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).