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A as you normally would with the

When to make an election. Election

Supplemental Documents

following changes:

(1) is timely made if it is made on a timely

To support the value of your gifts, you

filed gift tax return for the year the transfer

Report the transfer subject to an ETIP

must provide information showing how it

was made or was deemed to have been

on Schedule A, Part 2.

was determined.

made.

Column B. In addition to the

For stock of close corporations or

Elections (2) and (3) may be made on

information already requested, describe

inactive stock, attach balance sheets,

a timely filed gift tax return for the year for

the interest that is closing the ETIP;

particularly the one nearest the date of

which the election is to become effective.

explain what caused the interest to

the gift, and statements of net earnings or

terminate; and list the year the gift portion

To make one of these elections, check

operating results and dividends paid for

of the transfer was reported and its item

column C next to the transfer to which the

each of the 5 preceding years.

number on Schedule A that was originally

election applies. You must also attach an

For each life insurance policy, attach

filed to report the gift portion of the ETIP

explanation as described below. If you

Form 712, Life Insurance Statement.

transfer.

are making election (2) or (3) on a return

on which the transfer is not reported,

Note for single premium or paid-up

Column E. Give the date the ETIP

simply attach the statement described

policies. In certain situations, for

closed rather than the date of the initial

below.

example, where the surrender value of

gift.

the policy exceeds its replacement cost,

If you are reporting a transfer to a trust

Columns F, G, and H. Enter “N/A” in

the true economic value of the policy will

for which election (2) or (3) was made on

these columns.

be greater than the amount shown on line

a previously filed return, do not make an

The value is entered only in Column B

59 of Form 712. In these situations, report

entry in column C for that transfer and do

of Part 1, Schedule C. See Column B on

the full economic value of the policy on

not attach a statement.

page 10.

Schedule A. See Rev. Rul. 78-137,

Attachment. You must attach a

Split gifts —gifts made by spouse

1978-1 C.B. 280 for details.

statement to Form 709 that describes the

See this heading under Part 1 on page 8.

election you are making and clearly

If the gift was made by means of a

identifies the trusts and/or transfers to

trust, attach a certified or verified copy of

Part 3—Indirect Skips

which the election applies.

the trust instrument to the return on which

Some gifts made to trusts are subject only

you report your first transfer to the trust.

Split gifts — gifts made by spouse

to gift tax at the time of the transfer but

However, to report subsequent transfers

later may be subject to GST tax. The GST

See this heading under Part I on page 8.

to the trust, you may attach a brief

tax could apply either at the time of a

description of the terms of the trust or a

Part 4—Taxable Gift

distribution from the trust, at the

copy of the trust instrument.

Reconciliation

termination of the trust, or both.

Also attach any appraisal used to

Section 2632(c) defines indirect skips

Line 2

determine the value of real estate or

and applies special rules to the allocation

other property.

Enter the total annual exclusions you are

of GST exemption to such transfers. In

claiming for the gifts listed on Schedule A.

If you do not attach this information,

general, an indirect skip is a transfer of

See Annual Exclusion on page 2. If you

property that is subject to gift tax (other

you must include in Schedule A full

split a gift with your spouse, the annual

information to explain how the value was

than a direct skip) and is made to a GST

exclusion you claim against that gift may

trust. A GST trust is a trust that could

determined.

not be more than the smaller of your half

have a generation-skipping transfer with

Part 2—Direct Skips

of the gift or $11,000.

respect to the transferor, unless the trust

List in Part 2 only those gifts that are

provides for certain distributions of trust

Deductions

currently subject to both the gift and GST

corpus to non-skip persons. See section

taxes. You must list the gifts in Part 2 in

2632(c)(3)(B) for details.

Line 4 — Marital deduction

the chronological order that you made

List in Part 3 those gifts that are

Enter on line 4 all of the gifts to your

them. Number, describe, and value the

indirect skips as defined in section

spouse that you listed on Schedule A and

gifts as described in the instructions for

2632(c) or may later be subject to GST

for which you are claiming a marital

Part 1 on page 8.

tax. This includes indirect skips for which

deduction. Do not enter any gift that you

election 2, described below, will be made

If you made a transfer to a trust that

did not include on Schedule A. On the

in the current year or has been made in a

was a direct skip, list the entire gift as one

dotted line on line 4, indicate which

previous year. You must list the gifts in

line entry in Part 2.

numbered items from Schedule A are

Part 3 in the chronological order that you

gifts to your spouse for which you are

Column C — 2632(b) Election

made them.

claiming the marital deduction.

If you elect under section 2632(b)(3) to

Column C —2632(c) Election

Do not enter on line 4 any gifts to

not have the automatic allocation rules of

Section 2632(c) provides for the

TIP

your spouse who was not a U.S.

section 2632(b) apply to a transfer, enter

automatic allocation of the donor’s

citizen at the time of the gift.

a check in column C next to the transfer.

unused GST exemption to indirect skips.

You must also attach a statement to Form

You may deduct all gifts of

This section also sets forth three different

709 clearly describing the transaction and

nonterminable interests made during the

elections you may make regarding the

the extent to which the automatic

year that you entered on Schedule A

allocation of exemption.

allocation is not to apply. Reporting a

regardless of amount, and certain gifts of

1. You may elect not to have the

direct skip on a timely filed Form 709 and

terminable interests as outlined below.

automatic allocation rules apply to the

paying the GST tax on the transfer will

Terminable interests. Generally, you

current transfer made to a particular trust.

qualify as such a statement.

cannot take the marital deduction if the

2. You may elect not to have the

How to report GST transfers after the

gift to your spouse is a terminable

automatic rules apply to both the current

close of an ETIP. If you are reporting a

interest. In most instances, a terminable

transfer and any and all future transfers

generation-skipping transfer that was

interest is nondeductible if someone other

made to a particular trust.

subject to an ETIP (provided the ETIP

than the donee spouse will have an

3. You may elect to treat any trust as

closed as a result of something other than

interest in the property following the

a GST trust for purposes of the automatic

the death of the transferor — see Form

termination of the donee spouse’s

allocation rules.

706), and you are also reporting gifts

interest. Some examples of terminable

made during the year, complete Schedule

See section 2632(c)(5) for details.

interests are:

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2005 Page 9

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