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gifts to charities, you must include all of

Transfers to political organizations,

To the extent that the payment was for

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your gifts to charities on the return.

Payments that qualify for the

something other than medical care, it is a

educational exclusion, and

gift to the individual on whose behalf the

Transfers Subject to the Gift

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Payments that qualify for the medical

payment was made and may be offset by

Tax

exclusion.

the annual exclusion if it is otherwise

Generally, the federal gift tax applies to

These transfers are not “gifts” as that

available.

any transfer by gift of real or personal

term is used on Form 709 and its

The medical and educational

property, whether tangible or intangible,

instructions. You need not file a Form 709

exclusions are allowed without regard to

that you made directly or indirectly, in

to report these transfers and should not

the relationship between you and the

trust, or by any other means to a donee.

list them on Schedule A of Form 709 if

donee. For examples illustrating these

you do file Form 709.

The gift tax applies not only to the

exclusions, see Regulations section

gratuitous transfer of any kind of property,

Political organizations. The gift tax

25.2503-6.

but also to sales or exchanges, not made

does not apply to a transfer to a political

Qualified disclaimers. A donee’s

in the ordinary course of business, where

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

refusal to accept a gift is called a

money or money’s worth is exchanged

for the use of the organization.

disclaimer. If a person makes a qualified

but the value of the money (or property)

Educational exclusion. The gift tax

disclaimer of any interest in property, the

or money’s worth received is less than the

does not apply to an amount you paid on

property will be treated as if it had never

value of what is sold or exchanged. The

behalf of an individual to a qualifying

been transferred to that person.

gift tax is in addition to any other tax, such

domestic or foreign educational

Accordingly, the disclaimant is not

as federal income tax, paid or due on the

organization as tuition for the education or

regarded as making a gift to the person

transfer.

training of the individual. A qualifying

who receives the property because of the

The exercise or release of a general

educational organization is one that

qualified disclaimer.

power of appointment may be a gift by the

normally maintains a regular faculty and

Requirements. To be a qualified

individual possessing the power. General

curriculum and normally has a regularly

disclaimer, a refusal to accept an interest

powers of appointment are those in which

enrolled body of pupils or students in

in property must meet the following

the holders of the power can appoint the

attendance at the place where its

conditions.

property subject to the power to

educational activities are regularly carried

1. The refusal must be in writing.

themselves, their creditors, their estates,

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

2. The refusal must be received by

or the creditors of their estates. To qualify

regulations.

the donor, the legal representative of the

as a power of appointment, it must be

The payment must be made directly to

donor, the holder of the legal title to the

created by someone other than the holder

the qualifying educational organization

property disclaimed, or the person in

of the power.

and it must be for tuition. No educational

possession of the property within 9

The gift tax may also apply to the

exclusion is allowed for amounts paid for

months after the later of:

forgiveness of a debt, to interest-free or

books, supplies, room and board, or other

a. the day the transfer creating the

below market interest rate loans, to the

similar expenses that do not constitute

interest is made or

assignment of the benefits of an

direct tuition costs. To the extent that the

b. the day the disclaimant reaches

insurance policy, to certain property

payment to the educational institution was

age 21.

settlements in divorce cases, and to the

for something other than tuition, it is a gift

3. The disclaimant must not have

giving up of some amount of annuity in

to the individual for whose benefit it was

accepted the interest or any of its

exchange for the creation of a survivor

made, and may be offset by the annual

benefits.

annuity.

exclusion if it is otherwise available.

4. As a result of the refusal, the

Bonds that are exempt from federal

Contributions to a qualified tuition

interest must pass without any direction

income taxes are not exempt from federal

program (QTP) on behalf of a designated

from the disclaimant to either:

gift taxes.

beneficiary do not qualify for the

a. the spouse of the decedent or

Sections 2701 and 2702 provide rules

educational exclusion. See Line

b. a person other than the

for determining whether certain transfers

B — Qualified Tuition Programs (529

disclaimant, and

to a family member of interests in

Plans or Programs).

5. The refusal must be irrevocable

corporations, partnerships, and trusts are

Medical exclusion. The gift tax does not

and unqualified.

gifts. The rules of section 2704 determine

apply to an amount you paid on behalf of

whether the lapse of any voting or

The 9-month period for making the

an individual to a person or institution that

liquidation right is a gift.

disclaimer generally is determined

provided medical care for the individual.

Gifts to your spouse. You must file a

separately for each taxable transfer. For

The payment must be to the care

gifts, the period begins on the date the

gift tax return if you made any gift to your

provider. The medical care must meet the

spouse of a terminable interest that does

transfer is a completed transfer for gift tax

requirements of section 213(d) (definition

not meet the exception described in Life

purposes.

of medical care for income tax deduction

estate with power of appointment, or if

purposes). Medical care includes

Annual Exclusion

your spouse is not a U.S. citizen and the

expenses incurred for the diagnosis, cure,

The first $13,000 of gifts of present

total gifts you made to your spouse during

mitigation, treatment, or prevention of

interests to each donee during the

the year exceed $134,000.

disease, or for the purpose of affecting

calendar year is subtracted from total gifts

any structure or function of the body, or

You must also file a gift tax return to

in figuring the amount of taxable gifts. For

for transportation primarily for and

make the Qualified Terminable Interest

a gift in trust, each beneficiary of the trust

essential to medical care. Medical care

Property (QTIP) election described under

is treated as a separate donee for

also includes amounts paid for medical

Line 12. Election Out of QTIP Treatment

purposes of the annual exclusion.

insurance on behalf of any individual.

of Annuities.

All of the gifts made during the

The medical exclusion does not apply

Except as described above, you do not

calendar year to a donee are fully

to amounts paid for medical care that are

have to file a gift tax return to report gifts

excluded under the annual exclusion if

reimbursed by the donee’s insurance. If

to your spouse regardless of the amount

they are all gifts of present interests and

payment for a medical expense is

of these gifts and regardless of whether

they total $13,000 or less.

reimbursed by the donee’s insurance

the gifts are present or future interests.

Note. For gifts made to spouses who are

company, your payment for that expense,

Transfers Not Subject to the

to the extent of the reimbursed amount, is

not U.S. citizens, the annual exclusion

Gift Tax

not eligible for the medical exclusion and

has been increased to $134,000,

Three types of transfers are not subject to

you are considered to have made a gift to

provided the additional (above the

the gift tax. These are:

the donee of the reimbursed amount.

$13,000 annual exclusion) $121,000 gift

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2010 Page 2

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