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is treated as a separate donee for

the close of the ETIP. Use Form 709 only

Transfers Subject to the

purposes of the annual exclusion.

to report those transfers where the ETIP

Generation-Skipping Transfer

closed due to something other than the

Tax

All of the gifts made during the

donor’s death. (If the ETIP closed as the

calendar year to a donee are fully

You must report on Form 709 the GST

result of the donor’s death, report the

excluded under the annual exclusion if

tax imposed on inter vivos direct skips. An

transfer on Form 706, United States

they are all gifts of present interests and

inter vivos direct skip is a transfer made

Estate (and Generation-Skipping

they total $11,000 or less.

during the donor’s lifetime that is:

Transfer) Tax Return.)

•

Subject to the gift tax,

Note. For gifts made to spouses who

•

If you are filing this Form 709 solely to

Of an interest in property, and

are not U.S. citizens, the annual exclusion

•

report the GST portion of transfers

Made to a skip person. (See Gifts

has been increased to $117,000,

subject to an ETIP, complete the form as

Subject to Both Gift and GST Taxes on

provided the additional (above the

you normally would with the following

page 6.)

$11,000 annual exclusion) $106,000 gift

exceptions:

A transfer is subject to the gift tax if it

would otherwise qualify for the gift tax

1. Write “ETIP” at the top of page 1;

is required to be reported on Schedule A

marital deduction (as described in the line

2. Complete only lines 1 through 6, 8,

of Form 709 under the rules contained in

4 instructions on page 9).

and 9 of Part 1, General Information;

the gift tax portions of these instructions,

3. Complete Schedule A, Part 2, as

A gift of a future interest cannot be

including the split gift rules. Therefore,

explained in the instructions for that

excluded under the annual exclusion.

transfers made to political organizations,

schedule on page 9;

transfers that qualify for the medical or

A gift is considered a present interest if

4. Complete Schedule C. Complete

educational exclusions, transfers that are

the donee has all immediate rights to the

Column B of Schedule C, Part 1, as

fully excluded under the annual exclusion,

use, possession, and enjoyment of the

explained in the instructions for that

and most transfers made to your spouse

property or income from the property.

schedule on page 10;

are not subject to the GST tax.

5. Complete only lines 10 and 11 of

A gift is considered a future interest if

Transfers subject to the GST tax are

Schedule A, Part 4; and

the donee’s rights to the use, possession,

described in further detail in the

6. Complete Part 2 — Tax

and enjoyment of the property or income

instructions beginning on page 6.

Computation.

from the property will not begin until some

Certain transfers, particularly

future date. Future interests include

Section 2701 Elections

transfers to a trust, that are not

reversions, remainders, and other similar

subject to gift tax and are

The special valuation rules of section

interests or estates.

CAUTION

therefore not subject to the GST tax on

2701 contain three elections that you

A contribution to a qualified tuition

Form 709 may be subject to the GST tax

must make with Form 709.

plan on behalf of a designated beneficiary

at a later date. This is true even if the

1. A transferor may elect to treat a

is considered a gift of a present interest.

transfer is less than the $11,000 annual

qualified payment right he or she holds

exclusion. In this instance, you may want

(and all other rights of the same class) as

A gift to a minor is considered a

to apply a GST exemption amount to the

other than a qualified payment right.

present interest if all of the following

transfer on this return or on a Notice of

2. A person may elect to treat a

conditions are met:

Allocation. For more information, see Part

distribution right held by that person in a

1. Both the property and its income

3 — Indirect Skips on page 9 and Part 2 —

controlled entity as a qualified payment

may be expended by, or for the benefit of,

GST Exemption Reconciliation on page

right.

the minor before the minor reaches

11.

3. An interest holder may elect to treat

age 21;

as a taxable event the payment of a

Transfers Subject to an Estate

2. All remaining property and its

qualified payment that occurs more than 4

Tax Inclusion Period

income must pass to the minor on the

years after its due date.

minor’s 21st birthday; and

Certain transfers that are direct skips

3. If the minor dies before the age of

receive special treatment. If the

The elections described in (1) and (2)

21, the property and its income will be

transferred property would have been

must be made on the Form 709 that is

payable either to the minor’s estate or to

includible in the donor’s estate if the

filed by the transferor to report the

whomever the minor may appoint under a

donor had died immediately after the

transfer that is being valued under section

general power of appointment.

transfer (for a reason other than the donor

2701. The elections are made by

having died within 3 years of making the

attaching a statement to Form 709. For

The gift of a present interest to more

gift), the direct skip will be treated as

information on what must be in the

than one donee as joint tenants qualifies

having been made at the end of the

statement and for definitions and other

for the annual exclusion for each donee.

estate tax inclusion period (ETIP) rather

details on the elections, see section 2701

than at the time of the actual transfer.

and Regulations section 25.2701-2(c).

Nonresident Aliens

For example, if A transferred her

The election described in (3) may be

Nonresident aliens are subject to gift and

house to her granddaughter, B, but

made by attaching a statement to either a

GST taxes for gifts of tangible property

retained the right to live in the house until

timely or a late filed Form 709 filed by the

situated in the United States. Under

her death (a retained life estate), the

recipient of the qualified payment for the

certain circumstances, they are also

value of the house would be includible in

year the payment is received. If the

subject to gift and GST taxes for gifts of

A’s estate if she died while still holding

election is made on a timely filed return,

intangible property. See section 2501(a).

the life estate. In this case, the transfer to

the taxable event is deemed to occur on

B is a completed gift (it is a transfer of a

If you are a nonresident alien who

the date the qualified payment is

future interest) and must be reported on

made a gift subject to gift tax, you must

received. If it is made on a late filed

Part 1 of Schedule A. The GST portion of

file a gift tax return if:

return, the taxable event is deemed to

•

the transfer would not be reported until A

You gave any gifts of future interests,

occur on the first day of the month

•

died or otherwise gave up her life estate

Your gifts of present interests to any

immediately preceding the month in which

in the house.

donee other than your spouse total more

the return is filed. For information on what

than $11,000, or

Report the gift portion of such a

must be in the statement and for

•

Your outright gifts to your spouse who

transfer in Schedule A, Part 1, at the time

definitions and other details on this

is not a U.S. citizen total more than

of the actual transfer. Report the GST

election, see section 2701 and

$117,000.

portion in Schedule A, Part 2, but only at

Regulations section 25.2701-4(d).

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2005 Page 3

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