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property held by them as joint tenants or

assignment of the benefits of an

exclusion is allowed for amounts paid for

tenants by the entirety.

insurance policy, to certain property

books, supplies, room and board, or other

•

Only individuals are required to file gift

settlements in divorce cases, and to the

similar expenses that do not constitute

tax returns. If a trust, estate, partnership,

giving up of some amount of annuity in

direct tuition costs. To the extent that the

or corporation makes a gift, the individual

exchange for the creation of a survivor

payment to the educational institution was

beneficiaries, partners, or stockholders

annuity.

for something other than tuition, it is a gift

are considered donors and may be liable

to the individual for whose benefit it was

Bonds that are exempt from Federal

for the gift and GST taxes.

made, and may be offset by the annual

income taxes are not exempt from

•

The donor is responsible for paying the

exclusion if it is otherwise available.

Federal gift taxes.

gift tax. However, if the donor does not

Contributions to a qualified tuition

Code sections 2701 and 2702 provide

pay the tax, the person receiving the gift

program on behalf of a designated

rules for determining whether certain

may have to pay the tax.

beneficiary do not qualify for the

•

transfers to a family member of interests

If a donor dies before filing a return, the

educational exclusion. See Qualified

in corporations, partnerships, and trusts

donor’s executor must file the return.

Tuition Programs on page 5.

are gifts. The rules of section 2704

Who does not need to file. If you meet

determine whether the lapse of any voting

Medical exclusion. The gift tax does not

all of the following requirements, you are

or liquidation right is a gift.

apply to an amount you paid on behalf of

not required to file Form 709:

an individual to a person or institution that

•

Gifts to your spouse. You must file a

You made no gifts during the year to

provided medical care for the individual.

gift tax return if you made any gift to your

your spouse;

The payment must be to the care

•

spouse of a terminable interest that does

You did not give more than $11,000 to

provider. The medical care must meet the

not meet the exception described in Life

any one donee; and

requirements of section 213(d) (definition

•

estate with power of appointment on

All the gifts you made were of present

of medical care for income tax deduction

page 9 or if your spouse is not a U.S.

interests.

purposes). Medical care includes

citizen and the total gifts you made to

Gifts to charities. If the only gifts you

expenses incurred for the diagnosis, cure,

your spouse during the year exceed

made during the year are deductible as

mitigation, treatment, or prevention of

$112,000.

gifts to charities, you do not need to file a

disease, or for the purpose of affecting

You must also file a gift tax return to

return as long as you transferred your

any structure or function of the body, or

make the Qualified Terminable Interest

entire interest in the property to qualifying

for transportation primarily for and

Property (QTIP) election described on

charities. If you transferred only a partial

essential to medical care. Medical care

page 10.

interest, or transferred part of your

also includes amounts paid for medical

interest to someone other than a charity,

Except as described above, you do

insurance on behalf of any individual.

you must still file a return and report all of

not have to file a gift tax return to report

The medical exclusion does not apply

your gifts to charities.

gifts to your spouse regardless of the

to amounts paid for medical care that are

amount of these gifts and regardless of

If you are required to file a return to

reimbursed by the donee’s insurance. If

whether the gifts are present or future

report noncharitable gifts and you made

payment for a medical expense is

interests.

gifts to charities, you must include all of

reimbursed by the donee’s insurance

your gifts to charities on the return.

company, your payment for that expense,

Transfers Not Subject to the

to the extent of the reimbursed amount, is

Transfers Subject to the Gift

Gift Tax

not eligible for the medical exclusion and

Tax

Three types of transfers are not subject to

you have made a gift to the donee.

the gift tax. These are transfers to political

Generally, the Federal gift tax applies to

To the extent that the payment was for

organizations and payments that qualify

any transfer by gift of real or personal

something other than medical care, it is a

for the educational and medical

property, whether tangible or intangible,

gift to the individual on whose behalf the

exclusions. These transfers are not “gifts”

that you made directly or indirectly, in

payment was made and may be offset by

as that term is used on Form 709 and its

trust, or by any other means to a donee.

the annual exclusion if it is otherwise

instructions. You need not file a Form 709

The gift tax applies not only to the

available.

to report these transfers and should not

gratuitous transfer of any kind of property,

list them on Schedule A of Form 709 if

The medical and educational

but also to sales or exchanges, not made

you do file Form 709.

exclusions are allowed without regard to

in the ordinary course of business, where

the relationship between you and the

Political organizations. The gift tax

money or money’s worth is exchanged

donee. For examples illustrating these

does not apply to a transfer to a political

but the value of the money (or property)

exclusions, see Regulations section

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

or money’s worth received is less than the

25.2503-6.

for the use of the organization.

value of what is sold or exchanged. The

Qualified disclaimers. A donee’s refusal

gift tax is in addition to any other tax, such

Educational exclusion. The gift tax

as Federal income tax, paid or due on the

to accept a gift is called a disclaimer. If a

does not apply to an amount you paid on

transfer.

person makes a qualified disclaimer with

behalf of an individual to a qualifying

respect to any interest in property, the

domestic or foreign educational

The exercise or release of a general

property will be treated as if it had never

organization as tuition for the education or

power of appointment may be a gift by the

been transferred to that person.

training of the individual. A qualifying

individual possessing the power. General

Accordingly, the disclaimant is not

educational organization is one that

powers of appointment are those in which

regarded as making a gift to the person

normally maintains a regular faculty and

the holders of the power can appoint the

who receives the property because of the

curriculum and normally has a regularly

property subject to the power to

qualified disclaimer.

enrolled body of pupils or students in

themselves, their creditors, their estates,

attendance at the place where its

or the creditors of their estates. To qualify

Requirements. To be a qualified

educational activities are regularly carried

as a power of appointment, it must be

disclaimer, a refusal to accept an interest

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

created by someone other than the holder

in property must meet the following

regulations.

of the power.

conditions:

The gift tax may also apply to the

The payment must be made directly to

1. The refusal must be in writing;

forgiveness of a debt, to interest-free or

the qualifying educational organization

2. The refusal must be received by

below market interest rate loans, to the

and it must be for tuition. No educational

the donor, the legal representative of the

-2-

Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2003 Page 2

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