Instructions For Form 8939 - Allocation Of Increase In Basis For Property Acquired From A Decedent - 2010 Page 10

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Do not include in column (e)(i) any
definitions and general rules that may be
transfers that were not direct skips but to
adjustments to basis other than those
applicable, see the instructions to
which the decedent allocated the GST
provided for in section 1022(b).
Schedule R in the instructions to Form
exemption. These allocations by the
706, United States Estate (and
decedent are irrevocable.
Column (e)(ii). Spousal Property Basis
Generation-Skipping Transfer) Tax
Increase allocated to property. List the
Also include on this line allocations
Return.
amount of Spousal Property Basis
deemed to have been made by the
Increase (as defined in Rev. Proc.
How To Complete Schedules R
decedent under the rules of section 2632.
2011-41, section 4.02(2)) allocated to the
and R-1
Unless the decedent elected out of the
property described in column (a).
deemed allocation rules, allocations are
Valuation. Enter on Schedules R and
deemed to have been made in the
Do not include any adjustments to
R-1 the FMV of the property interests
following order:
basis other than those provided for in
subject to the GST tax.
section 1022(c) or in Rev. Proc. 2011-41,
1. To inter vivos direct skips and
How To Complete Schedule R
section 4.02(3).
2. Beginning with transfers made after
December 31, 2000, to lifetime transfers
Spousal Property Basis Increase
Part 1. GST Exemption
to certain trusts, by the decedent, that
!
may be allocated only to qualified
Reconciliation
constituted indirect skips that were
spousal property, except as
CAUTION
subject to the gift tax.
Part 1, line 8, Part 2, line 4, and line 4 of
otherwise provided in Rev. Proc. 2011-41,
Schedule R-1 are used to allocate the
section 4.02(3).
For more information, see section
decedent’s GST exemption. This
If column (e)(ii) includes an allocation
2632.
allocation is made by filing Form 8939
of Spousal Property Basis Increase to
and attaching a completed Schedule R
Line 3. Make an entry on this line if you
property that is sold (regardless of
and/or R-1. Once made, the allocation is
are filing Form(s) 709 for the decedent
whether the allocation of Spousal
irrevocable. You are not required to
and wish to allocate any exemption. See
Property Basis Increase is made before
allocate all of the decedent’s GST
Notice 2011-66, section II.B. for special
or after such sale) instead of being
exemption. However, the portion of the
rules regarding inter vivos direct skips
distributed to or for the surviving spouse,
exemption that you do not allocate will be
occurring during 2010.
check the box in column (e)(ii). Attach a
allocated by the IRS under the deemed
statement identifying the property by item
Lines 4 and 5. These lines represent
allocation at death rules of section
number and showing how the allocation
your allocation of the GST exemption to
2632(e).
of Spousal Property Basis Increase
direct skips made by reason of the
For transfers made through 1998, the
complies with the rules of Rev. Proc.
decedent’s death. Complete Part 2 and
GST exemption was $1,000,000.
2011-41, section 4.02(3).
Schedule R-1 before completing these
Beginning in 2010, the GST exemption is
lines.
Attach this statement to the
$5,000,000; however, the tax rate on
Schedule(s) A that show the property to
Line 8. Line 8 is used to allocate the
generation-skipping transfers made in
which Spousal Property Basis Increase is
remaining unused GST exemption (from
2010 is 0%. The exemption amounts for
allocated. Also, attach to such schedules
line 7) and to help you compute the trust’s
1999 through 2009 are as follows:
each document providing a bequest or
inclusion ratio. Line 8 is a Notice of
devise to the surviving spouse.
Allocation for allocating the GST
Year of transfer
GST exemption
exemption to trusts as to which the
Column (f). Ordinary gain. Enter in
1999
1,010,000
decedent is the transferor and from which
column (f) the maximum amount of gain,
2000
1,030,000
a generation-skipping transfer could occur
if any, that would be treated as ordinary
2001
1,060,000
after the decedent’s death.
income. Attach a statement including the
2002
1,100,000
item number from line 4, showing how
If line 8 is not completed, the deemed
2003
1,120,000
you figured the amount of gain that would
allocation at death rules will apply to
2004 and 2005
1,500,000
be ordinary and providing sufficient
allocate the decedent’s remaining unused
2006, 2007, and 2008
2,000,000
information to figure this amount on any
GST exemption, first to property that is
2009
3,500,000
subsequent sale, exchange, or other
the subject of a direct skip occurring at
disposition.
the decedent’s death, and then to trusts
The amount of each increase can only
Line 4B—Total Allocation of
as to which the decedent is the transferor.
be allocated to transfers made (or
If you wish to avoid the application of the
appreciation that occurred) during or after
Basis Increase
deemed allocation rules, you should enter
the year of the increase. The following
Add column (e)(i) and (e)(ii) and place the
on line 8 every trust (except certain trusts
example shows the application of this
sum on line 4B. The sum of line 4B,
entered on Schedule R-1, as described
rule:
column (e)(i) of all Schedules A may not
below) to which you wish to allocate any
Example. In 2003, G made a direct
exceed the amount on line 12c, General
part of the decedent’s GST exemption.
skip of $1,120,000 and applied her full
Basis Increase, on page 1. Enter the sum
Unless you enter a trust on line 8, the
$1,120,000 of GST exemption to the
of line 4B, column (e)(i) from all
unused GST exemption will be allocated
transfer. G made a $450,000 taxable
Schedules A on line 13 of page 1. Enter
to it under the deemed allocation rules.
direct skip in 2004 and another of
the sum of line 4B, column (e)(ii), from all
$90,000 in 2006. For 2004, G can only
If a trust is entered on Schedule R-1,
Schedules A on line 14, of page 1.
apply $380,000 of exemption ($380,000
the amount you entered on line 4 of
inflation adjustment from 2004) to the
Schedules R and
Schedule R-1 serves as a Notice of
$450,000 transfer in 2004. For 2006, G
Allocation and you need not enter the
R-1—GST Exemption
can apply $90,000 of exemption to the
trust on line 8 unless you wish to allocate
2006 transfer, but nothing to the transfer
more than the Schedule R-1, line 4
Introduction and Overview
made in 2004. At the end of 2006, G
amount to the trust. However, you must
would have $410,000 of unused
Schedule R is used to allocate the
enter the trust on line 8 if you wish to
exemption that she can apply to future
generation-skipping (GST) exemption.
allocate any of the unused GST
transfers (or appreciation) starting in
Schedule R-1 is used to inform the
exemption amount to it. Such an
2007.
trustee of certain trusts of the amount of
additional allocation would not ordinarily
GST exemption allocated to such trusts.
Line 2. These allocations will have been
be appropriate in the case of a trust
Because the GST tax rate for 2010 is
made either on Forms 709 filed by the
entered on Schedule R-1 when the trust
zero, these schedules are not used to
decedent or on Notices of Allocation
property passes outright (rather than to
compute the GST tax. For certain
made by the decedent for inter vivos
another trust) at the decedent’s death.
-9-

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