Guide to IRS Form 709 for Gift Tax

Aug 21, 2024

Notes on Form 709: Gift Tax and Generation Skipping Transfer Tax

Introduction

  • Presented by John from e-Gov Access Inc.
  • Discusses IRS Form 709, used for gift tax and generation-skipping transfer tax.
  • Form is downloadable from the IRS website.
  • E-Gov Access Inc. added yellow navigation buttons to aid form navigation.

Navigation and Usage

  • Navigation Buttons:
    • Help move through the form but do not print on the paper copy.
    • Example usage: move to Schedule B, back to navigation page, etc.
  • Software Requirement:
    • Must use Adobe Acrobat Reader for form calculations.
    • Feature for amended returns: "Amended" prints on form top when clicked.

Filling Out the Form

  • Example Information:
    • Taxpayer: Sam Jones, entered address and SSN.
    • Donee: Sam's son, Ed.

Form Details

  • Lines 8-9: Skipped as not applicable.
  • Line 10: Number of donees (1 - Ed).
  • Line 11: No previous filings, no address change, no gift splitting with spouse.
  • Line 19: DSUE (Deceased Spouse Unused Exemption) not applied, no spouse.

Entering Gifts

  • Schedule A, Part 1: Gifts subject only to gift tax.
    • Sam gave his son Ed $5 million in cash on 10/15/2020.
    • No discounts or Section 529 election.
  • Annual Exclusion:
    • Entered in Schedule A Part 4.
    • $15,000 per donee; taxable gift is $4,985,000.

Tax Computation

  • Total taxable gifts: $4,985,000.
  • Tax and Credit:
    • Tax computed from tax table.
    • Lifetime credit: $4,577,800 (not applicable for non-residents).
    • Tax liability if non-resident checked.

Case Changes

Additional Gift: Prior Year Gift of $10 Million

  • Schedule B: Prior year gifts noted.
    • Example: $10 million cash gift in 2019.
  • Tax Changes:
    • Total gifts: $14,985,000.
    • Computation results in tax of $1,994,000.
    • Lifetime credit used: $3,940,000.
    • Available credit: $632,000.
    • Tax due: $1,362,000.

Generation-Skipping Transfer (GST) Tax

  • Scenario: Ed is Sam's grandson, not son.
  • Schedule D: GST reconciliation.
    • Lifetime exemption: $11,580,000.
    • Prior year use: $10,000,000, leaving $1,580,000 available.
    • Total tax with GST: $1,368,000.
  • Tax Computation Impact:
    • Total taxable gifts: $6,353,000.
    • New tax: $6,487,000.
    • Tax due with GST consideration: $3,277,200.

Conclusion

  • Form 709 facilitates gift and generation-skipping tax calculations.
  • Understanding of form navigation and computation critical for accurate filing.
  • Useful for determining tax obligations with different scenarios (e.g., prior gifts, generational skips).