Instructions For Form 709 - 2016 Page 17

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1. If the GST exemption is being
$207,000 taxable generation-skipping
for the property transferred. You may elect
allocated on a timely filed (including
transfer. The donor can allocate $207,000
out of this automatic allocation as
extensions) gift tax return, enter the value
of exemption to the 2016 transfer but
explained in the instructions for Part 3.
as of the close of the ETIP.
cannot allocate the $3,743,000 of unused
2016 exemption to pre-2016 transfers.
Line 6
2. If the GST exemption is being
allocated on a late filed (past the due date
However, if in 2005, the donor made a
Notice of allocation. You may wish to
including extensions) gift tax return, enter
$1,750,000 transfer to a trust that was not
allocate GST exemption to transfers not
the value as of the date the gift tax return
a direct skip, but from which
reported on this return, such as a late
was filed.
generation-skipping transfers could be
allocation.
made in the future, the donor could
allocate the increased exemption to the
To allocate your exemption to such
Column C
trust, even though no additional transfers
transfers, attach a statement to this Form
You are allowed to claim the gift tax
were made to the trust. See Regulations
709 and entitle it “Notice of Allocation.”
annual exclusion currently allowable for
section 26.2642-4 for the redetermination
The notice must contain the following for
your reported direct skips (other than
of the applicable fraction when additional
each trust (or other transfer).
certain direct skips to trusts—see Note),
exemption is allocated to the trust.
Clear identification of the trust,
using the rules and limits discussed earlier
including the trust's EIN, if known.
Keep a record of your transfers and
for the gift tax annual exclusion. However,
If this is a late allocation, the year the
exemption allocations to make sure that
you must allocate the exclusion on a
transfer was reported on Form 709.
any future increases are allocated
gift-by-gift basis for GST computation
The value of the trust assets at the
correctly.
purposes. You must allocate the exclusion
effective date of the allocation.
Enter on line 1 of Part 2 the maximum
to each gift to the maximum allowable
The amount of your GST exemption
GST exemption you are allowed. This will
amount and in chronological order,
allocated to each gift (or a statement that
not necessarily be the highest indexed
beginning with the earliest gift that
you are allocating exemption by means of
amount if you made no generation-
qualifies for the exclusion. Be sure that
a formula such as “an amount necessary
skipping transfers during the year of the
you do not claim a total exclusion of more
to produce an inclusion ratio of zero”).
increase.
than $14,000 per donee.
The inclusion ratio of the trust after the
The donor can apply this exemption to
allocation.
Note. You may not claim any annual
inter vivos transfers (that is, transfers
Total the exemption allocations and
exclusion for a transfer made to a trust
made during the donor's life) on Form 709.
enter this total on line 6.
unless the trust meets the requirements
The executor can apply the exemption on
discussed under Part 2—Direct Skips.
Form 706 to transfers taking effect at
Note. Where the property involved in
death. An allocation is irrevocable.
Part 2—GST Exemption
such a transfer is subject to an ETIP
In the case of inter vivos direct skips, a
because it would be includible in the
Reconciliation
portion of the donor's unused exemption is
donor's estate if the donor died
Line 1
automatically allocated to the transferred
immediately after the transfer (other than
property unless the donor elects
by reason of the donor having died within
Every donor is allowed a lifetime GST
otherwise. To elect out of the automatic
3 years of making the gift), an allocation of
exemption. The amount of the exemption
allocation of exemption, you must file
the GST exemption at the time of the
for 2016 is $5,450,000. For transfers
Form 709 and attach a statement to it
transfer will only become effective at the
made through 1998, the GST exemption
clearly describing the transaction and the
end of the ETIP. For details, see Transfers
was $1 million. The exemption amounts
extent to which the automatic allocation is
Subject to an Estate Tax Inclusion Period
for 1999 through 2016 are as follows.
not to apply. Reporting a direct skip on a
(ETIP), earlier, and section 2642(f).
timely filed Form 709 and paying the GST
Year
Amount
Part 3—Tax Computation
tax on the transfer will prevent an
1999
$1,010,000
. . . . . . . . . . . . . .
automatic allocation.
You must enter in Part 3 every gift you
2000
$1,030,000
. . . . . . . . . . . . . .
listed in Part 1 of Schedule D.
2001
$1,060,000
Special QTIP election. If you elect QTIP
. . . . . . . . . . . . . .
2002
$1,100,000
treatment for any gifts in trust listed on
. . . . . . . . . . . . . .
Column C
2003
$1,120,000
Schedule A, then on Schedule D you may
. . . . . . . . . . . . . .
2004 and 2005
$1,500,000
also elect to treat the entire trust as
. . . . . . . .
You are not required to allocate your
2006, 2007, and 2008
$2,000,000
non-QTIP for purposes of the GST tax.
. . . .
available exemption. You may allocate
2009
$3,500,000
The election must be made for the entire
. . . . . . . . . . . . . .
some, all, or none of your available
trust that contains the particular gift
2010 and 2011
$5,000,000
. . . . . . . .
exemption, as you wish, among the gifts
involved on this return. Be sure to identify
2012
$5,120,000
listed in Part 3 of Schedule D. However,
. . . . . . . . . . . . . .
the item number of the specific gift for
2013
$5,250,000
the total exemption claimed in column C
. . . . . . . . . . . . . .
which you are making this special QTIP
2014
$5,340,000
may not exceed the amount you entered
. . . . . . . . . . . . . .
election.
2015
$5,430,000
on line 3 of Part 2 of Schedule D.
. . . . . . . . . . . . . .
2016
$5,450,000
. . . . . . . . . . . . . .
Line 5
Column D
Enter the amount of GST exemption you
In general, each annual increase can only
Carry your computation to three decimal
are applying to transfers reported in Part 3
be allocated to transfers made (or
places (for example, “1.000”).
of Schedule A.
appreciation occurring) during or after the
year of the transfer.
Part 2—Tax Computation
Section 2632(c) provides an automatic
Example. A donor made $1,750,000
(Page 1 of Form 709)
allocation to indirect skips of any unused
in GSTs through 2005, and allocated all
GST exemption. The unused exemption is
$1,500,000 of the exemption to those
allocated to indirect skips to the extent
transfers. In 2016, the donor makes a
necessary to make the inclusion ratio zero
-17-

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