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How To Complete Parts 1, 2,

these gifts in the same way you report

on inter vivos direct skips. An “inter vivos

gifts you made.

direct skip” is a transfer that is:

and 3

•

Subject to the gift tax,

After you determine which gifts you made

Gifts to Your Spouse

•

Of an interest in property, and

are subject to the gift tax and therefore

•

Except for the gifts described below, you

Made to a skip person.

should be listed on Schedule A, you must

do not need to enter any of your gifts to

All three requirements must be met

divide these gifts between:

your spouse on Schedule A.

before the gift is subject to the GST tax.

1. Part 1 — those subject only to the

A gift is “subject to the gift tax” if you

Terminable interest. Terminable

gift tax (gifts made to nonskip persons —

are required to list it on Schedule A of

interests are defined in the instructions to

see Part 1 — Gifts Subject Only to Gift

Form 709. However, if you make a

Part 4, line 4 on page 9. If all the

Tax on page 7),

nontaxable gift (which is a direct skip) to a

terminable interests you gave to your

2. Part 2 — those subject to both the

trust for the benefit of an individual, this

spouse qualify as life estates with power

gift and GST taxes (gifts made to skip

transfer is subject to the GST tax unless:

of appointment (defined under Life estate

persons — see Gifts Subject to Both Gift

with power of appointment on page 9),

1. During the lifetime of the

and GST Taxes below and Part 2 — Direct

you do not need to enter any of them on

beneficiary, no corpus or income may be

Skips on page 8), and

Schedule A.

distributed to anyone other than the

3. Part 3 — those subject only to the

beneficiary and

However, if you gave your spouse any

gift tax at this time but which could later

2. If the beneficiary dies before the

terminable interest that does not qualify

be subject to GST tax (gifts that are

termination of the trust, the assets of the

as a life estate with power of

indirect skips, see Part 3 — Indirect Skips

trust will be included in the gross estate of

appointment, you must report on

on page 9).

the beneficiary.

Schedule A all gifts of terminable interests

you made to your spouse during the year.

If you need more space, attach a

Note. If the property transferred in the

separate sheet using the same format as

Charitable remainder trusts. If you

direct skip would have been includible in

Schedule A.

make a gift to a charitable remainder trust

the donor’s estate if the donor had died

and your spouse is the only noncharitable

immediately after the transfer, see

Use the following guidelines when

beneficiary (other than yourself), the

Transfers Subject to an Estate Tax

TIP

entering gifts on Schedule A:

interest you gave to your spouse is not

Inclusion Period (ETIP) on page 3.

•

considered a terminable interest and,

Enter a gift only once — in Part 1, Part

To determine if a gift “is of an interest

therefore, should not be shown on

2, or Part 3;

in property” and “is made to a skip

•

Schedule A. For definitions and rules

Do not enter any gift or part of a gift

person,” you must first determine if the

concerning these trusts, see section

that qualified for the political organization,

donee is a “natural person” or a “trust” as

2056(b)(8)(B) and Regulations section

educational, or medical exclusion;

defined below.

•

20.2055-2.

Enter gifts under “Gifts made by

Trust. For purposes of the GST tax, trust

spouse” only if you have chosen to split

Future interest. Generally, you should

includes not only an explicit trust, but also

gifts with your spouse and your spouse is

not report a gift of a future interest to your

any other arrangement (other than an

required to file a Form 709 (see Part 1 —

spouse unless the future interest is also a

estate) that although not explicitly a trust,

General Information, Lines 12 – 18. Split

terminable interest that is required to be

has substantially the same effect as a

Gifts on page 4); and

reported as described above. However, if

trust. For example, trust includes life

•

In column F, enter the full value of the

you gave a gift of a future interest to your

estates with remainders, terms for years,

gift (including those made by your

spouse and you are required to report the

and insurance and annuity contracts. A

spouse, if applicable). If you have chosen

gift on Form 709 because you gave the

transfer of property that is conditional on

to split gifts, that one-half portion of the

present interest to a donee other than

the occurrence of an event is a transfer

gift is entered in column G.

your spouse, then you should enter the

in trust.

entire gift, including the future interest

Interest in property. If a gift is made to a

Gifts to Donees Other Than

given to your spouse, on Schedule A. You

natural person, it is always considered a

Your Spouse

should use the rules under Gifts Subject

gift of an interest in property for purposes

to Both Gift and GST Taxes below to

You must always enter all gifts of future

of the GST tax.

determine whether to enter the gift on

interests that you made during the

If a gift is made to a trust, a natural

Schedule A, Part 1, Part 2, or Part 3.

calendar year regardless of their value.

person will have an interest in the

Spouses who are not U.S. citizens. If

No gift splitting. If the total gifts of

property transferred to the trust if that

your spouse is not a U.S. citizen and you

present interests to any donee are more

person either has a present right to

gave him or her a gift of a future interest,

than $12,000 in the calendar year, then

receive income or corpus from the trust

you must report on Schedule A all gifts to

you must enter all such gifts that you

(such as an income interest for life) or is a

your spouse for the year. If all gifts to your

made during the year to or on behalf of

permissible current recipient of income or

spouse were present interests, do not

that donee, including those gifts that will

corpus from the trust (for example,

report on Schedule A any gifts to your

be excluded under the annual exclusion.

possesses a general power of

spouse if the total of such gifts for the

If the total is $12,000 or less, you need

appointment).

year does not exceed $120,000 and all

not enter on Schedule A any gifts (except

Skip person. A donee, who is a natural

gifts in excess of $12,000 would qualify

gifts of future interests) that you made to

person, is a skip person if that donee is

for a marital deduction if your spouse

that donee. Enter these gifts in the top

assigned to a generation that is two or

were a U.S. citizen (see the instructions

half of Part 1, 2, or 3, as applicable.

more generations below the generation

for Schedule A, Part 4, line 4, on page 9).

assignment of the donor. See

Gift splitting elected. Enter on Schedule

If the gifts exceed $120,000, you must

Determining the Generation of a

A the entire value of every gift you made

report all of the gifts even though some

Donee on page 7.

during the calendar year while you were

may be excluded.

married, even if the gift’s value will be

A donee that is a trust is a skip person

less than $12,000 after it is split in

Gifts Subject to Both Gift

if all the interests in the property

Column G of Part 1, 2, or 3 of

transferred to the trust (as defined above)

and GST Taxes

Schedule A.

are held by skip persons.

Gifts made by spouse. If you elected

A trust will also be a skip person if

Definitions

gift splitting and your spouse made gifts,

there are no interests in the property

list those gifts in the space below “Gifts

Direct skip. The GST tax you must

transferred to the trust held by any

made by spouse” in Part 1, 2, or 3. Report

report on Form 709 is that imposed only

person, and future distributions or

-6-

Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2006 Page 6

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