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Gifts Subject to Both Gift

more generations below the generation

youngest of the generations that would

assignment of the donor. See Determining

apply.

and GST Taxes

the Generation of a Donee.

If an estate, trust, partnership,

Definitions

A donee that is a trust is a skip person

corporation, or other entity (other than

if all the interests in the property

governmental entities and certain

Direct skip. The GST tax you must report

transferred to the trust (as defined above)

charitable organizations and trusts,

on Form 709 is that imposed only on inter

are held by skip persons.

described in sections 511(a)(2) and

vivos direct skips. An inter vivos direct skip

511(b)(2), as discussed later) is a donee,

A trust also will be a skip person if there

is a transfer that is:

then each person who indirectly receives

are no interests in the property transferred

Subject to the gift tax,

the gift through the entity is treated as a

to the trust held by any person, and future

Of an interest in property, and

donee and is assigned to a generation as

distributions or terminations from the trust

Made to a skip person.

explained in the above rules.

can be made only to skip persons.

All three requirements must be met before

the gift is subject to the GST tax.

Charitable organizations and trusts,

Nonskip person. A nonskip person is

described in sections 511(a)(2) and

any donee who is not a skip person.

A gift is “subject to the gift tax” if you

511(b)(2), and governmental entities are

are required to list it on Schedule A of

Determining the Generation of

assigned to the donor's generation.

Form 709. However, if you make a

a Donee

Transfers to such organizations are

nontaxable gift (which is a direct skip) to a

therefore not subject to the GST tax.

trust for the benefit of an individual, this

Generally, a generation is determined

These gifts should always be listed in Part

transfer is subject to the GST tax unless:

along family lines as follows.

1 of Schedule A.

1. During the lifetime of the

1. If the donee is a lineal descendant

Generation assignments under Notice

beneficiary, no corpus or income may be

of a grandparent of the donor (for

2017-15. Notice 2017-15 permits a

distributed to anyone other than the

example, the donor's cousin, niece,

taxpayer to reduce his or her GST

beneficiary; and

nephew, etc.), the number of generations

exemption allocated to transfers that were

between the donor and the descendant

2. If the beneficiary dies before the

made to or for the benefit of transferees

(donee) is determined by subtracting the

termination of the trust, the assets of the

whose generation assignment is changed

number of generations between the

trust will be included in the gross estate of

as a result of the Windsor decision. A

grandparent and the donor from the

the beneficiary.

taxpayer’s GST exemption that was

number of generations between the

allocated to a transfer to a transferee (or a

grandparent and the descendant (donee).

Note. If the property transferred in the

trust for the sole benefit of such

direct skip would have been includible in

2. If the donee is a lineal descendant

transferee) whose generation assignment

the donor's estate if the donor died

of a grandparent of a spouse (or former

should have been determined on the basis

immediately after the transfer, see

spouse) of the donor, the number of

of a familial relationship as the result of the

Transfers Subject to an Estate Tax

generations between the donor and the

Windsor decision, and are non-skip

Inclusion Period (ETIP).

descendant (donee) is determined by

persons, is deemed void. For additional

subtracting the number of generations

To determine if a gift “is of an interest in

information, go to

Estate and Gift Taxes at

between the grandparent and the spouse

property” and “is made to a skip person,”

IRS.gov.

(or former spouse) from the number of

you must first determine if the donee is a

generations between the grandparent and

Charitable Remainder Trusts

“natural person” or a “trust,” as defined

the descendant (donee).

below.

Gifts in the form of charitable remainder

3. A person who at any time was

annuity trusts, charitable remainder

Trust. For purposes of the GST tax, a

married to a person described in (1) or (2)

unitrusts, and pooled income funds are

trust includes not only an ordinary trust,

above is assigned to the generation of that

not transfers to skip persons and therefore

but also any other arrangement (other

person. A person who at any time was

are not direct skips. You should always list

than an estate) that although not explicitly

married to the donor is assigned to the

these gifts in Part 1 of Schedule A even if

a trust, has substantially the same effect

donor's generation.

all of the life beneficiaries are skip

as a trust. For example, a trust includes

4. A relationship by adoption or

persons.

life estates with remainders, terms for

half-blood is treated as a relationship by

years, and insurance and annuity

Generation Assignment Where

whole-blood.

contracts. A transfer of property that is

Intervening Parent Is Deceased

conditional on the occurrence of an event

A person who is not assigned to a

is a transfer in trust.

If you made a gift to your grandchild and at

generation according to (1), (2), (3), or (4)

the time you made the gift, the

Interest in property. If a gift is made to a

above is assigned to a generation based

grandchild's parent (who is your or your

natural person, it is always considered a

on his or her birth date as follows.

spouse's or your former spouse's child) is

gift of an interest in property for purposes

1. A person who was born not more

deceased, then for purposes of generation

of the GST tax.

assignment, your grandchild is considered

than 12

years after the donor is in the

1 2

If a gift is made to a trust, a natural

to be your child rather than your

donor's generation.

person will have an interest in the property

grandchild. Your grandchild's children will

2. A person born more than 12

1 2

transferred to the trust if that person either

be treated as your grandchildren rather

years, but not more than 37

years, after

1 2

has a present right to receive income or

than your great-grandchildren.

the donor is in the first generation younger

corpus from the trust (such as an income

than the donor.

This rule also is applied to your lineal

interest for life) or is a permissible current

descendants below the level of

recipient of income or corpus from the

3. Similar rules apply for a new

grandchild. For example, if your

trust (for example, possesses a general

generation every 25 years.

grandchild is deceased, your

power of appointment).

If more than one of the rules for

great-grandchildren who are lineal

Skip person. A donee, who is a natural

assigning generations applies to a donee,

descendants of the deceased grandchild

person, is a skip person if that donee is

that donee is generally assigned to the

are considered your grandchildren for

assigned to a generation that is two or

purposes of the GST tax.

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2017 Page 8

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