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checking the box on line 3 of Schedule

the individual has transferred. For

Schedule B(2)—Specific

A, the valuation date should be the

generation-skipping transfers made

Termination-Related Debts,

same as the termination date.

through 1998, the amount of the

Expenses, and Taxes

exemption was $1 million. The GST

Column e. Value. Reduce the value

exemption amounts for 1999 through

Report here only those expenses

of any property being reported on

2009 are as follows:

related solely to the interest that has

Schedule A by the amount of any

terminated. Examples of these

consideration provided by the skip

GST

expenses are property tax on real

person.

Year of Transfer

exemption

estate, the cost of selling property, or

1999 . . . . . . . . . . . . . . . . .

$1,010,000

attorney’s fees for defending the title to

Explain how the values reported in

2000 . . . . . . . . . . . . . . . . .

$1,030,000

property.

column e were determined and attach

2001 . . . . . . . . . . . . . . . . .

$1,060,000

copies of any appraisals.

Column a. Item no. Assign an item

2002 . . . . . . . . . . . . . . . . .

$1,100,000

number to each separate expense. This

2003 . . . . . . . . . . . . . . . . .

$1,120,000

will not necessarily correspond with the

2004 and 2005 . . . . . . . . . .

$1,500,000

Schedules B(1) and B(2)

2006, 2007, and 2008 . . . . .

$2,000,000

item numbers on Schedule A.

To determine the taxable amount for a

2009 . . . . . . . . . . . . . . . . .

$3,500,000

Column b. Description. List the

taxable termination, you may deduct

names and addresses of persons to

For existing trusts, transferors may

expenses similar to those deductible

whom the expenses are payable and

allocate the additional GST exemption

under section 2053 from the value of

describe the nature of the expense. List

amount attributable to indexing

the property subject to the termination.

the item number(s) from Schedule A to

adjustments if they otherwise qualify

which the expense relates.

under the existing rules for late

Schedule B(1)—General

Column c. Amount. If the expense

allocations. For more information, see

Trust Debts, Expenses, and

relates to more property than that

section 2632 and Multiple transfers on

Taxes

involved in the termination but less than

page 6.

the entire trust, enter in column c only

Report here only those expenses

Once made, allocations are

the amount attributable to the property

related to the entire trust. Examples of

irrevocable.

involved in the termination. Determine

such expenses are trustee’s fees,

Allocation of the GST exemption is

this amount by multiplying the total

administrative expenses, financial

made by the settlor on Form 709, and/

expense times a fraction. The

advisor’s fees, and accounting fees.

or on Form 706 by the executor of the

numerator of the fraction is the value of

settlor’s estate. Therefore, you should

the property involved in the termination

Column a. Item no. Assign an item

obtain information regarding the

and to which the expense relates. The

number to each separate expense.

allocation of the exemption to this trust

denominator is the total value of the

These will not necessarily correspond

from the settlor or the executor of the

property to which the expense relates.

with the item numbers on Schedule A.

settlor’s estate, as applicable.

Column b. Description. List the

Schedule A (Lines 5–10)

If the settlor’s entire GST exemption

names and addresses of persons to

is not allocated by the due date

whom the expenses are payable and

Line 7. Inclusion Ratio

(including extensions) of the settlor’s

describe the nature of the expenses.

estate tax return, the exemption is

The trustee must figure the inclusion

automatically allocated to the settlor’s

Column c. Amount. Enter here the

ratio for every termination. All

generation-skipping transfers under the

entire amount of the expense for the

terminations, or any parts of a single

rules of section 2632.

tax year for which the return is being

termination, that have different inclusion

filed.

ratios must be shown on separate

Denominator. Valuation of trust

Schedules A. Identify the separate

assets. In general, for an inter vivos

Line 2. Figure the percentage of

trusts by Schedule A number when

transfer, you should use the gift tax

expense to allocate to the property

showing your inclusion ratio calculation.

value in the denominator of the

involved in the termination as follows.

applicable fraction as long as the

The inclusion ratio is the excess of 1

1. Divide the value of the interest

allocation of the GST exemption was

over the applicable fraction determined

that has been terminated by the total

made on a timely filed gift tax return or

for the trust in which the termination

value of the trust at the time of the

was deemed made under section

occurred.

termination; and

2632(b)(1).

Applicable fraction. The applicable

2. Multiply the result by a fraction,

If the allocation of the exemption to

fraction is a fraction, the numerator of

the numerator of which is the number of

an inter vivos transfer is not made on a

which is the amount of the GST

days in the year through the date of the

timely filed gift tax return and is not

exemption. The denominator of the

termination, and the denominator of

deemed made under section

fraction is:

which is the total number of days in the

2632(b)(1), the value for purposes of

1. The value of the property

year (or, if the entire trust was

the applicable fraction is the value of

transferred to the trust, minus

terminated during the year, the total

the property transferred at the time the

2. The sum of:

number of days the trust was in

allocation under section 2632(a) is filed

existence during the year).

a. Any federal estate tax or state

with the IRS.

death tax actually recovered from the

The value of a testamentary transfer

trust attributable to the property, and

If there is more than one termination

is generally the estate tax value.

b. Any charitable deduction allowed

during the year, you must reduce the

under section 2055 or 2522 with

total expense used in the allocation by

For qualified terminable interest

respect to the property.

the expense allocated to the prior

property (QTIP) that is included in the

terminations. For example, assume that

estate of the surviving spouse of the

Round the applicable fraction to at

the total administrative expense for the

settlor because of section 2044, if the

least the nearest one-thousandth (for

year was $1,000 and $300 was

surviving spouse is considered the

example,“.001”).

allocated to the first termination. The

transferor under section 2652(a) for

expense allocated to the second

Numerator. GST exemption. Every

GST purposes, the value is the estate

termination would be a percentage of

individual settlor is allowed a lifetime

tax value in the estate of the surviving

$700, not of the entire $1,000.

GST exemption against property that

spouse.

-5-

Instructions For Form 706-Gs(T) - Generation-Skipping Transfer Tax Return For Terminations - 2008 Page 5

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