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interest to someone other than a charity,

to your spouse regardless of the amount

The medical exclusion does not apply

you must still file a return and report all of

of these gifts and regardless of whether

to amounts paid for medical care that are

your gifts to charities.

the gifts are present or future interests.

reimbursed by the donee’s insurance. If

payment for a medical expense is

If you are required to file a return to

Transfers Not Subject to the

reimbursed by the donee’s insurance

report noncharitable gifts and you made

Gift Tax

company, your payment for that expense,

gifts to charities, you must include all of

to the extent of the reimbursed amount, is

Three types of transfers are not subject to

your gifts to charities on the return.

not eligible for the medical exclusion and

the gift tax. These are:

•

Transfers Subject to the

Transfers to political organizations,

you have made a gift to the donee.

•

Gift Tax

Payments that qualify for the

To the extent that the payment was for

educational exclusion, and

Generally, the federal gift tax applies to

something other than medical care, it is a

•

Payments that qualify for the medical

any transfer by gift of real or personal

gift to the individual on whose behalf the

exclusion.

property, whether tangible or intangible,

payment was made and may be offset by

These transfers are not “gifts” as that

that you made directly or indirectly, in

the annual exclusion if it is otherwise

term is used on Form 709 and its

trust, or by any other means to a donee.

available.

instructions. You need not file a Form 709

The gift tax applies not only to the

The medical and educational

to report these transfers and should not

gratuitous transfer of any kind of property,

exclusions are allowed without regard to

list them on Schedule A of Form 709 if

but also to sales or exchanges, not made

the relationship between you and the

you do file Form 709.

in the ordinary course of business, where

donee. For examples illustrating these

Political organizations. The gift tax

money or money’s worth is exchanged

exclusions, see Regulations section

does not apply to a transfer to a political

but the value of the money (or property)

25.2503-6.

organization (defined in section 527(e)(1))

or money’s worth received is less than the

for the use of the organization.

Qualified disclaimers. A donee’s refusal

value of what is sold or exchanged. The

to accept a gift is called a disclaimer. If a

gift tax is in addition to any other tax, such

Educational exclusion. The gift tax

person makes a qualified disclaimer with

as federal income tax, paid or due on the

does not apply to an amount you paid on

respect to any interest in property, the

transfer.

behalf of an individual to a qualifying

property will be treated as if it had never

domestic or foreign educational

The exercise or release of a general

been transferred to that person.

organization as tuition for the education or

power of appointment may be a gift by the

Accordingly, the disclaimant is not

training of the individual. A qualifying

individual possessing the power. General

regarded as making a gift to the person

educational organization is one that

powers of appointment are those in which

who receives the property because of the

normally maintains a regular faculty and

the holders of the power can appoint the

qualified disclaimer.

curriculum and normally has a regularly

property subject to the power to

enrolled body of pupils or students in

themselves, their creditors, their estates,

Requirements. To be a qualified

attendance at the place where its

disclaimer, a refusal to accept an interest

or the creditors of their estates. To qualify

educational activities are regularly carried

in property must meet the following

as a power of appointment, it must be

on. See section 170(b)(1)(A)(ii) and its

created by someone other than the holder

conditions.

regulations.

of the power.

1. The refusal must be in writing.

The payment must be made directly to

2. The refusal must be received by

The gift tax may also apply to the

the qualifying educational organization

the donor, the legal representative of the

forgiveness of a debt, to interest-free or

and it must be for tuition. No educational

donor, the holder of the legal title to the

below market interest rate loans, to the

exclusion is allowed for amounts paid for

property to which the interest relates, or

assignment of the benefits of an

books, supplies, room and board, or other

the person in possession of the property

insurance policy, to certain property

similar expenses that do not constitute

within 9 months after the later of:

settlements in divorce cases, and to the

direct tuition costs. To the extent that the

giving up of some amount of annuity in

a. the day on which the transfer

payment to the educational institution was

exchange for the creation of a survivor

creating the interest is made, or

for something other than tuition, it is a gift

annuity.

b. the day on which the disclaimant

to the individual for whose benefit it was

reaches age 21.

Bonds that are exempt from federal

made, and may be offset by the annual

3. The disclaimant must not have

income taxes are not exempt from federal

exclusion if it is otherwise available.

accepted the interest or any of its

gift taxes.

Contributions to a qualified tuition

benefits.

Code sections 2701 and 2702 provide

program on behalf of a designated

4. As a result of the refusal, the

rules for determining whether certain

beneficiary do not qualify for the

interest must pass without any direction

transfers to a family member of interests

educational exclusion. See Line B —

from the disclaimant to either:

in corporations, partnerships, and trusts

Qualified Tuition Programs beginning on

a. the spouse of the decedent, or

are gifts. The rules of section 2704

page 5.

b. a person other than the

determine whether the lapse of any voting

disclaimant, and

Medical exclusion. The gift tax does not

or liquidation right is a gift.

5. The refusal must be irrevocable

apply to an amount you paid on behalf of

Gifts to your spouse. You must file a

an individual to a person or institution that

and unqualified.

gift tax return if you made any gift to your

provided medical care for the individual.

spouse of a terminable interest that does

The 9-month period for making the

The payment must be to the care

not meet the exception described in Life

provider. The medical care must meet the

disclaimer generally is determined

estate with power of appointment on page

requirements of section 213(d) (definition

separately for each taxable transfer. For

10 or if your spouse is not a U.S. citizen

gifts, the period begins on the date the

of medical care for income tax deduction

and the total gifts you made to your

transfer is a completed transfer for gift tax

purposes). Medical care includes

spouse during the year exceed $117,000.

expenses incurred for the diagnosis, cure,

purposes.

You must also file a gift tax return to

mitigation, treatment, or prevention of

Annual Exclusion

make the Qualified Terminable Interest

disease, or for the purpose of affecting

Property (QTIP) election described under

any structure or function of the body, or

The first $11,000 of gifts of present

Line 13 — QTIP election for annuities on

for transportation primarily for and

interests to each donee during the

page 10.

essential to medical care. Medical care

calendar year is subtracted from total gifts

Except as described above, you do not

also includes amounts paid for medical

in figuring the amount of taxable gifts. For

have to file a gift tax return to report gifts

insurance on behalf of any individual.

a gift in trust, each beneficiary of the trust

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2005 Page 2

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