later than April 16, 2007.

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2006 Page 3

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