Instructions For Form 709 - 2016 Page 10

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Part 2—Direct Skips
most commonly sold to the public. The
donor (or an applicable family member)
location of the item must be taken into
holds an applicable retained interest in the
List in Part 2 only those gifts that are
account whenever appropriate.
corporation or partnership, or retains an
currently subject to both the gift and GST
interest in the trust. For details, see
taxes. You must list the gifts in Part 2 in
The FMV of a stock or bond (whether
sections 2701 and 2702, and their
the chronological order that you made
regulations.
listed or unlisted) is the mean between the
them. Number, describe, and value the
highest and lowest selling prices quoted
gifts as described in the instructions for
on the valuation date. If only the closing
Column G. Split Gifts
Part 1.
selling prices are available, then the FMV
Enter an amount in this column only if you
is the mean between the quoted closing
If you made a transfer to a trust that
have chosen to split gifts with your
selling price on the valuation date and on
was a direct skip, list the entire gift as one
spouse.
the trading day before the valuation date.
line entry in Part 2.
If there were no sales on the valuation
Split Gifts—Gifts Made by
date, figure the FMV as follows.
Column C. 2632(b) Election
Spouses
1. Find the mean between the highest
If you elect under section 2632(b)(3) to not
If you elected to split gifts with your
and lowest selling prices on the nearest
have the automatic allocation rules of
spouse and your spouse has given a
trading date before and the nearest
section 2632(b) apply to a transfer, enter a
gift(s) that is being split with you, enter in
trading date after the valuation date. Both
check in column C next to the transfer.
this area of Part 1 information on the gift(s)
trading dates must be reasonably close to
You must also attach a statement to Form
made by your spouse. If only you made
the valuation date.
709 clearly describing the transaction and
gifts and you are splitting them with your
2. Prorate the difference between
the extent to which the automatic
spouse, do not make an entry in this area.
mean prices to the valuation date.
allocation is not to apply. Reporting a
Generally, if you elect to split your gifts,
direct skip on a timely filed Form 709 and
3. Add or subtract (whichever applies)
you must split all gifts made by you and
paying the GST tax on the transfer will
the prorated part of the difference to or
your spouse to third-party donees. The
qualify as such a statement.
from the mean price figured for the nearest
only exception is if you gave your spouse
trading date before the actual valuation
How to report generation-skipping
a general power of appointment over a gift
date.
transfers after the close of an ETIP. If
you made.
you are reporting a generation-skipping
If no actual sales were made
Supplemental Documents
transfer that was subject to an ETIP
reasonably close to the valuation date,
(provided the ETIP closed as a result of
To support the value of your gifts, you
make the same computation using the
something other than the death of the
must provide information showing how it
mean between the bona fide bid and the
transferor; see Form 706), and you are
was determined.
asked prices instead of sales prices. If
also reporting gifts made during the year,
actual sales prices or bona fide bid and
complete Schedule A as you normally
For stock of close corporations or
asked prices are available within a
would with the transfer subject to an ETIP
inactive stock, attach balance sheets,
reasonable period of time before the
listed on Schedule A, Part 2.
particularly the one nearest the date of the
valuation date but not after the valuation
gift, and statements of net earnings or
Column B. In addition to the
date, or vice versa, use the mean between
operating results and dividends paid for
information already requested, describe
the highest and lowest sales prices or bid
each of the 5 preceding years.
the interest that is closing the ETIP;
and asked prices as the FMV.
explain what caused the interest to
For each life insurance policy, attach
terminate; and list the year the gift portion
Stock of close corporations or inactive
Form 712, Life Insurance Statement.
of the transfer was reported and its item
stock must be valued on the basis of net
Note for single premium or paid-up
number on Schedule A that was originally
worth, earnings, earning and dividend
policies. In certain situations, for
filed to report the gift portion of the ETIP
capacity, and other relevant factors.
example, where the surrender value of the
transfer.
policy exceeds its replacement cost, the
Generally, the best indication of the
Column E. Give the date the ETIP
true economic value of the policy will be
value of real property is the price paid for
closed rather than the date of the initial
greater than the amount shown on line 59
the property in an arm's-length transaction
gift.
of Form 712. In these situations, report the
on or before the valuation date. If there
full economic value of the policy on
has been no such transaction, use the
Columns F, G, and H. Enter “N/A” in
Schedule A. See Rev. Rul. 78-137, 1978-1
comparable sales method. In comparing
these columns.
C.B. 280, for details.
similar properties, consider differences in
The value is entered only in column B
the date of the sale, and the size,
of Part 1, Schedule D. See Column B,
If the gift was made by means of a
condition, and location of the properties,
earlier.
trust, attach a certified or verified copy of
and make all appropriate adjustments.
the trust instrument to the return on which
Split Gifts—Gifts Made by
you report your first transfer to the trust.
The value of all annuities, life estates,
Spouse
However, to report subsequent transfers
terms for years, remainders, or reversions
to the trust, you may attach a brief
See this heading under Part 1.
is generally the present value on the date
description of the terms of the trust or a
Part 3—Indirect Skips
of the gift.
copy of the trust instrument.
Some gifts made to trusts are subject only
Sections 2701 and 2702 provide
Also attach any appraisal used to
to gift tax at the time of the transfer but
special valuation rules to determine the
determine the value of real estate or other
later may be subject to GST tax. The GST
amount of the gift when a donor transfers
property.
tax could apply either at the time of a
an equity interest in a corporation or
distribution from the trust, at the
partnership (section 2701) or makes a gift
If you do not attach this information,
termination of the trust, or both.
in trust (section 2702). The rules only
Schedule A must include a full explanation
apply if, immediately after the transfer, the
of how value was determined.
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