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would otherwise qualify for the gift tax

educational exclusions, transfers that are

5. Complete only lines 10 and 11 of

marital deduction (as described in the line

fully excluded under the annual exclusion,

Schedule A, Part 4; and

4 instructions discussed later).

and most transfers made to your spouse

6. Complete Part 2 — Tax

are not subject to the GST tax.

Computation.

A gift of a future interest cannot be

Transfers subject to the GST tax are

excluded under the annual exclusion.

Section 2701 Elections

described in further detail in the

A gift is considered a present interest if

instructions.

The special valuation rules of section

the donee has all immediate rights to the

2701 contain three elections that you

use, possession, and enjoyment of the

Certain transfers, particularly

must make with Form 709.

property or income from the property.

transfers to a trust, that are not

1. A transferor may elect to treat a

subject to gift tax and are

A gift is considered a future interest if

CAUTION

qualified payment right he or she holds

therefore not subject to the GST tax on

the donee’s rights to the use, possession,

(and all other rights of the same class) as

Form 709 may be subject to the GST tax

and enjoyment of the property or income

other than a qualified payment right.

at a later date. This is true even if the

from the property will not begin until some

2. A person may elect to treat a

transfer is less than the $13,000 annual

future date. Future interests include

distribution right held by that person in a

exclusion. In this instance, you may want

reversions, remainders, and other similar

controlled entity as a qualified payment

to apply a GST exemption amount to the

interests or estates.

right.

transfer on this return or on a Notice of

A contribution to a QTP on behalf of a

3. An interest holder may elect to treat

Allocation. For more information, see Part

designated beneficiary is considered a gift

as a taxable event the payment of a

3 — Indirect Skips and Part 2 — GST

of a present interest.

qualified payment that occurs more than 4

Exemption Reconciliation.

A gift to a minor is considered a

years after its due date.

Transfers Subject to an Estate

present interest if all of the following

Tax Inclusion Period (ETIP)

The elections described in (1) and (2)

conditions are met:

above must be made on the Form 709

1. Both the property and its income

Certain transfers that are direct skips

that is filed by the transferor to report the

may be expended by, or for the benefit of,

receive special treatment. If the

transfer that is being valued under section

the minor before the minor reaches

transferred property would have been

2701. The elections are made by

age 21;

includible in the donor’s estate if the

attaching a statement to Form 709. For

2. All remaining property and its

donor had died immediately after the

information on what must be in the

income must pass to the minor on the

transfer (for a reason other than the donor

statement and for definitions and other

minor’s 21st birthday; and

having died within 3 years of making the

details on the elections, see section 2701

3. If the minor dies before the age of

gift), the direct skip will be treated as

and Regulations section 25.2701-2(c).

21, the property and its income will be

having been made at the end of the ETIP

The election described in (3) above

payable either to the minor’s estate or to

rather than at the time of the actual

may be made by attaching a statement to

whomever the minor may appoint under a

transfer.

the Form 709 filed by the recipient of the

general power of appointment.

For example, if A transferred her

qualified payment for the year the

house to her granddaughter, B, but

The gift of a present interest to more

payment is received. If the election is

retained the right to live in the house until

than one donee as joint tenants qualifies

made on a timely filed return, the taxable

her death (a retained life estate), the

for the annual exclusion for each donee.

event is deemed to occur on the date the

value of the house would be includible in

qualified payment is received. If it is made

Nonresident Aliens

A’s estate if she died while still holding

on a late filed return, the taxable event is

the life estate. In this case, the transfer to

Nonresident aliens are subject to gift and

deemed to occur on the first day of the

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

GST taxes for gifts of tangible property

month immediately preceding the month

future interest) and must be reported on

situated in the United States. Under

in which the return is filed. For information

Part 1 of Schedule A. The GST portion of

certain circumstances, they are also

on what must be in the statement and for

the transfer would not be reported until A

subject to gift and GST taxes for gifts of

definitions and other details on this

died or otherwise gave up her life estate

intangible property. See section 2501(a).

election, see section 2701 and

in the house.

If you are a nonresident alien who

Regulations section 25.2701-4(d).

Report the gift portion of such a

made a gift subject to gift tax, you must

All of the elections may be revoked

transfer on Schedule A, Part 1, at the time

file a gift tax return if:

only with the consent of the IRS.

•

of the actual transfer. Report the GST

You gave any gifts of future interests,

•

portion on Schedule A, Part 2, but only at

Your gifts of present interests to any

When To File

the close of the ETIP. Use Form 709 only

donee other than your spouse total more

to report those transfers where the ETIP

Form 709 is an annual return.

than $13,000, or

•

closed due to something other than the

Your outright gifts to your spouse who

Generally, you must file the Form 709

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

is not a U.S. citizen total more than

no earlier than January 1, but not later

result of the donor’s death, report the

$134,000.

than April 15, of the year after the gift was

transfer on Form 706, United States

made. However, for gifts made in 2010,

Transfers Subject to the GST

Estate (and Generation-Skipping

the due date of the Form 709 is April 18,

Tax

Transfer) Tax Return.)

2011, because April 15, 2011, is a legal

You must report on Form 709 the GST

If you are filing this Form 709 solely to

holiday in the District of Columbia. See

tax imposed on inter vivos direct skips. An

report the GST portion of transfers

section 7503.

inter vivos direct skip is a transfer made

subject to an ETIP, complete the form as

If the donor died during 2010, the

during the donor’s lifetime that is:

you normally would with the following

executor must file the donor’s 2010 Form

•

Subject to the gift tax,

exceptions:

709 not later than the earlier of:

•

Of an interest in property, and

•

1. Write “ETIP” at the top of page 1;

The due date (with extensions) for filing

•

Made to a skip person. (See Gifts

2. Complete only lines 1 through 6, 8,

the donor’s estate tax return, or

Subject to Both Gift and GST Taxes.)

•

and 9 of Part 1 — General Information;

April 18, 2011, or the extended due

A transfer is subject to the gift tax if it

3. Complete Schedule A, Part 2, as

date granted for filing the donor’s gift tax

is required to be reported on Schedule A

explained in the instructions for that

return.

of Form 709 under the rules contained in

schedule;

Extension of Time To File

the gift tax portions of these instructions,

4. Complete Schedule C. Complete

including the split gift rules. Therefore,

Column B of Schedule C, Part 1, as

There are two methods of extending the

transfers made to political organizations,

explained in the instructions for that

time to file the gift tax return. Neither

transfers that qualify for the medical or

schedule;

method extends the time to pay the gift or

-3-

Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2010 Page 3

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