Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return and related returns
IRS has released Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return for gifts made during 2010, Form 706-GS(D), Generation-Skipping Transfer Tax Return For 2010 Distributions, Form 706-GS(T), Generation-Skipping Transfer Tax Return For 2010 Terminations, and their accompanying instructions. These forms reflect law, administrative and indexing changes for gifts made in 2010 including changes made by the Tax Relief Act of 2010.
Form 709. This form is used to report transfers subject to the federal gift and certain generation-skipping transfer (GST) taxes and to figure the tax, if any, due on those transfers. It also is used to report allocation of the lifetime GST exemption to property transferred during the transferor's lifetime. A caption entitled “What's New” notes the following changes:
... Regular annual exclusion. The annual exclusion remains at $13,000.
... Annual exclusion for gifts to noncitizen spouses. For gifts made to spouses who are not U.S. citizens, the annual exclusion has increased to $134,000.
... Top rate. The top rate on gifts is now 35%.
... GST rate. For 2010, the GST tax rate is 0%.
... Unified credit. The unified credit for 2010 is $330,800.
... Credit allocated to prior gifts. Section 302(d)(2) of the Tax Relief Act of 2010 mandates that any unified credit allocated to gifts made in prior periods be redetermined using current gift tax rates. Information concerning gifts from prior periods is reported in five columns on Schedule B of Form 709. Column C reports the unified credit used for the gift. The instructions contain elaborate rules for determining the unified credit for prior gifts under the section 302(d)(2) mandate. First, the donor must determine which one of three scenarios he falls under:
... Prior gifts totaling $500,000 or less;
... Prior gifts totaling between $500,000 and $1,000,000; or
... Prior gifts totaling over $1,000,000.
For Scenario 1, the donor enters in column C the amount of unified credit actually applied in the prior period, as shown on Forms 709 previously filed. For Scenario 2, a number of steps must be applied in a worksheet to determine the amount to enter in column C. There is a blank worksheet and a filled-in one serving as an example. An even more elaborate worksheet applies for Scenario 3. Here, too, there is a blank worksheet and a filled-in one serving as an example. If any amount of specific exemption is claimed for gifts made after Sept. 8,’76, and before Jan. 1,’77, the donor must use the worksheet for Scenario 3.
... Trust transfers. All transfers in trust made after Dec. 31, 2009, except as provided in regs, are treated as a transfer of property by gift unless the trust is treated as wholly owned by the donor or the donor's spouse under the grantor trust provisions in Code Sec. 671 to Code Sec. 678.
Form 706-GS(D). This form is used by a skip person distributee to calculate and report the tax due on distributions from a trust that are subject to the GST tax. A caption entitled “What's New” notes the following:
... For generation-skipping transfers made in 2010, the rate determined by Code Sec. 2641 is zero under section 302(c) of the Tax Relief Act of 2010.
... For generation-skipping transfers made after Dec. 31, 2009, but before Dec. 17, 2010, the due date of the return will be Sept. 19, 2011 (not including extensions).
... In accordance with T.D. 9501, the paid preparer signature block has been revised. Paid preparers must sign the return and furnish the information requested in the Paid Preparer Use Only area.
Form 706-GS(D-1). A trustee uses this form to report certain distributions from a trust that are subject to GST tax and to provide the skip person distributee with information needed to figure the tax due on the distribution. IRS did not revise this form but it did revise the instructions to it. The revised instructions are to be used with the October 2008 revision of Form 706-GS(D-1). Generally, the trustee must file Copy A of Form 706-GS(D-1) with IRS and send Copy B to the distributee by April 15th of the year following the calendar year when the distribution was made. However, the instructions note that for distributions made in 2010, the due dates are modified as follows:
... For distributions made between Jan. 1, 2010, and Dec. 16, 2010, the due date for the Form 706-GS(D) will be Sept. 19, 2011.
... For 2010 distributions made Dec. 17, 2010, or later, the due date for the Form 706-GS(D) will be Apr. 18, 2011, due to the Emancipation Day holiday in the District of Columbia.
Form 706-GS(T). This form is used by a trustee to figure and report the tax due from certain trust terminations that are subject to the GST tax. This form reflects the same new items as are reflected on Form 706-GS(D).
References: For gift tax returns, see Federal Tax Coordinator 2d ¶S-2200; United States Tax Reporter Estate & Gift ¶60,194; TaxDesk ¶746,000; TG ¶40350.