Instructions For Form 709 - 2008 (Page 11 of 12) in pdf

Part 2—GST Exemption

Form 709 and paying the GST tax on the

some, all, or none of your available

transfer will qualify as such a statement.

exemption, as you wish, among the gifts

Reconciliation

listed in Part 3 of Schedule C. However,

Special QTIP election. If you have

the total exemption claimed in column C

Line 1

elected QTIP treatment for any gifts in

may not exceed the amount you entered

trust listed on Schedule A, then you may

Every donor is allowed a lifetime GST

on line 3 of Part 2 of Schedule C.

make an election on Schedule C to treat

exemption. The amount of the exemption

the entire trust as non-QTIP for purposes

for 2008 is $2,000,000. For transfers

You may enter an amount in column C

of the GST tax. The election must be

made through 1998, the GST exemption

that is greater than the amount you

made for the entire trust that contains the

was $1 million. The exemption amounts

entered in column B.

particular gift involved on this return. Be

for 1999 through 2008 are as follows:

Column D

sure to identify by item number the

Year

Amount

specific gift for which you are making this

Carry your computation to three decimal

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

special QTIP election.

places (for example, “1.000”).

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

Line 5

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

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

Enter on line 5 the amount of GST

Part 2—Tax Computation

exemption you are applying to transfers

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

(Page 1 of Form 709)

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

reported in Part 3 of Schedule A.

2006, 2007, and 2008 . . . $2,000,000

Section 2632(c) provides an automatic

Lines 4 and 5

allocation to indirect skips of any unused

In general, each annual increase can only

To compute the tax for the amount on line

GST exemption. The unused exemption

be allocated to transfers made (or

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

is allocated to indirect skips to the extent

appreciation occurring) during or after the

the amount on line 2 (to be entered on

necessary to make the inclusion ratio

year of the transfer.

line 5), use the Table for Computing Gift

zero for the property transferred. You may

Tax on page 12.

elect out of this automatic allocation as

Example. A donor made $1,750,000

explained in the instructions for Part 3 on

in GSTs through 2005, and allocated all

Line 7

page 9.

$1,500,000 of the exemption to those

If you are a citizen or resident of the

transfers. In 2008, the donor makes a

Line 6

United States, you must take any

$207,000 taxable generation-skipping

available unified credit against gift tax.

Notice of allocation. You may wish to

transfer. The donor can allocate $207,000

Nonresident aliens may not claim the

allocate GST exemption with this return to

of exemption to the 2008 transfer but

unified credit. If you are a nonresident

transfers not reported on this return, such

cannot allocate the $293,000 of unused

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

as a late allocation.

2008 exemption to pre-2008 transfers.

8, and write in zero on line 11.

To allocate your exemption to such

However, if in 2005, the donor made a

transfers, attach a statement to this Form

Line 10

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

709 and entitle it “Notice of Allocation.”

a direct skip, but from which generation-

Enter 20% of the amount allowed as a

The notice must contain the following for

skipping transfers could be made in the

specific exemption for gifts made after

each trust (or other transfer):

future, the donor could allocate the

September 8, 1976, and before January

•

Clearly identify the trust, including the

increased exemption to the trust, even

1, 1977. (These amounts will be among

trust’s EIN, if known;

though no additional transfers were made

those listed in Schedule B, column D, for

•

If this is a late allocation, the year the

to the trust. See Regulations section

gifts made in the third and fourth quarters

transfer was reported on Form 709;

26.2642-4 for details on the

of 1976.)

•

The value of the trust assets at the

redetermination of the applicable fraction

effective date of the allocation;

Line 13

when additional exemption is allocated to

•

The amount of your GST exemption

the trust.

Gift tax conventions are in effect with

allocated to each gift (or a statement that

Australia, Austria, Denmark, France,

You should keep a record of your

you are allocating exemption by means of

Germany, Japan, Sweden, and the United

transfers and exemption allocations to

a formula such as “an amount necessary

Kingdom. If you are claiming a credit for

make sure that any future increases are

to produce an inclusion ratio of zero”);

payment of foreign gift tax, figure the

allocated correctly.

and

credit on an attached sheet and attach

•

The inclusion ratio of the trust after the

Enter on line 1 of Part 2 the maximum

evidence that the foreign taxes were paid.

allocation.

GST exemption you are allowed. This will

See the applicable convention for details

not necessarily be the highest indexed

Total the exemption allocations and

of computing the credit.

amount if you made no generation-

enter this total on line 6.

Line 19

skipping transfers during the year of the

Note. Where the property involved in

increase.

Make your check or money order payable

such a transfer is subject to an ETIP

to “United States Treasury” and write the

because it would be includible in the

The donor can apply this exemption to

donor’s social security number on it. You

donor’s estate if the donor died

inter vivos transfers (that is, transfers

may not use an overpayment on Form

immediately after the transfer (other than

made during the donor’s life) on Form

1040 to offset the gift and GST taxes

by reason of the donor having died within

709. The executor can apply the

owed on Form 709.

3 years of making the gift), an allocation

exemption on Form 706 to transfers

of the GST exemption at the time of the

taking effect at death. An allocation is

Signature

transfer will only become effective at the

irrevocable.

end of the ETIP. For details, see

As a donor, you must sign the return. If

In the case of inter vivos direct skips, a

Transfers Subject to an Estate Tax

you pay another person, firm, or

portion of the donor’s unused exemption

Inclusion Period (ETIP) on page 3 and

corporation to prepare your return, that

is automatically allocated to the

section 2642(f).

person must also sign the return as

transferred property unless the donor

preparer unless he or she is your regular

Part 3—Tax Computation

elects otherwise. To elect out of the

full-time employee.

automatic allocation of exemption, you

You must enter in Part 3 every gift you

must file Form 709 and attach a

Third-party designee. If you want to

listed in Part 1 of Schedule C.

statement to it clearly describing the

allow the return preparer (listed on the

Column C

transaction and the extent to which the

bottom of page 1 of Form 709, if

automatic allocation is not to apply.

You are not required to allocate your

applicable) to discuss your 2008 Form

Reporting a direct skip on a timely filed

available exemption. You may allocate

709 with the IRS, check the “Yes” box to

-11-

Instructions For Form 709 - 2008 Page 11

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